# Title 26.1 — Insurance

## Chapter 26.1-46 — Risk Retention Groups and Purchasing Groups

### § 26.1-46-01. Definitions.

As used in this chapter:
1. "Commissioner" means the North Dakota insurance commissioner or the
commissioner, director, or superintendent of insurance in any other state.
2. "Completed operations liability" means liability arising out of the installation,
maintenance, or repair of any product at a site which is not owned or controlled by any
person who performs that work or any person who hires an independent contractor to
perform that work, but includes liability for activities which are completed or
abandoned before the date of the occurrence giving rise to the liability.
3. "Domicile", for purposes of determining the state in which a purchasing group is
domiciled, means:
a. For a corporation or limited liability company, the state in which the purchasing
group is incorporated or organized.
b. For an entity which is not a corporation or limited liability company, the state of its
principal place of business.
4. "Hazardous financial condition" means that, based on its present or reasonably
anticipated financial condition, a risk retention group, although not yet financially
impaired or insolvent, is unlikely to be able to do either of the following:
a. To meet obligations to policyholders with respect to known claims and reasonably
anticipated claims.
b. To pay other obligations in the normal course of business.
5. "Insurance" means primary insurance, excess insurance, reinsurance, surplus lines
insurance, and any other arrangement for shifting and distributing risk which is
determined to be insurance under the laws of this state.
6. a. "Liability" means legal liability for damages, including costs of defense, legal
costs and fees, and other claims expenses because of injuries to other persons,
damage to their property, or other damage or loss, including contractual claims
and expenses, to such other persons resulting from or arising out of either of the
following:
(1) Any business whether profit or nonprofit, trade, product, services including
professional services, premises, or operations.
(2) Any activity of any state or local government, or any agency or political
subdivision thereof.
b. The term does not include personal risk liability and an employer's liability with
respect to its employees other than legal liability under the federal Employer's
Liability Act [45 U.S.C. 51 et seq.].
7. "Personal risk liability" means liability for damages because of injury to any person,
damage to property, or other loss or damage resulting from any personal, familial, or
household responsibilities or activities, rather than from responsibilities or activities
referred to in subsection 6.
8. "Plan of operation or a feasibility study" means an analysis which presents the
expected activities and results of a risk retention group, including, at a minimum, all of
the following:
a. For each state in which it intends to operate, the coverages, deductibles,
coverage limits, rates, and rating classification systems for each line of insurance
the group intends to offer.
b. Historical and expected loss experience of the proposed members and national
experience of similar exposures to the extent that this experience is reasonably
available.
c. Pro forma financial statements and projections.
d. Appropriate opinions by a qualified independent casualty actuary, including a
determination of minimum premium or participation levels required to commence
operations and to prevent a hazardous financial condition.

e. Identification of management, underwriting and claims procedures, marketing
methods, managerial oversight methods, reinsurance agreements, and
investment policies.
f. Such other matters as may be prescribed by the commissioner for liability
insurance companies authorized by the insurance laws of the state in which the
risk retention group is chartered.
g. Information sufficient to verify that its members are engaged in businesses or
activities similar or related with respect to the liability to which such members are
exposed by virtue of any related, similar, or common business, trade, product,
services, premises, or operations.
h. Identification of each state in which the risk retention group has obtained, or
sought to obtain, a charter and license, and a description of its status in each
such state.
9. "Product liability" means liability for damages because of any personal injury, death,
emotional harm, consequential economic damage, or property damage, including
damages resulting from the loss of use of property, arising out of the manufacture,
design, importation, distribution, packaging, labeling, lease, or sale of a product, but
does not include the liability of any person for those damages if the product involved
was in the possession of such a person when the incident giving rise to the claim
occurred.
10. "Purchasing group" means any group which meets all of the following:
a. The group has as one of its purposes the purchase of liability insurance on a
group basis.
b. The group purchases insurance only for its group members and only to cover
their similar or related liability exposure, as described in subdivision c.
c. The group is composed of members whose business or activities are similar or
related with respect to the liability to which members are exposed by virtue of any
related, similar, or common business, trade, product, services, premises, or
operations.
d. The group is domiciled in any state.
11. "Risk retention group" means any corporation or other limited liability association:
a. Whose primary activity consists of assuming and spreading all, or any portion, of
the liability exposure of its group members.
b. Which is organized for the primary purpose of conducting the activity described
under subdivision a.
c. Which is chartered and licensed as a liability insurance company and authorized
to engage in the business of insurance under the laws of any state; or, before
January 1, 1985, was chartered or licensed and authorized to engage in the
business of insurance under the laws of Bermuda or the Cayman Islands and,
before such date, had certified to the insurance commissioner of at least one
state that it satisfied the capitalization requirements of such state, except that any
such group shall be considered to be a risk retention group only if it has been
engaged in business continuously since that date and only for the purpose of
continuing to provide insurance to cover product liability or completed operations
liability as such terms were defined in the Product Liability Risk Retention Act of
1981 before the date of the enactment of the Liability Risk Retention Act of 1986.
d. Which does not exclude any person from membership in the group solely to
provide for members of such a group a competitive advantage over such a
person.
e. Which has as its owners only persons who comprise the membership of the risk
retention group and who are provided insurance by such group, or has as its sole
owner an organization which has as its members only persons who comprise the
membership of the risk retention group and its owners only persons who
comprise the membership of the risk retention group and who are provided
insurance by such group.

f. Whose members are engaged in businesses or activities similar or related with
respect to the liability of which such members are exposed by virtue of any
related, similar, or common business trade, product, services, premises, or
operations.
g. Whose activities do not include the provision of insurance other than:
(1) Liability insurance for assuming and spreading all or any portion of the
liability of its group members.
(2) Reinsurance with respect to the liability of any other risk retention group or
any members of such other group which is engaged in business or activities
so that the group or member meets the requirement described in
subdivision f from membership in the risk retention group which provides
such reinsurance.
h. The name of which includes the phrase "risk retention group".
12. "State" means any state of the United States or the District of Columbia.
### § 26.1-46-02. Risk retention groups chartered in this state.

A risk retention group seeking to be chartered in this state must be chartered and licensed
as a liability insurance company authorized by the insurance laws of this state and, except as
provided elsewhere in this chapter, shall comply with all of the laws, rules, regulations, and
requirements applicable to such insurers chartered and licensed in this state and with section
requirements of this state. Notwithstanding any other provision to the contrary, all risk retention
groups chartered in this state shall file with the department and the national association of
insurance commissioners an annual statement in a form prescribed by the national association
of insurance commissioners and in diskette form, if required by the commissioner, and
completed in accordance with its instructions and the national association of insurance
commissioners accounting practices and procedures manual. Before it may offer insurance in
any state, each risk retention group doing business in this state, except for a risk retention group
chartered in this state which does business only in this state and which has fewer than
twenty-six resident members or insureds, shall also submit for approval to the insurance
commissioner of this state a plan of operation or a feasibility study and revisions of such plan or
study if the group intends to offer any additional lines of liability insurance. Immediately upon
receipt of an application for charter in this state, the risk retention group shall provide summary
information concerning the filing to the national association of insurance commissioners,
including the name of the risk retention group, the identity of the initial members of the group,
the identity of the individuals who organized the group or who will provide administrative
services or otherwise influence or control the activities of the group, the amount and nature of
initial capitalization, the coverages to be afforded, and the states in which the group intends to
operate. Upon receipt of this information, the commissioner shall forward the information to the
national association of insurance commissioners. Providing notification to the national
association of insurance commissioners is in addition to, and is not sufficient to satisfy, the
requirements of this chapter.
### § 26.1-46-03. Risk retention groups not chartered in this state - Requirements for

operation.
Risk retention groups chartered in states other than this state and seeking to do business
as a risk retention group in this state shall observe and abide by the laws of this state as follows:
1. Notice of operations and designation of commissioner as agent. Before offering
insurance in this state, a risk retention group shall submit to the commissioner on a
form prescribed by the national association of insurance commissioners all of the
following:
a. A statement identifying the state or states in which the risk retention group is
chartered and licensed as a liability insurance company, date of chartering, its
principal place of business, and such other information, including information on
its membership, as the commissioner of this state may require to verify that the
risk retention group is qualified under subsection 11 of section 26.1-46-01.

b. A copy of its plan of operation or a feasibility study and revisions of such plan or
study submitted to its state of domicile; provided, however, that the provision
relating to the submission of a plan of operation or a feasibility study does not
apply with respect to any line or classification of liability insurance which was
defined in the Product Liability Risk Retention Act of 1981 before October 27,
1986, and was offered before such date by any risk retention group which had
been chartered and operating for not less than three years before such date.
c. The risk retention group shall submit a copy of any revision to its plan of
operation or feasibility study required by section 26.1-46-02 at the same time that
the revision is submitted to the commissioner of its chartering state.
d. A statement of registration, for which a filing fee must be determined by the
commissioner, which designated the commissioner as its agent for the purpose of
receiving service of legal documents or process.
2. Financial condition. Any risk retention group doing business in this state shall submit to
the commissioner upon the commissioner's request all of the following:
a. A copy of the group's financial statement submitted to its state of domicile, which
must be certified by an independent public accountant and contain a statement of
opinion on loss and loss adjustment expense reserves made by a member of the
American academy of actuaries or a qualified loss reserve specialist according to
criteria established by the national association of insurance commissioners.
b. A copy of each examination of the risk retention group as certified by the
commissioner or public official conducting the examination.
c. Upon request by the commissioner, a copy of any audit performed with respect to
the risk retention group.
d. Such information as may be required to verify its continuing qualifications as a
risk retention group under subsection 11 of section 26.1-46-01.
3. Taxation.
a. All premiums paid for coverages within this state to risk retention groups are
subject to taxation at the same rate and subject to the same interest, fines, and
penalties for nonpayment that are applicable to foreign-admitted insurers.
b. To the extent insurance producers are utilized, the insurance producers shall
report and pay the taxes for the premiums for risks which the insurance
producers have placed with or on behalf of a risk retention group not chartered in
this state.
c. To the extent the insurance producers are not utilized or fail to pay the tax, each
risk retention group shall pay the tax for risks insured within the state. Further,
each risk retention group shall report all premiums paid to it for risks insured
within the state.
d. This subsection does not apply to risk retention groups doing business in this
state which have fewer than twenty-six resident members or insureds.
e. To the extent that insurance producers are utilized pursuant to section
26.1-46-11, each insurance producer shall keep a complete and separate record
of all policies procured from each risk retention group, which record must be open
to examination by the commissioner, as provided in sections 26.1-03-19.1
through 26.1-03-22. These records must, for each policy and each kind of
insurance provided thereunder, include the limit of liability, the time period
covered, the effective date, the name of the risk retention group which issued the
policy, the gross premium charged, and the amount of return premiums, if any.
4. Compliance with prohibited practices chapter. Any risk retention group, its insurance
producers and representatives, shall comply with chapter 26.1-04.
5. Examination regarding financial condition. Any risk retention group must submit to an
examination by the commissioner to determine its financial condition if the
commissioner of the jurisdiction in which the group is chartered has not initiated an
examination or does not initiate an examination, within sixty days after a request by
the commissioner of this state. Any such examination must be coordinated to avoid

unjustified repetition and conducted in an expeditious manner and in accordance with
the national association of insurance commissioners examiner handbook.
6. Notice to purchasers. Any policy issued by a risk retention group must contain in
ten-point type of the front page and the declaration page, the following notice:
This policy is issued by your risk retention group. Your risk retention group may
not be subject to all of the insurance laws and regulations of your state. State
insurance insolvency guaranty funds are not available for your risk retention
group.
7. Prohibited acts regarding solicitation or sale. The following acts by a risk retention
group are prohibited:
a. The solicitation or sale of insurance by a risk retention group to any person who is
not eligible for membership in such group.
b. The solicitation or sale of insurance by, or operation of, a risk retention group that
is in a hazardous financial condition or is financially impaired.
8. Prohibition on ownership by an insurance company. No risk retention group may be
allowed to do business in this state if an insurance company is directly or indirectly a
member or owner of such risk retention group, other than in the case of a risk retention
group all of whose members are insurance companies.
9. Delinquency proceedings. A risk retention group not chartered in this state and doing
business in this state shall comply with a lawful order issued in a voluntary dissolution
proceeding or in a delinquency proceeding commenced by a state insurance
commissioner if there has been a finding of financial impairment after an examination
under subsection 4.
10. Any risk retention group, its insurance producers, and representatives shall comply
with chapter 26.1-04. The terms of any insurance policy issued by any risk retention
group may not provide, or be construed to provide, coverage prohibited generally by
statute of this state or declared unlawful by the highest court of this state whose law
applies to such policy.
11. A risk retention group that violates any provisions of this chapter will be subject to fines
and penalties, including revocation of its right to do business in this state, applicable to
licensed insurers generally. In addition to complying with the requirements of this
section, any risk retention group operating in this state prior to enactment of this
chapter, within thirty days after the effective date of this chapter, shall comply with the
provision of subdivision a of subsection 1.
12. A risk retention group that is not chartered in this state but is in compliance with this
section is deemed an authorized insurer for the satisfaction of any requirement, under
the laws of this state, that insurance coverage be placed with an authorized insurer.
### § 26.1-46-04. Compulsory associations.

1. No risk retention group may join or contribute financially to any insurance insolvency
guaranty fund, or similar mechanism, in this state, nor may any risk retention group, or
its insureds, receive any benefit from any such fund for claims arising out of the
operations of such risk retention group.
2. When a purchasing group obtains insurance covering its members' risks from an
insurer not authorized in this state or a risk retention group, no such risks, wherever
resided or located, may be covered by any insurance guaranty fund or similar
mechanism in this state.
3. When a purchasing group obtains insurance covering its members' risks from an
authorized insurer, only risks resident or located in this state may be covered by the
state guaranty fund subject to chapter 26.1-42.1.
### § 26.1-46-05. Countersignatures not required.

A policy of insurance issued to a risk retention group or any member of that group may not
be required to be countersigned except as otherwise provided in section 26.1-11-07.

### § 26.1-46-06. Purchasing groups - Exemption from certain laws relating to the group

purchase of insurance.
A purchasing group and its insurer or insurers is subject to all applicable laws of this state,
except that a purchasing group and its insurer or insurers are exempt, in regard to liability
insurance for the purchasing group, from any law that would:
1. Prohibit the establishment of a purchasing group.
2. Make it unlawful for an insurer to provide or offer to provide insurance on a basis
providing, to a purchasing group or its members, advantages based on their loss and
expense experience not afforded to other persons with respect to rates, policy forms,
coverages, or other matters.
3. Prohibit a purchasing group or its members from purchasing insurance on a group
basis described in subsection 2.
4. Prohibit a purchasing group from obtaining insurance on a group basis because the
group has not been in existence for a minimum period of time or because any member
has not belonged to the group for a minimum period of time.
5. Require that a purchasing group must have a minimum number of members, common
ownership or affiliation, or certain legal form.
6. Require that a certain percentage of a purchasing group must obtain insurance on a
group basis.
7. Otherwise discriminate against a purchasing group or any of its members.
8. Require that any insurance policy issued to a purchasing group or any of its members
be countersigned by an insurance producer residing in this state.
### § 26.1-46-07. Notice and registration requirements of purchasing groups.

1. A purchasing group which intends to do business in this state shall, prior to doing
business, furnish notice to the commissioner on forms prescribed by the national
association of insurance commissioners which must do all of the following:
a. Identify the state in which the group is domiciled.
b. Identify all other states in which the group intends to do business.
c. Specify the lines and classifications of liability insurance which the purchasing
group intends to purchase.
d. Identify the insurance company from which the group intends to purchase its
insurance and the domicile of such company.
e. Specify the method by which, and the person or persons, if any, through whom
insurance will be offered to its members whose risks are resident or located in
this state.
f. Identify the principal place of business of the group.
g. Provide such other information as may be required by the commissioner to verify
that the purchasing group is qualified under subsection 10 of section 26.1-46-01.
2. A purchasing group shall, within ten days, notify the commissioner of any changes in
any of the items set forth in subsection 1.
3. The purchasing group shall register with and designate the insurance commissioner as
its agent solely for the purpose of receiving service of legal documents or process,
except that such requirements do not apply in the case of a purchasing group which
only purchases insurance that was authorized under the federal Products Liability Risk
Retention Act of 1981 to which all of the following apply:
a. The group was domiciled before April 1, 1986, and is domiciled on and after
October 27, 1986, in any state of the United States.
b. Before October 27, 1986, the group purchased insurance from an insurance
carrier licensed in any state and since October 27, 1986, the group purchased its
insurance from an insurance carrier licensed in any state.
c. The group was a purchasing group under the requirements of the federal Product
Liability Risk Retention Act of 1981 before October 27, 1986.
d. The group does not purchase insurance that was not authorized for purposes of
an exemption under that Act, as in effect before October 27, 1986.

e. Each purchasing group that is required to give notice pursuant to subsection 1
shall also furnish such information as may be required by the commissioner to
verify that the entity qualifies as a purchasing group, determine where the
purchasing group is located, and determine appropriate tax treatment.
f. Any purchasing group which was doing business in this state prior to the
enactment of this chapter shall, within thirty days after August 1, 1993, furnish
notice to the commissioner pursuant to the provisions of subsection 1 and furnish
such information as may be required pursuant to subsections 2 and 3.
### § 26.1-46-08. Restrictions on insurance purchased by purchasing groups.

1. A purchasing group may not purchase insurance from a risk retention group that is not
chartered in a state or from an insurer not admitted in the state in which the
purchasing group is located, unless the purchase is effected through a licensed
insurance producer acting pursuant to the surplus lines laws and regulations of such
state.
2. A purchasing group which obtains liability insurance from an insurer not admitted in
this state or a risk retention group shall inform each of the members of the group which
have a risk resident or located in this state that the risk is not protected by an
insurance insolvency guaranty fund in this state, and that the risk retention group or
insurer may not be subject to all insurance laws and rules of this state.
3. A purchasing group may not purchase insurance providing for a deductible or
self-insured retention applicable to the group as a whole unless the purchasing group
uses a policyholder's disclosure statement approved by the commissioner which
clearly explains in simplified language the policy is subject to a group deductible or
self-insured retention and provides a detailed explanation of the process of the
satisfaction of the deductible or self-insured retention among members.
4. A purchasing group may not purchase insurance providing for a shared aggregate limit
applicable to the group as a whole unless the purchasing group uses a policyholder's
disclosure statement approved by the commissioner which clearly explains in
simplified language the policy is subject to a group aggregate limit and coverage for
each individual member could be exhausted by claims from other members. The
insurance must allow for an individual member to purchase additional limits in the
event of exhaustion and this option must be described in the disclosure statement.
### § 26.1-46-08.1. Purchasing group taxation - Fees.

1. a. Premium taxes and taxes on premiums paid for coverage of risks resident or
located in this state by a purchasing group or any members of the purchasing
group must be:
(1) Imposed at the same rate and subject to the same interest, fines, and
penalties as applicable to premium taxes and taxes on premiums paid for
similar coverage from a similar insurance source by other insureds; and
(2) Paid first by the insurance source, and if not by the source, by the insurance
producer for the purchasing group, and if not by the insurance producer,
then by the purchasing group.
b. To the extent any administrative fee is charged under subsection 2, the fee may
not be considered a premium and is not subject to premium tax.
2. A purchasing group's administrator, manager, or other related party may charge
reasonable fees provided the fees are:
a. For reimbursement of expenses incurred by the administrator, manager, or other
related party in performing its administrative duties for the purchasing group; and
b. Disclosed to all members of the risk purchasing group on a form approved by the
commissioner which states the nature of the administrative duties for which the
fees will be charged along with separate itemization of the amount of fees to be
paid by each member.

### § 26.1-46-09. Administrative and procedural authority regarding risk retention groups

and purchasing groups.
The commissioner is authorized to make use of any of the powers and requirements
established under title 26.1 so long as those powers or requirements are not specifically
pre-empted by the federal Product Liability Risk Retention Act of 1981, as amended by the Risk
Retention Amendments of 1986. This includes the commissioner's administrative authority to
investigate, issue subpoenas, conduct depositions and hearings, issue orders, impose
penalties, and seek injunctive relief. With regard to any investigation, administrative
proceedings, or litigation, the commissioner can rely on the procedural law and regulations of
the state. The injunctive authority of the commissioner in regard to risk retention groups is
restricted by the requirements that any injunction be issued by a court of competent jurisdiction.
### § 26.1-46-10. Penalties.

A risk retention group which violates any provision of this chapter is subject to fines and
penalties applicable to licensed insurers generally, including revocation of its certificate of
authority to do business in this state.
### § 26.1-46-11. Duty of insurance producers to obtain license.

Any person acting, or offering to act, as an insurance producer for a risk retention group or
purchasing group, which solicits members, sells insurance coverage, purchases coverage for its
members located within the state, or otherwise does business in this state, shall, before
commencing any such activity, obtain a license from the commissioner. This section does not
apply to any person acting as an insurance producer for a risk retention group doing business in
this state which has fewer than twenty-six resident members or insureds.
### § 26.1-46-12. Binding effect of orders issued in United States district court.

An order issued by any district court of the United States enjoining a risk retention group
from soliciting or selling insurance, or operating, in any state or in all states or in any territory or
possession of the United States upon a finding that such a group is in a hazardous financial
condition is enforceable in the courts of the state.
### § 26.1-46-13. Rules and regulations.

The commissioner may adopt such rules relating to risk retention groups as may be
necessary or desirable to carry out the provisions of the chapter.
