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2023 Regular Session
SENATE BILL NO. 147
BY SENATOR ROBERT MILLS
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
SELF INSURANCE. Creates the Louisiana Churches and Nonprofit Religious
Organizations Self-Insured Fund. (gov sig)
1 AN ACT
2 To enact Subpart P-1 of Part I of Chapter 2 of Title 22 of the Louisiana Revised Statutes of
3 1950, to be comprised of R.S. 22:472.1 through 472.20, relative to self-insurance
4 funds; to authorize the creation of the Louisiana Churches and Nonprofit Religious
5 Organizations Self-Insured Fund; to provide for legislative intent and public purpose;
6 to provide for requirements and management of the self-insurance fund; to provide
7 for definitions; to provide for agreements creating a self-insurance fund; to provide
8 for financial documents; to provide for financial requirements; to provide for excess
9 insurance; to provide for investments; to provide for insurance agents; to provide for
10 rate filings and rate determinations; to provide for insolvencies; to provide for
11 examinations; to provide for audits; to provide for reports; to provide for the hiring
12 of certain professional services providers under certain circumstances; to provide for
13 disclosures; to provide for terms of dissolution; to provide the use of certain fund
14 information; to provide for jurisdiction; and to provide for related matters.
15 Be it enacted by the Legislature of Louisiana:
16 Section 1. Subpart P-1 of Part I of Chapter 2 of Title 22 of the Louisiana Revised
17 Statutes of 1950, comprised of R.S. 22:472.1 through 472.20, is hereby enacted to read as
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1 follows:
2 SUBPART P-1. LOUISIANA CHURCHES AND NONP ROFIT
3 RELIGIOUS ORGANIZATIONS SELF-INSURED FUND
4 §472.1. Legislative finding; public purpose
5 A. Louisiana is currently experiencing a crisis in the availability and
6 affordability of insurance for churches and nonprofit religious organizations.
7 Louisiana property owners and their insurers sustained catastrophic losses in
8 2020 and 2021 from hurricanes Laura, Delta, Zeta, and Ida. As the result of
9 their losses and their assessment of the risk of loss from future storms, many
10 insurers, including the largest insurer of churches, have substantially reduced
11 their participation in the voluntary market for property insurance. With fewer
12 insurers in the voluntary market, competitive pressure on premium rates is
13 reduced. Current underwriting practices have resulted in a substantial increase
14 in the number of Louisiana churches that are forced to obtain their property
15 insurance coverage or their wind and hail coverage from Louisiana Citizens
16 Property Insurance Corporation, if they can indeed find coverage.
17 B. Increased premiums and assessments make property insurance
18 coverage unaffordable for some churches and nonprofit religious organizations.
19 Due to the fact that property insurance is often unavailable or unaffordable,
20 many churches and nonprofit religious organizations are being forced to sell or
21 abandon their churches and religious buildings or are prevented from restoring
22 storm-damaged properties.
23 C. Throughout Louisiana, churches and other religious organizations are
24 the bedrock that holds many communities together. In addition to providing
25 spiritual and emotional support for their membership in times of crisis,
26 churches and other nonprofit religious organizations provide services to the
27 needy such as soup kitchens, food pantries, orphanages, adoption services, and
28 foster care. Churches and other nonprofit religious organizations provide
29 mentorship for the youth, assistance to the elderly, and disaster relief services
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1 when hurricanes and tornadoes strike. Churches and other nonprofit religious
2 organizations also provide much needed hope, help, and services for those
3 individuals in addiction recovery. Church-supported nonviolent offender
4 programs at places such as Angola State Prison have greatly reduced violence
5 in these facilities and greatly reduced recidivism rates in the state. This
6 voluminous list of services, most of which are provided free of charge to the
7 community, resulting in the savings of untold millions of dollars each year to
8 state and local taxpayers.
9 D. The availability of property insurance for churches and other
10 nonprofit religious organizations at a reasonable cost is essential to the
11 well-being of the state. Churches and other religious organizations cannot invest
12 in, and lenders will not finance, the construction and ownership of churches and
13 religious buildings without adequate property insurance protection. The state
14 has a vital interest in fostering the availability of property insurance at
15 reasonable cost for churches and other religious organizations.
16 §472.2. Creation of fund
17 The Louisiana Churches and Nonprofit Religious Organizations
18 Self-Insured Fund is hereby created for the purpose of allowing churches,
19 religious organizations, and religious denominations to ban together and
20 self-insure, thereby, increasing the availability of property insurance for local
21 churches and religious buildings, increasing competitive pressure on insurance
22 rates, and reducing the volume of business written by the Louisiana Citizens
23 Property Insurance Corporation by offering a less expensive alternative to its
24 policyholders and reducing the exposure and potential assessments to
25 policyholders by the Louisiana Citizens Property Insurance Corporation.
26 §472.3. Authorization; requirements; regulation
27 A. Two or more churches or nonprofit religious organizations or one or
28 more religious denominations may agree to pool their liabilities for the purposes
29 of providing property coverage for their buildings and properties, so long as
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1 they have a positive net worth, are financially solvent, and capable of assuming
2 the obligations set forth under this Part.
3 B. The Department of Insurance shall promulgate necessary rules to
4 implement and regulate the activities authorized in this Subpart.
5 §472.4. Definitions
6 Wherever used in this Subpart, unless a different meaning clearly
7 appears in the context, the following terms, whether used in the singular or
8 plural, shall have the following meanings:
9 (1) "Church" means a nonprofit religious organization made up of a
10 group of religious believers.
11 (2) "Department" means the Department of Insurance.
12 (3) "Fund" means the self-insurance fund established pursuant to this
13 Subpart to provide property insurance for churches and nonprofit religious
14 organizations and shall be known as the Louisiana Churches and Nonprofit
15 Religious Organizations Self-Insured Fund.
16 (4) "Hazardous financial condition" means a condition in which, based
17 upon its present or reasonably anticipated financial condition, the fund,
18 although not yet financially impaired or insolvent, is unlikely to be able to:
19 (a) Meet obligations with respect to known claims and reasonably
20 anticipated claims.
21 (b) Pay other obligations in the normal course of business.
22 (5) "Insolvency" means the condition existing when the fund's liabilities
23 are greater than the fund's assets as determined in accordance with generally
24 accepted accounting principles as delineated in the fund's financial statement
25 audited by an independent certified public accountant and calculated before a
26 member distribution is payable or before a dividend is declared.
27 (6) "Nonprofit religious organization" means an active corporation or
28 other entity organized under the United States Internal Revenue Code as a
29 nonprofit organization defined as any one of the following:
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1 (a) A church or religious house of worship.
2 (b) An organization formed for religious purposes.
3 (c) A nonprofit institution affiliated with a faith-based organization.
4 (d) An integrated auxiliary organization of a church.
5 (7) "Property coverage" means coverage for the damage or loss of a
6 structure or building and may include any or all of the following:
7 (a) Premises liability coverage.
8 (b) Contents coverage for furniture or equipment.
9 (c) Wind and hail coverage.
10 (d) Loss of use coverage.
11 (e) Medical payments coverage.
12 (8) "Religious denomination" means a group of individual churches or
13 houses of worship who are called or identified using the same terms and a
14 particular set of beliefs or spiritual or religious values.
15 §472.5. Agreement to pool liabilities; initial financial requirements
16 A.(1) Any arrangement authorized pursuant to this Subpart shall not be
17 deemed to be an insurer or insurance and shall not be subject to the Louisiana
18 Insurance Code, unless specifically referenced in this Subpart. The members of
19 the arrangement shall not be insurers or be subject to the Louisiana Insurance
20 Code.
21 (2) An agreement to pool liabilities under this Subpart shall be set forth
22 in an indemnity agreement signed by the members and fund representatives
23 acknowledging and agreeing to the assumption of the liabilities as set forth in
24 this Subpart.
25 (3) The arrangement shall not be considered a member insurer of the
26 Louisiana Insurance Guaranty Association, nor shall the Louisiana Insurance
27 Guaranty Association be liable for any claim, or increments of any claim, made
28 against the arrangement.
29 (4) The arrangement may include establishment of a trust fund and shall
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1 be for the purpose of serving as the group self-insurance fund for participating
2 Louisiana churches and nonprofit religious organizations which arrangement
3 shall be governed by a board of trustees.
4 (5)(a) The arrangement shall be domiciled in the state of Louisiana. All
5 books, records, documents, accounts, and vouchers of the arrangement shall be
6 kept in a manner that its financial condition, affairs, and operations can be
7 ascertained so that financial statements filed with the Department of Insurance
8 are readily verified and determined whether to be in compliance. Any or all
9 books, records, documents, original indemnity agreements, accounts, and
10 vouchers may be photographed or reproduced on film. Any photographs,
11 microphotographs, optical imaging, or film reproductions of any original books,
12 records, documents, original indemnity agreements, accounts, and vouchers
13 shall for all purposes, including but not limited to admission into evidence in
14 any court or adjudicatory proceeding, be considered the same as the originals,
15 and a transcript, exemplification, or certified copy of any photograph,
16 microphotograph, optical imaging, or film reproduction shall be deemed to be
17 a transcript, exemplification, or certified original. Any original considered
18 reproduced may thereafter be disposed of or destroyed, as provided for in
19 Subparagraph (b) of this Paragraph, provided provisions are made for
20 preserving and examining the reproduction.
21 (b) Except as otherwise provided in Subparagraph (a) of this Paragraph,
22 original books, records, documents, accounts, and vouchers, or reproductions,
23 shall be preserved and kept in this state for the purpose of examination and
24 until the authority to destroy or otherwise dispose of the records is secured from
25 the department. All original records, or certified reproductions, shall be
26 maintained for the period commencing on the first day following the last period
27 examined by the department through the subsequent examination period, or
28 five years, whichever is longer, except that any original, or certified
29 reproduction, in which the member agrees to or acknowledges the members'
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1 solidary liability for liabilities of the fund shall be permanently maintained.
2 (6)(a) In order to maintain financial stability in the fund, the department
3 shall at times that require two or more members of the fund maintain a
4 minimum combined net worth of one million dollars and a current assets to
5 current liabilities ratio of at least one-to-one.
6 (b) After the fund has been operating for three years and has a total
7 surplus of three million dollars, the department may waive the requirements of
8 Subparagraph (a) of this Paragraph.
9 (7)(a) To maintain the financial stability of the fund, the fund shall assess
10 each member an amount which equal to a certain percentage of the premium
11 dollars owed by the member and the percentage paid shall be known as a
12 reserve payment. The percentage amount to be paid by all members shall be
13 approved by the department.
14 (b) All reserve payments shall be deposited into a separate account
15 known as the reserve account and shall be maintained at all times while the
16 fund is in operation. No payment may be paid out of the reserve account unless
17 approved by the department.
18 B. The fund shall submit to the department an application, on an
19 application form prescribed and furnished by the department, for authority to
20 act as a group self-insurance fund for property coverage. Each application shall
21 include evidence of the fund's inception, which establishes financial strength
22 and liquidity of the members to pay claims promptly and support the financial
23 ability of the fund to satisfy its obligations upon the establishment of the fund,
24 including all of the following:
25 (1) Financial statements, dated not less than one year prior to the
26 application, audited by an independent certified public accountant, showing at
27 the inception of the fund a combined net worth of those members of not less
28 than the amount required by Subsection A of this Section. In lieu of an audited
29 financial statement, the department may require that the fund submit necessary
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1 financial documents in a form and manner approved by the department to
2 verify the combined net worth of those members or principals as required in
3 Subsection A of this Section.
4 (2) Current financial documents of all other members dated not less than
5 one year prior to the application.
6 (3) Schedules of the entire membership showing the following items:
7 (a) The ratio of current assets to current liabilities of all members
8 combined to be greater than one-to-one.
9 (b) The working capital of all members combined to be of an amount
10 establishing the financial strength and liquidity of the members to pay claims
11 promptly.
12 (c) The net worth of all members combined to be not less than the
13 amount required by Subsection A of this Section.
14 (4) Other financial information and documents as required by the
15 department.
16 (5) The application shall be in writing, on a form provided by the
17 department, and shall comply with all of the following:
18 (a) Applications shall be submitted to the department at least ninety days
19 prior to the effective date of the establishment of a fund. Any application
20 submitted with fewer than ninety days remaining before the desired effective
21 date, or which does not contain answers to all questions, or which is not sworn
22 to and subscribed before a notary public, or which does not contain all required
23 documents, statements, reports, and required information, may be returned
24 without review by the department.
25 (b) All applications shall be accompanied by the following items:
26 (i) The properly completed indemnity agreement in a form acceptable
27 to the department pursuant to Paragraph (A)(2) of this Section.
28 (ii) Security as required by this Subpart.
29 (iii) Copies of acceptable excess insurance or reinsurance, as required by
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1 this Subpart. All excess insurance or reinsurance shall be approved by the
2 department prior to use.
3 (iv) A bond covering each third-party administrator as provided by this
4 Subpart. If the fund employs its own administrator, the fund shall be required
5 to purchase a bond, errors-and-omission insurance, directors-and-officers
6 insurance, or other security approved by the department for the administration
7 of the fund.
8 (v) A certification from a designated depository attesting to the amount
9 of monies on hand.
10 (vi) Copies of fund bylaws and any trust agreement or other governance
11 documents.
12 (vii) Individual application of each member of the fund applying for
13 membership in the fund on the effective date of the fund and copies of each
14 member's executed indemnity agreements.
15 (viii) Evidence of financial strength and liquidity of the members dated
16 as of the date of the filing of the application to satisfy the financial strength and
17 liquidity requirements of this Subpart.
18 (ix) Proof that the fund shall have the minimum annual earned normal
19 premium required by this Subpart.
20 (x) The current annual report or financial statement of any casualty
21 insurance company providing excess or reinsurance coverage for the fund
22 meeting the requirements of this Subpart, if the statement is not already on file
23 with the department.
24 (xi) The name, address, and telephone number of each attorney
25 representing the fund, each qualified actuary for the fund, and each certified
26 public accountant who will be auditing the annual financial statements of the
27 fund, as well as evidence of appointment of each by the fund.
28 (xii) The domicile address in this state where the books and records of
29 the fund will be maintained, and the state from which the fund will be
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1 administered.
2 (xiii) Proof of advance payment to the fund by each initial member of the
3 fund of not less than twenty-five percent of that member's first year estimated
4 annually earned normal premiums.
5 (xiv) A feasibility study or other analysis prepared by a qualified actuary
6 utilizing actual loss history of the initial members of the fund.
7 (xv) Pro forma financial statements projecting the first three years of
8 operations of the fund based upon a feasibility study or other analysis prepared
9 by a qualified actuary. The pro forma financial statements shall include a pro
10 forma balance sheet, income statement, and statement of cash flow, each of
11 which shall be prepared in accordance with generally accepted accounting
12 principles.
13 (xvi) A copy of the fund's premium billing policy indicating whether the
14 premium payments to the fund are to be paid by members annually, monthly,
15 quarterly, or any combination thereof.
16 §472.6. Requirements; excess insurance; administrative and service companies;
17 status; liability; refunds
18 A. The fund established pursuant to this Subpart shall comply with all
19 of the following items:
20 (1) File rates in accordance with R.S. 22:472.10 and maintain at least
21 seven hundred fifty thousand dollars in earned premiums in the first fund year.
22 In the second and each subsequent year, the fund shall maintain at least two
23 million dollars in earned premiums. The amounts maintained shall be
24 documented on the fund's audited financial statement prepared in accordance
25 with generally accepted accounting principles.
26 (2)(a) During the first fund year, the fund shall deposit with the
27 department a safekeeping receipt or trust receipt from a bank doing business
28 in this state or from a savings and loan association chartered to do business in
29 the state indicating that the fund has deposited and pledged one hundred
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1 thousand dollars in money or bonds of the United States, the state of Louisiana,
2 or any political subdivision of the state, having a par value of one hundred
3 thousand dollars, or post a surety bond issued by a corporate surety authorized
4 to do business in this state, in the amount of one hundred thousand dollars, to
5 secure the obligations of the fund under this Subpart.
6 (b) In the second and subsequent fund years, it shall deposit with the
7 department a safekeeping receipt or trust receipt from a bank doing business
8 in this state or from a savings and loan association chartered to do business in
9 this state indicating that the fund has deposited and pledged two hundred fifty
10 thousand dollars in money or bonds of the United States, the state of Louisiana,
11 or any political subdivision of the state, having a par value of two hundred fifty
12 thousand dollars, or post a surety bond issued by a corporate surety authorized
13 to do business in this state, in the amount of two hundred fifty thousand dollars,
14 to secure the obligations of the fund under this Subpart.
15 (3) Provide property coverage as required by this Subpart.
16 (4)(a) Maintain, on a fund-year basis, a contract or contracts of specific
17 excess insurance or reinsurance of not less than an amount that is actuarially
18 sound and approved by the department. The maximum retention under the
19 excess insurance or reinsurance contracts shall not exceed amounts as may be
20 provided by the department.
21 (b) For purposes of authorizing the purchase of reinsurance required
22 under this Subsection, the fund shall be deemed an insurer. The excess
23 insurance or reinsurance shall be purchased only from a company having a
24 rating of A- by A.M. Best Company, A- by Fitch Ratings, A by Weiss Ratings,
25 A- by S&P Global Ratings, or A3 by Moody's Investors Services, or better, and
26 this reinsurance may be purchased from admitted or nonadmitted companies,
27 provided that the provisions of R.S. 22:651 through 661, and Financial
28 Accounting Standard Number 113 as promulgated and updated by the
29 Financial Accounting Standards Board. The department shall approve all
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1 excess insurance policies or reinsurance agreements prior to use by the fund.
2 (5) File with the department financial statements and financial reports,
3 including financial statements audited by an independent certified public
4 accountant and actuarial reports, as may be required by the department under
5 rules promulgated pursuant to the Administrative Procedure Act.
6 B. In order for a casualty insurance company to be eligible to write
7 excess coverage for the fund, the company shall have on file with the
8 department its current financial statement showing assets, including any
9 surplus to policyholders, at least equal to the current requirements by the
10 department for admission of a new company to do business in this state.
11 Contracts or policies for excess insurance coverage written by active
12 underwriters of Lloyd's of London are acceptable upon prior approval by the
13 department.
14 C. Any fund administrator contracted by the fund and whose acts are
15 not covered by the fund's bond, errors-and-omissions insurance,
16 directors-and-officers' insurance, or other security approved by the
17 department, and any person, including an individual, partnership, corporation,
18 and other entity contracting, either directly or indirectly, with a fund to provide
19 claims adjusting, underwriting, safety engineering, loss control, marketing,
20 investment advisory, or administrative services to the fund or its membership,
21 other than bookkeeping, or auditing, or claims investigation services to the fund
22 shall comply with all of the following:
23 (1) Post a surety bond with the department issued by a corporate surety
24 authorized to do business in this state of not less than fifty thousand dollars or
25 deposit with the department a safekeeping receipt or trust receipt from a bank
26 doing business in this state or from a savings and loan association chartered to
27 do business in this state indicating that the deposit of fifty thousand dollars in
28 money or bonds of the United States, the state of Louisiana, or any political
29 subdivision of the state, having a par value of fifty thousand dollars, to secure
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1 the performance of its obligations under the contract and under this Subpart.
2 (2) Place all terms, agreements, fee arrangements, and any other
3 conditions in a written agreement, which constitute the entire agreement
4 between the parties, signed by the person and the fund.
5 D. A fund created pursuant to this Subpart shall not be considered a
6 partnership under the laws of Louisiana.
7 E. All members of the fund are solidarily liable for liabilities of the fund
8 incurred by the fund after the inception of the fund year in which the operator
9 becomes a member of the fund, to the extent required by this Subpart.
10 F. The board of trustees may declare, as refundable to fund members,
11 any monies in excess of amounts necessary to fulfil obligations of the fund. The
12 board of trustees may distribute the refund at its discretion, in accordance with
13 the agreement establishing the fund and the following conditions:
14 (1) The amount of the distribution shall not exceed the members'
15 distributions payable and recorded on the balance sheet as indicated by the
16 most recently completed audited financial statements of the fund.
17 (2) The fund shall provide written notification to the department at least
18 ten days before the payment of a distribution.
19 G. Each application for membership in the fund shall contain written
20 notice that the fund is not covered by the Louisiana Guarantee Insurance
21 Association.
22 §472.7. Investments
23 A. Only a security or other investment that is interest-bearing or
24 interest- accruing or dividend-paying or income-paying and which is not then
25 in default may be purchased or acquired by the fund and the fund shall receive
26 for its exclusive account and benefit the interest or income accruing on the
27 security.
28 B. The board of trustees may invest amounts not needed for current
29 obligations in any or all of the following items:
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1 (1) Deposits in federally insured banks or savings and loan associations
2 when any one of the following applies:
3 (a) The deposits are insured by the Federal Deposit Insurance
4 Corporation.
5 (b) The deposits are collateralized by direct obligations of the United
6 States government.
7 (2) Bonds or securities not in default as to principal or interest, which are
8 obligations of the United States government or of any agency of the United
9 States government, without limitation.
10 (3) Pass-through mortgage-backed securities and collateralized mortgage
11 obligations issued by the Federal National Mortgage Association, the
12 Government National Mortgage Association, the Federal Home Loan Mortgage
13 Corporation, or the Federal Housing Administration, without limitation,
14 provided that the collateralized mortgage obligations have a minimum rating
15 of A by Moody's, S&P Global Ratings, or Fitch.
16 (4) Obligations of the state of Louisiana or its subdivisions having a
17 minimum rating of A by Moody's, S&P Global Ratings, or Fitch. Not more than
18 five percent of the fund's assets may be invested in any particular issue and the
19 type of investment cannot exceed fifteen percent of the fund's assets in the
20 aggregate.
21 (5) Obligations of any state or its subdivisions having a minimum rating
22 of A by Moody's, S &P Global Ratings, or Fitch. Not more than five percent of
23 the fund's assets may be invested in any particular issue and the type of
24 investment cannot exceed fifteen percent of the fund's assets in the aggregate.
25 (6) Commercial mortgage-backed securities with purchases having a
26 minimum rating of Aaa by Moody's, AAA by S&P Global Ratings, or AAA by
27 Fitch. Not more than two percent of the fund's assets may be invested in one
28 issue, and this type of investment shall not exceed ten percent of the fund's
29 assets in the aggregate.
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1 (7) Asset-backed securities with purchases having a minimum rating of
2 Aa by Moody's, AA by S&P Global Ratings, or AA by Fitch. No more than five
3 percent of the fund's assets may be invested in one issue, and this type of
4 investment cannot exceed ten percent of the fund's assets in the aggregate.
5 (8) Repurchase agreements, without limitation, when the collateral for
6 the agreement is a direct obligation of the United States government, provided
7 that the repurchase agreement shall meet all of the following specifications:
8 (a) Be in writing.
9 (b) Have a specific maturity date.
10 (c) Adequately identify each security to which the agreement applies.
11 (d) State that in the event of default by the party agreeing to repurchase
12 the securities described in the agreement at the term contained in the
13 agreement, title to the described securities shall pass immediately to the fund
14 without recourse.
15 (9) Corporate bonds, subject to the following limitations:
16 (a) The bonds shall have a minimum rating of Baa by Moody's, BBB by
17 S&P Global Ratings, or BBB by Fitch.
18 (b) Except as provided in Subparagraph (d) of this Paragraph, not more
19 than five percent of the fund's assets may be invested in corporate bonds of any
20 particular issue or issuer.
21 (c) Except as provided in Subparagraph (d) of this Paragraph, not more
22 than fifty percent of the fund's assets may be invested in corporate bonds of all
23 types.
24 (d) The five-percent and fifty-percent limitations specified in
25 Subparagraphs (b) and (c) of this Paragraph, respectively, may be exceeded up
26 to an additional ten percent of the fund's assets if the financial circumstances
27 acceptable to the department, like an increase in market value after initial
28 purchase of a corporate bond, provided that the following occur:
29 (i) The initial purchase of corporate bonds was within the limitations
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1 specified in Subparagraphs (b) and (c) of this Paragraph.
2 (ii) In determining the financial condition of the fund, the department
3 shall not include as assets of the fund those corporate bonds which exceed fifty
4 percent of the fund's total assets.
5 (10) Mutual or trust fund institutions registered with the Securities and
6 Exchange Commission under the Securities Act of 1933 and the Investment
7 Company Act of 1940 which have underlying investments consisting solely of
8 securities approved for investment as set forth in this Subsection. This
9 investment shall not exceed fifty percent of the fund's assets in the aggregate.
10 (11)(a) Equities subject to all of the following limitations:
11 (i) The equity sector shall not exceed fifteen percent of the overall
12 investment fund.
13 (ii) A minimum of five different issues shall be held in the equity sector
14 to provide for diversification.
15 (iii) No single issue may represent more than five percent, at cost, of the
16 overall investment fund.
17 (iv) Market capitalization of each issue shall be at least one billion
18 dollars.
19 (v) Each eligible issue shall be paying a cash dividend.
20 (vi) Except as provided in Subparagraph (b) of this Paragraph, equity
21 holdings are restricted to high quality, readily marketable securities
22 corporations that are domiciled in the United States and that are actively traded
23 on the major United States exchanges, including the New York Stock Exchange
24 and the National Association of Securities Dealers Automated Quotation Stock
25 Market, L.L.C.
26 (b) Foreign domiciled corporations are eligible if they trade American
27 Depositary Receipts on the major United States exchanges.
28 (c) In lieu of individual securities, investment in a mutual fund or
29 exchange traded fund which pays a dividend and consists of securities which
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1 have an average market capitalization of at least one billion dollars is permitted.
2 The same general quality constraints shall be met and the aggregate total of the
3 funds, plus any individual securities, may not exceed fifteen percent of the
4 overall investment fund.
5 C. The fund shall not invest in rental assets and shall include but not be
6 limited to any of the following items:
7 (1) Any item carried as an asset on the fund's balance sheet which is not,
8 in fact, actually owned by the fund.
9 (2) Any item carried as an asset on the fund's balance sheet, the
10 ownership of which is subject to resolution, rescission, or revocation upon the
11 fund's insolvency, receivership, bankruptcy, statutory supervision,
12 rehabilitation, liquidation, or upon the occurrence of any other contingency.
13 (3) Any item carried as an asset on the fund's balance sheet for which the
14 fund pays a regular or periodic fee for the right to carry the item as an asset,
15 whether the fee is characterized as a rental, a management fee, or a dividend
16 not previously approved by the department, or other periodic payment for such
17 right. This provision does not apply to leases capitalized under generally
18 accepted accounting principles.
19 (4) Any asset purchased for investment by the fund on credit in which
20 the interest rate paid by the fund on its credit instrument is greater than the
21 interest rate or yield generated by the purchased asset.
22 (5) Any asset on the fund's balance sheet subject to a mortgage, lien,
23 privilege, preference, pledge, charge, or other encumbrance which is not
24 accurately reflected in the liability section of the fund's balance sheet.
25 (6) Any asset received by the fund as a contribution to capital or surplus
26 from any person that meets any of the criteria set forth in Paragraphs (1)
27 through (5) of this Subsection while in the hands of that contributing person, or
28 at the moment of the contribution to capital, or thereafter.
29 §472.8. Authority of Department of Insurance
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1 A. No fund shall become operative until it is issued a certificate of
2 authority by the department. Except for the certificate of authority, the
3 department shall keep confidential all documents and records associated with
4 the provisions of this Section.
5 B. The certificate of authority shall be continuous until revoked or
6 suspended by the department, or until it is voluntarily surrendered by the fund.
7 C.(1) The department may examine the affairs, books, transactions, work
8 papers, files, accounts, records, assets, and liabilities of the fund to determine
9 compliance with this Subpart and pursuant to any rules and regulations
10 promulgated by the department or orders and directives issued by the
11 department. In addition, to the extent necessary and material to the
12 examination of the fund, the department shall have the authority to examine the
13 affairs, books, transactions, work papers, files, accounts, and records of the
14 fund's administrator, service company, certified public accountant, or actuary
15 generated in the course of transacting business on behalf of the group
16 self-insurance fund being examined. All examinations shall be conducted in
17 accordance with the provisions of this Subpart. The reasonable expenses of the
18 examinations shall be paid by the fund.
19 (2) Upon the request of the department, the group self-insurance fund
20 established pursuant to this Subpart shall cause a rate review to be conducted
21 by a national independent actuarial firm, provided that the department shall
22 not make more than two requests in any calendar year for a rate review under
23 the provisions of this Subsection. The firm shall report its findings to the
24 department.
25 (3) All work papers, recorded information, documents, information, and
26 copies thereof produced by, obtained by, or disclosed to the department or any
27 other person, pursuant to the authority of the department under this Subpart,
28 shall be given confidential treatment and are not subject to subpoena, except in
29 the following circumstances:
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1 (a) The information sought has been provided pursuant to an
2 examination, as authorized by R.S. 22:472.13(C), or provided in examination
3 reports, as required by R.S. 22:472.14(I).
4 (b) The documents sought are audited financial statements or financial
5 documents which have been filed with the department.
6 D. The department may issue cease and desist orders and suspend or
7 revoke the certificate of authority of the fund which the department determines
8 is not in compliance with this Subpart or with any rule promulgated by the
9 department pursuant to the Administrative Procedure Act or order or directive
10 issued by the department. A cease and desist order may include a prohibition
11 on writing or incurring any new or renewal business by the fund.
12 E. If the department determines that the fund or any trustee, member,
13 officer, director, or employee of the fund failed to comply with the provisions
14 of this Subpart, any applicable laws relating to the fund, any rule promulgated
15 by the department, or any order or directive issued by the department, the
16 department may levy a fine not to exceed two thousand dollars for each
17 violation. If the conduct for which a previous fine was levied by the department
18 is committed again, the department may levy a fine not to exceed four thousand
19 dollars. The enforcement of any fine and any appeal from a fine shall be
20 conducted in accordance with the Administrative Procedure Act.
21 F. The division of administrative law shall conduct a hearing in
22 accordance with R.S. 22:2191.
23 G. The provisions of this Section shall not prohibit the legislative auditor
24 from reviewing records and conducting an audit in accordance with R.S.
25 24:513.
26 H.(1) The department may order that the group self-insurance fund
27 submit a corrective action plan to the department for its approval to remediate
28 any noncompliance or financial issues affecting the fund.
29 (2) The corrective action plan shall be submitted by the fund to the
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1 department for its approval and include standards, time frames, and other
2 parameters acceptable to the department. Any corrective action plan that is
3 submitted to the department by the fund shall be kept confidential by the
4 department.
5 (3) The corrective action plan may include any of the following:
6 (a) Mandatory training.
7 (b) On-site or off-site monitoring and supervision of the activities of the
8 fund for a specified period of time to determine progress regarding correction
9 of deficiencies.
10 (c) The submission of written progress reports.
11 (d) The institution of measures to conserve or generate additional
12 funding for the fund.
13 (e) The imposition of fines and penalties for any misconduct which
14 contributed to the need for the imposition of the corrective action plan.
15 (4) Failure by the group self-insurance fund to comply with a corrective
16 action plan approved by the department may result in any of the following:
17 (a) The imposition of fines and penalties.
18 (b) Revocation of the fund's certificate of authority.
19 (c) Placement of the fund into administrative supervision pursuant to
20 R.S. 22:731, et seq.
21 (d) Placement of the fund into receivership pursuant to R.S. 22:2001, et
22 seq.
23 §472.9. Licensing of agents; claims against insurance agents
24 A. Any person soliciting membership for the fund shall be licensed by the
25 department as a property and casualty producer pursuant to R.S. 22:1571 et
26 seq. No employee of the fund, religious denomination, or association of
27 nonprofit religious organizations shall be required to be licensed as an agent if
28 the solicitation of membership for the fund is not the primary duty of the
29 employee.
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1 B. No action shall lie against an insurance producer or other person
2 involved in the marketing, selling, or solicitation of participation in the fund for
3 claims arising out of the insolvency of the fund or the inability of the fund to pay
4 claims as they become due unless the claimant first exhaust all remedies
5 available to him against the members of the fund as provided by this Subpart.
6 §472.10. Rates; filing; review of rate determination
7 A. The fund shall use rates filed on an actuarially justified basis with the
8 department for ninety days, unless the department disapproves the use of rates
9 within the ninety-day period.
10 B. The fund shall provide a reasonable procedure for any member
11 aggrieved by the fund to request in written form a review of the application of
12 the rating system for the coverage afforded by the fund. The fund may grant or
13 deny the request in written form within thirty days after receipt of the request.
14 If the fund rejects a request or fails to grant or reject a request within the
15 thirty-day period, the member may appeal to the division of administrative law
16 for a hearing in accordance with the provisions of the Administrative Procedure
17 Act within thirty days after expiration of the thirty day period. After the
18 hearing, the administrative law judge may affirm, modify, or reverse the action
19 taken by the fund.
20 §472.11. Consecutive net losses
21 If the fund has three years of consecutive net losses on the audited
22 financial statements of the fund, or two years of consecutive net losses on the
23 audited financial statements of the fund in excess of five hundred thousand
24 dollars or five percent of the premium of the latest audited financial statement,
25 whichever is greater, an authorized representative of the fund shall do all of the
26 following:
27 (1) Attend a meeting with the department, the administrator of the fund,
28 any third-party administrator contracted or performing services for the fund,
29 and the fund's board of trustees to discuss the financial condition of the fund
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1 and to advise the department of the course of action the fund will take to obtain
2 net incomes on subsequent audited financial statements.
3 (2) File with the department a written and signed plan from the fund's
4 board of trustees describing the actions the fund will take to generate net
5 incomes on subsequent audited financial statements.
6 (3) Obtain an actuarial rate analysis, if an actuarial rate analysis was not
7 performed for the previous fund year.
8 §472.12. Insolvencies
9 A. If the fund is insolvent, in addition to any other provision of law or
10 rule, the department shall require that the fund files a written plan within sixty
11 days from the date the fund becomes aware of the insolvency, and the plan shall
12 be signed by the board of trustees. In determining the fund's insolvency, assets
13 shall not include intangible property, like patents, trade names, or goodwill. The
14 plan submitted by the fund to eliminate the insolvency shall set forth in detail
15 the means by which the fund intends to eliminate the insolvency and may
16 include an assessment of the members of the fund including the timetable for
17 implementation of the plan and requirements for reporting to the department.
18 The department shall review the plan submitted by the fund and notify the fund
19 of the plan's approval or disapproval within thirty days of the department's
20 receipt of the plan.
21 B. If the department determines that a plan submitted by the fund is
22 disapproved or, once a plan has been approved by the department, that the fund
23 is not implementing a plan in accordance with the terms of the plan, the
24 department shall give written notification to the fund of its determination.
25 C. If administrative supervision becomes necessary, the provisions of
26 Subpart H of Part III of Chapter 2 of this Title shall apply to the fund and the
27 department shall have administrative supervision over the fund in the same
28 manner as if the fund were an insurance company.
29 D.(1) In addition to any other powers of the department, if the group
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1 self-insurance fund is insolvent, operating in a hazardous financial condition,
2 or operating in violation of the requirements of this Subpart, the department
3 may institute delinquency proceedings against the fund, including entering an
4 order for injunctive relief or placing the fund into administrative supervision,
5 pursuant to R.S. 22:731 et seq. or into receivership pursuant to R.S. 22:2001 et
6 seq.
7 (2) The department shall promulgate rules and regulations in accordance
8 with the Administrative Procedure Act providing for the grounds, conduct, and
9 procedures applicable to the delinquency proceedings.
10 E. The distribution of general assets from the estate of the fund shall be
11 prioritized as follows:
12 (1) The department's costs and expenses of administration.
13 (2) Payment of claims to third parties and insureds arising out of and
14 within the coverage of agreements or evidences of coverage issued by the fund,
15 up to the policy limits.
16 (3) Payment of claims by the federal government other than those claims
17 otherwise prioritized within this Subsection.
18 (4) Payment of compensation owed to employees of the fund shall be paid
19 in accordance with the applicable provisions of administrative supervision,
20 pursuant to R.S. 22:731 et seq. or receivership pursuant to R.S. 22:2001 et seq.
21 (5) Payment of claims for unearned premiums or other premium refunds
22 and claims of general creditors, including claims of any ceding and assuming
23 company in their capacity as such.
24 (6) Payment of all other claims.
25 §472.13. Examination
26 A. The department shall, at least once every five years conduct an
27 examination of the group self-insurance fund and at such other times as the
28 department deems it is necessary.
29 B. If an examination is needed, the department shall appoint one or more
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1 examiners to perform the examination and instruct them as to the scope of the
2 examination. In performing its examination, the examiner or examiners shall
3 observe the guidelines and procedures deemed appropriate by the department.
4 C. The provisions of this Subpart shall not be construed to limit the
5 department's authority to use any final or preliminary examination report, any
6 examiner or fund work papers or other documents, or any other information
7 discovered or developed during the course of any examination in the
8 furtherance of any legal or regulatory action which the department may
9 consider appropriate.
10 D. The provisions of this Subpart shall not be construed to limit the
11 authority of the department to terminate or suspend any examination in order
12 to pursue other legal or regulatory action pursuant to the applicable laws of this
13 state. Findings of fact and conclusions made pursuant to any examination shall
14 be prima facie evidence in any legal or regulatory action.
15 E. In conducting its examination, the department shall examine the
16 affairs, transactions, accounts, records, documents, and assets of the authorized
17 group self-insurance fund. For the purpose of ascertaining its condition or
18 compliance with this Subpart, the department may examine the accounts,
19 records, documents, and transactions of all of the following items:
20 (1) Any insurance agent, solicitor, or broker, but only insofar as the
21 accounts, records, documents, and transactions relate to group self-insurance
22 funds.
23 (2) Any person having a contract under which he enjoys, in fact, the
24 exclusive or dominant right to manage or control the group self-insurance fund.
25 F. The group self-insurance fund being examined, and its officers,
26 trustees, employees, administrators, and representatives, shall produce and
27 make freely accessible to the department the accounts, records, documents, and
28 files in its possession or control relating to the subject of the examination and
29 shall otherwise facilitate the examination.
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1 G. The department may take depositions, subpoena witnesses or
2 documentary evidence, administer oaths, and examine under oath any
3 individual relative to the affairs of the group self-insurance fund being
4 examined. Any person who testifies falsely or makes any false affidavit during
5 the course of an examination shall be guilty of perjury.
6 H. If the department conducts an examination or investigation pursuant
7 to this Subpart, all expenses incurred by the department including the expenses
8 and fees of examiners, auditors, accountants, actuaries, attorneys, or clerical or
9 other assistants who are employed by the department to make the examination,
10 shall be paid by the group self-insurance fund.
11 I. The department may recover all expenses incurred from time to time
12 for the examination or investigation of any person or entity acting as an
13 administrator or third-party administrator in this state for the group
14 self-insurance fund.
15 J. The department shall employ the examiners, auditors, accountants,
16 actuaries, attorneys, and clerical or other assistants as are necessary to conduct
17 the examination and to compile and prepare a report thereon, and the
18 compensation for such examination shall be fixed according to the time actually
19 devoted to the work, including conducting the examination and compiling the
20 report thereon, as required by law. Compensation paid pursuant to this
21 Subsection shall be reasonable and commensurate with the value of the services
22 performed.
23 K. Upon completion of the examination of the group self-insurance fund
24 or at stated periods during an examination, the department shall forward to the
25 group self-insurance fund a statement showing the amount of expenses incurred
26 in the examination to the date of the statement. Upon receipt, the group
27 self-insurance fund shall pay the amount of expenses to the department.
28 L. After the receipt of the billing, if the group self-insurance fund
29 considers the amount of expenses billed to it unreasonable or contrary to the
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1 provisions of this Subpart, the fund within fifteen days, may file a rule to show
2 cause in a court of competent jurisdiction upon the department as to the
3 reasonableness and legality of the amount of expenses billed to it by the
4 department. The rule to show shall be tried in court by preference as to
5 scheduling, and upon appeal, shall be given preference in the appellate court,
6 as provided by the law in the same manner as that given to the state for other
7 state cases.
8 M. If the group self-insurance fund fails or refuses to pay the expenses
9 of examination as billed by the department after fifteen days from the receipt
10 of the billing or after final judgment of the court where a rule has been filed as
11 provided in this Subpart, then the department may suspend or revoke the
12 certificate of authority of such group self-insurance fund to do business in this
13 state until the full amount of the bill is paid.
14 §472.14. Examination reports
15 A. All examination reports shall be comprised only of facts appearing
16 upon the books, records, or other documents of the group self-insurance fund
17 or as ascertained from the testimony of its officers or agents or other persons
18 examined concerning its affairs, and any conclusions and recommendations the
19 examiners find reasonably warranted from the facts. The department shall keep
20 confidential all documents and records associated with the provisions of this
21 Section.
22 B. Not later than sixty days following completion of the examination, the
23 examiner in charge shall file with the department a verified written report of
24 examination under oath. Upon receipt of the verified report, the department
25 shall transmit the report to the fund examined, together with a notice which
26 shall afford the fund examined a reasonable opportunity of not more than thirty
27 days to make a written submission or rebuttal with respect to any matters
28 contained in the examination report.
29 C. Within thirty days of the end of the period allowed for the receipt of
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1 written submissions or rebuttals, the department shall fully consider and review
2 the report, together with any written submissions or rebuttals and any relevant
3 portions of the examiner's work papers, and enter an order for one of the
4 following:
5 (1) Adoption of the examination report as filed, or with modifications or
6 corrections. If the examination report reveals that the group self-insurance fund
7 is operating in violation of any law, rule, regulation, or prior order or directive
8 of the department, the department may order the fund to take any action the
9 department determines is necessary and appropriate to cure the violation.
10 (2) Rejection of the examination report with direction to the examiners
11 to reopen the examination for purposes of obtaining additional documentation,
12 data, information, and testimony.
13 D. Within thirty days of rejection by the department of an examination
14 report in accordance with Paragraph (C)(2) of this Section, unless the
15 department extends the time for reasonable cause, the examiner in charge shall
16 refile with the department a verified written report of examination, as may be
17 modified or corrected, under oath. Upon receipt of the refiled verified report,
18 the department shall transmit the refiled report to the fund examined, together
19 with a notice similar to the notice provided for in Subsection B of this Section,
20 except the notice shall indicate that the report is a refiled report.
21 E. Within thirty days of the end of the period allowed for the receipt of
22 written submissions or rebuttals, as provided for in Subsections B and D of this
23 Section, the department shall fully consider and review the refiled report,
24 together with any written submissions or rebuttals and any relevant portions
25 of the work papers of the examiner, and enter an order for one of the following:
26 (1) Adoption of the examination report as refiled or with modification
27 or corrections. If the refiled examination report reveals that the group
28 self-insurance fund is operating in violation of any law, rule, regulation, or prior
29 order or directive of the department, the department may order the fund to
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1 take any action the department considers necessary and appropriate to cure the
2 violation.
3 (2) Rejection of the examination report and referral of the matter for
4 hearing before an administrative law judge within the division of administrative
5 law in accordance with the provisions of the Administrative Procedure Act, for
6 purposes of obtaining additional documentation, data, information, and
7 testimony.
8 F. All orders entered pursuant to Paragraph (C)(1) or (E)(1) of this
9 Section shall be accompanied by findings and conclusions resulting from
10 consideration by the department and review of the examination report, relevant
11 examiner work papers, and any written submissions or rebuttals. Any order
12 shall be served upon the fund by certified mail, together with a copy of the
13 adopted examination report. Within thirty days of the issuance of the adopted
14 report, the trustees of the group self-insurance fund shall state, under oath, that
15 they have received a copy of the adopted report and related orders.
16 G. Within thirty days after receipt of notification of the department's
17 order pursuant to Subsection F of this Section, the fund may make written
18 demand for an administrative law hearing in accordance with the provisions of
19 the Administrative Procedure Act.
20 H.(1) The hearing provided for under Subsection G of this Section shall
21 be conducted as required by the Administrative Procedure Act. At the
22 conclusion of the hearing, the administrative law judge shall enter an order
23 adopting the examination report as filed, or subsequently filed again with
24 modifications or corrections, and may order the fund to take any action that the
25 department considers necessary and appropriate to cure any violation of any
26 law, regulation, or prior order or directive of the department.
27 (2) The division of administrative law shall issue the order within thirty
28 days after the conclusion of the hearing and shall give a copy of the order to
29 each person to whom notice of the hearing was given or required to be given.
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1 I.(1) Upon the adoption of the examination report under Paragraph
2 (C)(1) or (E)(1) or Subsection H of this Section, the department shall continue
3 to hold the content of the examination report as private and confidential
4 information for a period not to exceed thirty consecutive days, unless the
5 provisions of R.S. 22:472.13(C) and Subsection B of this Section apply.
6 Thereafter, the department may open the report for public inspection provided
7 no court of competent jurisdiction has stayed its publication.
8 (2) Notwithstanding any provision of law to the contrary, nothing shall
9 prevent, or be construed to prohibit, the department from disclosing the content
10 of an examination report, preliminary examination report or results, or any
11 matter relating thereto, to another office of the department or to the insurance
12 department of any other state or country, or to law enforcement officials of this
13 or any other state or agency of the federal government at any time, provided the
14 agency or office receiving the report or matters relating thereto agrees, in
15 writing, to hold it confidential and in a manner consistent with this Subpart.
16 (3) If the department determines that regulatory action is appropriate
17 as a result of any examination, it may initiate any proceedings or actions as
18 provided by law.
19 J. All work papers, recorded information, and documents, as well as all
20 copies thereof produced by, obtained by, or disclosed to the department, or any
21 other person, in the course of an examination made under this Subpart, or
22 pursuant to the authority of the commissioner under this Subpart, shall be given
23 confidential treatment and are not subject to subpoena and may not be made
24 public by the department or any other person, unless the provisions of R.S.
25 22:472.13(C) and Subsection I of this Section apply. The parties shall agree, in
26 writing prior to receiving the information, to provide to it the same confidential
27 treatment as required by this Section, unless the prior written consent of the
28 fund has been obtained.
29 K.(1) No examiner may be appointed by the department if that examiner,
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1 either directly or indirectly, has a conflict of interest or is affiliated with the
2 management of or owns a pecuniary interest in any person or entity subject to
3 examination under this Subpart.
4 (2) Notwithstanding the requirements of this Section, the department
5 may retain from time to time, on an individual basis, qualified actuaries,
6 certified public accountants, or other similar individuals who are independently
7 practicing their professions, even though those persons may from time to time
8 be similarly employed or retained by persons subject to examination under this
9 Subpart.
10 L.(1) No cause of action shall arise nor shall any liability be imposed
11 against the department, the authorized representative of the department, or any
12 examiner appointed by the department for any statement made or conduct
13 performed in good faith while carrying out the provisions of this Subpart.
14 (2) No cause of action shall arise nor shall any liability be imposed
15 against any person for the act of communicating or delivering information or
16 data to the department, or the authorized representative of the department, or
17 an examiner, pursuant to an examination made under this Subpart, if that act
18 of communication or delivery was performed in good faith and without
19 fraudulent intent or the intent to deceive.
20 M.(1) In addition to those examinations performed pursuant to R.S.
21 22:472.13, the department shall conduct financial reviews of the group self-
22 insurance fund. The reviews shall include the audited financial statements of the
23 group self-insurance fund rendered pursuant to generally acceptable accounting
24 principles, results of prior examinations and office reviews, management
25 changes, consumer complaints, and any other relevant information as from time
26 to time may be required by the department.
27 (2) Failure by the group self-insurance fund to supply information
28 requested by the department during the course of a financial review shall
29 subject the group self-insurance fund to revocation or suspension of its license
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1 or a fine not to exceed ten thousand dollars per occurrence.
2 (3) All work papers, recorded information, and documents as well as all
3 copies thereof produced by, obtained by, or disclosed to the department, or any
4 other person in the course of conducting a financial review, shall be given
5 confidential treatment and are not subject to subpoena and may not be made
6 public by the department or any other person, except that any access may be
7 granted to insurance departments of other states; international, federal, or state
8 law enforcement agencies; or international, federal, or state regulatory agencies
9 with statutory oversight over the financial services industry, if the recipient
10 agrees to maintain the confidentiality of those documents which are confidential
11 under the laws of this state.
12 (4) In conducting financial reviews, the examiner or examiners shall
13 observe those guidelines and procedures as the department may deem
14 appropriate.
15 (5) Nothing contained in this Subpart shall be construed to limit the
16 department's authority to use any final or preliminary analysis findings, any
17 department or fund work papers or other documents, or any other information
18 discovered or developed during the course of any analysis in the furtherance of
19 any legal or regulatory action.
20 (6) The group self-insurance fund against whom a fine has been levied
21 shall be given ten days' notice of imposition of the fine. Upon receipt of this
22 notice, the aggrieved party may apply for and is entitled to an administrative
23 hearing pursuant to the Administrative Procedure Act.
24 N. The provisions of this shall not prohibit the legislative auditor from
25 reviewing records and conducting an audit in accordance with R.S. 24:513.
26 §472.15. Authorization of the Department of Insurance to employ investigators
27 The department may to employ investigators to investigate complaints
28 received against the group self-insurance fund authorized to do business in this
29 state and against any unauthorized group self-insurance fund that is reported
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1 to be operating in this state.
2 §472.16. Disclosure
3 A. It is unlawful for any person who is an officer, trustee, employee,
4 administrator, agent, or representative of the group self-insurance fund, as well
5 as any person, partnership, corporation, banking corporation, or any other
6 legal entity which performs any service for the group self-insurance fund, or
7 prepares any report, audit, financial statement or report for, or makes any
8 representation on behalf of, for, or with regard to the group self-insurance fund,
9 in connection with any investigation, or examination authorized by this
10 Subpart, to act with the specific intent to do any of the following items:
11 (1) Represent falsely, directly or indirectly, to the department or any
12 employee, trustee, or administrator of the department, that an asset of the
13 group self-insurance fund is unencumbered, or to misrepresent any other
14 material fact pertaining to the status of any asset or liability of the group
15 self-insurance fund.
16 (2) Materially misrepresent to the department, or any employee, trustee,
17 or administrator of the department, the value of any asset or the amount of any
18 liability of the group self-insurance fund, or any affiliate, subsidiary, or holding
19 fund associated therewith, provided that with regard to a material
20 misrepresentation of the value of any asset or liability, any deviation from the
21 actual value of assets or liability which results from utilization of and
22 compliance with generally accepted insurance accounting and reporting
23 procedures shall not be deemed a violation of this Section.
24 (3) Fail to disclose to the department the existence of any liability of the
25 group self-insurance fund, or affiliate, subsidiary, or holding company
26 associated therewith when such disclosure is properly requested or required in
27 writing by an examiner or administrator of the department.
28 (4) Materially misrepresent, withhold, deny access to, or otherwise
29 preclude the obtainment of any information properly requested in writing and
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1 in accordance with provisions of law affecting dissemination or disclosure of
2 information by specific institutions by an examiner or administrator of the
3 department, which is material and relevant to an examination properly
4 conducted by the department and examiners and administrators of the
5 department.
6 B. Whoever violates any provision of this Section, upon conviction, shall
7 be fined by the court not more than fifty thousand dollars or subject to the
8 penalties provided in R.S. 22:1924.
9 §472.17. Departmental complaint directives; failure to comply; fines; hearing
10 A. Any person subject to the regulatory authority of the department who
11 fails to comply with any directive issued by the department in connection with
12 a consumer complaint filed pursuant to this Subpart shall be fined an amount
13 not to exceed two hundred fifty dollars for each occurrence.
14 B. Any person against whom a fine has been levied shall be given ten
15 days, notice of the action. Upon receipt of this notice, the person aggrieved may
16 apply for and may have an administrative hearing conducted in accordance
17 with the provisions of the Administrative Procedure Act.
18 §472.18. Dissolution
19 A. If the fund elects to dissolve, it shall apply to the department for
20 authority to dissolve. An application for dissolution shall be on forms prescribed
21 by the department and shall be approved or disapproved by the department
22 within sixty days of receipt.
23 B. The dissolution of the fund without authorization is prohibited and
24 shall not absolve or release the fund, a member, or any person or entity which
25 has executed an indemnity agreement from the fund's or person's obligations
26 incurred or entered into prior to the dissolution of the fund.
27 C. Applications to dissolve shall be granted if either of the following
28 conditions are met:
29 (1) The fund has no outstanding liabilities including incurred but not
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1 reported liabilities.
2 (2) The fund is covered by an irrevocable commitment from a licensed
3 insurer which provides for payment of all outstanding liabilities and for
4 providing all related services, including payment of claims, preparation of
5 reports, and administration of transactions associated with the period during
6 which the plan provided coverage.
7 D. Upon the dissolution of the fund and after payment of all outstanding
8 liabilities and indebtedness, the assets of the fund shall be distributed to all
9 employers participating in the fund pursuant to a distribution plan submitted
10 by the fund to the department and approved by the department.
11 §472.19. Exclusive use of information
12 A.(1) Except as otherwise provided in this Section, for purposes of
13 soliciting, selling, or negotiating the renewal or sale of group self-insurance
14 coverage, products, or insurance services, an insurance agent or insurance
15 broker shall have the exclusive use of expirations, records, or other written or
16 electronic information directly related to the group self-insurance application
17 submitted by or the group self-insurance policy written through an insurance
18 agent or insurance broker. The group self-insurance fund shall not use
19 expirations, records, or other written or electronic information to solicit, sell,
20 or negotiate the renewal or sale of insurance coverage, insurance products, or
21 insurance services to the insured, either directly or by providing such
22 information to others, without the express written consent of the insurance
23 agent or insurance broker.
24 (2) The expirations, records, or other written or electronic information
25 may be used to review the group self-insurance application, to issue a policy, or
26 for any other purpose necessary for placing such business through the insurance
27 producer. The expirations, records, or other written or electronic information
28 may also be used for any other purpose which does not involve the soliciting,
29 selling, or negotiating the renewal or sale of group self-insurance coverage,
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1 products, or services.
2 B. This Section shall not apply:
3 (1) When the member of the fund requests, individually or through an
4 insurance producer, that the group self-insurance company renew the policy or
5 write other insurance business.
6 (2) When the insurance agent has, by contract, agreed to act exclusively
7 for one company or group of affiliated companies, in which case the rights of the
8 agent shall be determined by the terms of the agent's contract with that
9 company or affiliated group.
10 (3) When the insurance producer is in default for nonpayment of
11 premiums under the insurance agent's or insurance broker's contract or other
12 agreement with the group self-insurer, unless there is a legitimate dispute as to
13 monies owed.
14 (4) When the agency contract is terminated and the insurance company
15 is required by law to continue coverage for the insured, in which event the
16 insurance company shall continue to pay the insurance agent or the insurance
17 broker commissions on such policies that the company is required to renew
18 during the thirty-six-month period following the effective date of the
19 termination. The commission shall be at the insurer's prevailing commission
20 rates in effect on the date of renewal for that class or line of business in effect
21 on the date of renewal for brokers or agents whose contracts are not
22 terminated.
23 C. The insurance producer and insurer may, in a written agreement
24 separate from the agency contract, mutually agree to terms different from the
25 provisions set forth in this Section. The terms of the agreement shall be
26 negotiated in good faith between the parties.
27 D.(1) The department may adopt rules, in accordance with the
28 Administrative Procedure Act, to enforce the provisions of this Section, and any
29 violation of this Section or the rules adopted pursuant to this Section shall be
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1 subject to regulation by the department under R.S. 22:472.8.
2 (2) In addition, the insurance producer may have a claim for lost
3 commissions. The claim shall be resolved in accordance with the dispute
4 resolution terms in the applicable contract or agreement. In the absence of any
5 dispute resolution terms, the parties shall attempt to resolve their dispute
6 through mediation. If the claim is not resolved through mediation, the claim
7 may be resolved through binding arbitration if the parties agree. In the absence
8 of an agreement to resolve the claim through binding arbitration, the insurance
9 producer may maintain an action for lost commissions.
10 (3) Except as provided in Subsection B of this Section, nothing in this
11 Section shall be interpreted as impairing any rights in law or contract currently
12 enjoyed by any party.
13 §472.20. Jurisdiction
14 The Nineteenth Judicial District Court shall have exclusive jurisdiction
15 over any proceeding instituted pursuant to this Subpart.
16 Section 2. This Act shall become effective upon signature by the governor or, if not
17 signed by the governor, upon expiration of the time for bills to become law without signature
18 by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
19 vetoed by the governor and subsequently approved by the legislature, this Act shall become
20 effective on the day following such approval.
The original instrument was prepared by Carla S. Roberts. The following
digest, which does not constitute a part of the legislative instrument, was
prepared by Thomas L. Tyler.
DIGEST
SB 147 Engrossed 2023 Regular Session Robert Mills
Proposed law authorizes the creation of a self-insurance fund to provide property coverage
for churches and nonprofit religious organizations. Creates the Louisiana Churches and
Nonprofit Religious Organizations Self-Insured Fund to allow churches and religious
organizations to self-insure by allowing churches, religious organizations, and religious
denominations to ban together and self-insure to increase availability of property insurance
for local churches and religious buildings, increasing competition on insurance rates, and
reducing the volume of business written by the Louisiana Citizens Property Insurance
Corporation.
Proposed law authorizes two or more churches or nonprofit religious organizations or one
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or more religious denominations to pool their liabilities for the purposes of providing
property coverage for their buildings and properties, so long as they have a positive net
worth, are financially solvent, and capable of assuming the obligations.
Proposed law defines "hazardous financial condition", "insolvency", "nonprofit religious
organization", and "property coverage" which includes coverage for damage or loss of a
structure or building and may include any or all of the following:
(1)Premises liability coverage.
(2)Contents coverage for furniture or equipment.
(3)Wind and hail coverage.
(4)Loss of use coverage.
(5)Medical payments coverage.
Proposed law provides that agreements to pool liabilities are not to be deemed insurance and
are not subject to the Louisiana Insurance Code nor shall it be insured by the La. Insurance
Guaranty Association nor shall the Association be liable for any claims under the agreement.
Proposed law provides for establishment of a trust fund to serve as the group self-insurance
fund governed by a board of trustees.
Proposed law requires that two or more members of the fund maintain a minimum combined
net worth of one million dollars with a ratio of current assets to liabilities of at least one-to-
one. Provides that once the fund has been in operation for three years and has a total surplus
of three million dollars, the Department of Insurance may waive the one million dollar
requirement.
Proposed law provides for audit of financial statements or the department may require
submission of necessary financial documents in a form and manner approved by the
Department of Insurance.
Proposed law provides for written application to the Department of Insurance to form a self-
insurance fund. Requires that applications contain the following items:
(1)The properly completed indemnity agreement in a form acceptable to the department.
(2)Security as required by law.
(3)Copies of acceptable excess insurance or reinsurance as required by law.
(4)A bond covering each third-party administrator as provided by law. If the fund
employs its own administrator, the fund shall purchase a bond, errors-and-omission
insurance, directors-and-officers insurance, or other security approved by the
department for the administration of the fund.
(5)A certification from a designated depository attesting to the amount of monies on
hand.
(6)Copies of fund bylaws and any trust agreement or other governance documents.
(7)Individual application of each member of the fund applying for membership in the
fund and copies of each member's executed indemnity agreement.
(8)Evidence of financial strength and liquidity of the members dated as of the date of
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the filing of the application.
(9)Proof that the fund shall have the minimum annual earned normal premium required
by law.
(10)The current annual report or financial statement of any casualty insurance company
providing excess or reinsurance coverage for the fund meeting the requirements of
law.
(11)The name, address, and telephone number of each attorney representing the fund,
each qualified actuary for the fund, and each certified public accountant who will be
auditing the annual financial statements of the fund, as well as evidence of
appointment of each by the fund.
(12)The domicile address in this state where the books and records of the fund will be
maintained, and the state from which the fund will be administered.
(13)Proof of advance payment to the fund by each initial member of the fund of not less
than 25% of that member's first year estimated annually earned normal premiums.
(14)A feasibility study or other analysis prepared by a qualified actuary utilizing actual
loss history of the initial members of the fund.
(15)Pro forma financial statements projecting the first three years of operations of the
fund based upon a feasibility study or other analysis prepared by a qualified actuary
which shall include a pro forma balance sheet, income statement, and statement of
cash flow, each of which shall be prepared in accordance with generally accepted
accounting principles.
(16)A copy of the fund's premium billing policy indicating whether the premium
payments to the fund will be paid by members annually, monthly, quarterly, or any
combination thereof.
Proposed law sets forth certain requirements for the fund; provides for excess insurance;
administrative and service companies; liability of the fund; and refunds. Provides that the
fund is not to be considered a partnership under state law; that fund members shall be
solidarily liable for liabilities of the fund incurred by the fund after the inception of the fund
year in which the operator becomes a member of the fund, to the extent required by law.
Proposed law provides that monies in excess of that necessary to pay all obligations of the
fund may be declared as refundable to the members of the fund by the board of trustees.
Proposed law provides for investments by the fund and that securities or other investments
be interest-bearing or interest-accruing or dividend-paying or income-paying. Prohibits
investment in rental assets.
Proposed law delineates the authority of the Department of Insurance in the self-insurance
fund. Provides that nothing shall prohibit the legislative auditor from reviewing records and
conducting an audit in accordance with law.
Proposed law requires licensing of persons soliciting membership except that no employee
of the fund, religious denomination, or association of nonprofit religious organizations shall
be required to be licensed as an agent if the solicitation of membership for the fund is not
the primary duty of the employee.
Proposed law requires the fund to file rates on an actuarially justified basis with the
department and to use the rates ninety days after filing, unless disapproved by the
department within the ninety-day period.
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Proposed law provides for actions when the fund has three years of consecutive net losses
on the audited financial statements of the fund, or two years of consecutive net losses on the
audited financial statements of the fund in excess of five hundred thousand dollars or five
percent of the premium of the latest audited financial statement, whichever is greater.
Proposed law provides for insolvencies involving the fund and for the department to conduct
examination of the fund at least once every five years. Provides that the examination include
the affairs, transactions, accounts, records, documents, and assets of the authorized group
self-insurance fund. Provides that all expenses incurred by the department in conducting the
examination or investigation, including the expenses and fees of examiners, auditors,
accountants, actuaries, attorneys, or clerical or other assistants who are employed by the
department, shall be paid by the group self-insurance fund.
Proposed law provides for response to issues related in the examination by the fund.
Proposed law provides for instances procedures in which the fund chooses to dissolve and
for approval or disapproval by the department. Prohibits dissolution of the fund without
authorization. Provides that application to dissolve be granted if either of the following
conditions is met:
(1)The fund has no outstanding liabilities including incurred but not reported liabilities.
(2)The fund is covered by an irrevocable commitment from a licensed insurer which
provides for payment of all outstanding liabilities and for providing all related
services, including payment of claims, preparation of reports, and administration of
transactions associated with the period during which the plan provided coverage.
Proposed law grants exclusive jurisdiction over any proceeding instituted under proposed
law to the Nineteenth Judicial District Court.
Effective upon signature of the governor or upon lapse of time for gubernatorial action.
(Adds R.S. 22:472.1 through 472.20)
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Insurance to the original
bill
1. Adds comprehensive provisions regarding the obligations, operations, and
responsibilities of the self-insurance fund.
2. Adds provisions for financial audits of the fund.
3. Adds provisions as to requirements for application of the self-insurance fund.
4. Adds provisions for excess insurance; administrative and service companies;
and for fund members to be solidarily liable for liabilities of the fund.
5. Adds provisions for investments by the fund.
6. Adds provisions as to fund audits by the Department of Insurance.
7. Adds provisions regarding records of the fund.
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