# Title 26.1 — Insurance

## Chapter 26.1-09 — Reciprocal or Interinsurance Exchanges

### § 26.1-09-01. Reciprocal or interinsurance exchange authorized.

Individuals, partnerships, and corporations of this state, in this chapter referred to as
subscribers, may exchange reciprocal or interinsurance contracts other than life insurance, with
each other or with individuals, partnerships, and corporations of other states and countries to
provide indemnity among themselves against any loss which may be insured against under
authority of law.
### § 26.1-09-02. Domestic corporations have right to exchange contracts.

Any domestic corporation, in addition to the rights, powers, and franchises specified in its
articles of incorporation, as a subscriber, may exchange insurance contracts of the kind and
character mentioned in this chapter. The right to exchange the contracts is incidental to the
purposes for which the corporation was organized and is granted as fully as the rights and
powers expressly conferred upon the corporation.
### § 26.1-09-03. Reciprocal or interinsurance contracts - Execution.

Reciprocal or interinsurance contracts may be executed by an attorney, insurance producer,
or other representative, in this chapter designated as an attorney, duly authorized and acting for
the subscribers. The attorney may be a corporation. The office of the attorney may be
maintained at the place designated by the subscribers in the power of attorney.
### § 26.1-09-04. Subscribers to file verified declaration with commissioner - Contents.

The subscribers contracting among themselves to conduct a reciprocal or interinsurance
exchange through their attorney, shall file with the commissioner a declaration verified by the
oath of the attorney, or when the attorney is a corporation, by the oath of a chief officer thereof,
setting forth:
1. The name of the attorney and the name or designation under which contracts are
issued. The name or designation may not be so similar to any name or designation
adopted by any attorney or any insurance organization in the United States which was
writing the same class of insurance prior to the adoption of the name or designation as
to confuse or deceive.
2. The kind or kinds of insurance to be effected or exchanged.
3. A copy of the form of policy, contract, or agreement under or by which such insurance
is to be effected or exchanged.
4. A copy of the form of the power of attorney or other authority of the attorney under
which the insurance is to be effected or exchanged.
5. The location of the office from which the contracts or agreements are to be issued.
6. That applications have been made for indemnity upon at least one hundred separate
risks aggregating not less than one million five hundred thousand dollars as
represented by executed contracts or bona fide applications to become concurrently
effective.
7. That assets conforming to section 26.1-09-08 are in the possession of the attorney
and are available for payment of losses.
### § 26.1-09-05. Attorney to file statement authorizing suit and consenting to service.

Concurrently with the filing of the declaration provided for by section 26.1-09-04, the
attorney shall file with the commissioner a written statement executed by the attorney for the
subscribers conditioned that upon the issuance of the certificate of authority:
1. Civil actions may be brought in connection with the policies, contracts, or agreements
entered into under this chapter in the county in which any property insured in the
policies, contracts, or agreements is located or in which any accident insured against
occurs.

2. Service of process may be made upon the commissioner in all civil actions arising in
this state out of the policies, contracts, or agreements entered into under this chapter.
### § 26.1-09-06. Consent to service of process - Judgment - Satisfaction.

Service of process made upon the commissioner is valid and binding upon all subscribers at
any time exchanging reciprocal or interinsurance contracts through the attorney filing the
statement required under section 26.1-09-05. A judgment rendered in any case of the nature
described in section 26.1-09-05 is valid and binding upon all subscribers as their liability may
appear and may be satisfied out of any funds in the possession of the attorney belonging to the
subscribers.
### § 26.1-09-07. Maximum indemnity on fire risk - Statement of maximum liability on single

risk.
A subscriber to a reciprocal or interinsurance contract may not assume on any single fire
insurance risk an amount greater than ten percent of the net worth of the subscriber. Whenever
required so to do by the commissioner, the attorney shall furnish to the commissioner a
statement under oath of the attorney showing the maximum amount of indemnity carried upon
any single fire insurance risk.
### § 26.1-09-08. Required assets - Reserve fund.

As used in this section, "net premiums or deposits" means the advance payments by
subscribers after deducting the amounts specifically provided for expenses in subscribers'
agreements. Assets in cash or in securities authorized for investment of funds of insurance
companies doing the same kind of business by the laws of the state in which the principal office
of the exchange is located must be maintained at all times in an amount equal to fifty percent of
the net annual advance premiums or deposits collected and credited to the accounts of
subscribers on policies having one year or less to run and pro rata on those for longer periods,
or in lieu thereof, one hundred percent of the net unearned premiums or deposits collected and
credited to the accounts of subscribers. In addition to those assets, there must be maintained a
reserve in the case of all classes of liability or similar kinds of insurance, in cash or in approved
or authorized securities, sufficient to discharge all liabilities on all outstanding losses arising
under policies issued, calculated on the basis of net premiums or deposits, and in accordance
with the laws relating to reserves for companies insuring similar risks. Whenever the assets are
less than the amount required by this section or less than one hundred thousand dollars,
whichever is the greater, the subscribers, or their attorney for them, shall make up the
deficiency.
### § 26.1-09-09. Annual report - Publication of annual statement - Examination.

The attorney, within the time limited for filing the annual report by insurance companies
transacting the same kind of business, shall make a report to the commissioner for each
calendar year showing the financial condition at the office where the contracts are issued, and
shall furnish any additional information and reports the commissioner requires to show the total
premiums or deposits collected, the total losses paid, the total amounts returned to subscribers,
and the amounts retained for expenses. The attorney may not be required to furnish the names
and addresses of any subscribers. The attorney shall publish an abstract of annual statement as
required by section 26.1-03-10. The business affairs and assets of the attorney are subject to
visitation and examination by the commissioner at the expense of the office examined. If the
principal office of the attorney is located in another state, the commissioner, in lieu of an
examination conducted by the commissioner's office as provided for in this section, may accept
a certified copy of the report of examination made by the insurance office of the state where the
principal office is located or by the insurance department of any other state.
### § 26.1-09-10. Attorney's license fee and gross premium tax in lieu of other taxes.

The attorney, in lieu of all other state, county, or municipal fees and taxes of any and every
character in this state, shall pay annually to the state, on account of the transaction of the

reciprocal or interinsurance exchange business in this state, a license fee of fifteen dollars and a
tax as provided by section 26.1-03-17 on the gross premiums or deposits collected from
subscribers in this state after deducting therefrom all sums returned to the subscribers or
credited to their accounts other than for losses.
### § 26.1-09-11. Appointment of insurance producers by attorney - Insurance producer's

license fee.
The attorney may appoint insurance producers to represent the attorney in this state, but
the insurance producers, before writing or soliciting any of the insurance provided for under this
chapter, must receive a certificate of authority from the commissioner. The fee for the certificate
is that specified in section 26.1-01-07.
### § 26.1-09-12. Certificate of authority - Issuance - Renewal - Suspension and revocation.

Upon compliance with this chapter and the payment of the required fees and taxes, the
commissioner shall issue a certificate of authority to the attorney in the name and title
mentioned in section 26.1-09-04, to expire on the succeeding April thirtieth. The commissioner
may suspend or revoke any certificate in case of a breach of any of the conditions imposed by
the chapter after a reasonable notice in writing has been given to the attorney to appear and
show cause why the action should not be taken. Any attorney who procures a certificate under
this chapter may have the certificate renewed annually thereafter at the time provided for the
issuance of renewal certificates to insurance companies. A certificate continues in force and
effect until a new certificate is issued or is specifically refused.
### § 26.1-09-13. Solicitation without certificate of authority - Limitation.

For the purpose of organization, and upon the issuance of a permit by the commissioner,
powers of attorney may be solicited without a license or certificate of authority, but an attorney,
insurance producer, or other person may not effect any insurance contract under this chapter
until in compliance with this chapter.
### § 26.1-09-14. General insurance laws not applicable.

Except as otherwise provided in this chapter, no insurance law of this state applies to the
exchange of indemnity contracts under this chapter unless the law specifically applies to the
contracts.
### § 26.1-09-15. Penalty.

Any attorney who exchanges any contract of indemnity of the kind and character specified
in this chapter, and any attorney or representative of the attorney who solicits or negotiates any
application for such contract without complying with this chapter, is guilty of a class B
misdemeanor.
