Rhode Island 2025 Regular Session

Rhode Island Senate Bill S0600 Compare Versions

Only one version of the bill is available at this time.

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5	5	2025 -- S 0600
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7	7	LC001777
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9	9	S T A T E O F R H O D E I S L A N D
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2025
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO INSURANCE -- VOLUNTARY RESTRUCTURING OF SOLVENT
16	16	INSURERS
17	17	Introduced By: Senators Sosnowski, Murray, and Britto
18	18	Date Introduced: March 06, 2025
19	19	Referred To: Senate Commerce
20	20	(Dept. of Business Regulation)
21	21
22	22	It is enacted by the General Assembly as follows:
23	23	SECTION 1. Section 27-14.5-1 of the General Laws in Chapter 27-14.5 entitled 1
24	24	"Voluntary Restructuring of Solvent Insurers" is hereby amended to read as follows: 2
25	25	27-14.5-1. Definitions. 3
26	26	As used in this chapter: 4
27	27	(1) “Applicant” means a commercial run-off insurer applying under § 27-14.5-4. 5
28	28	(2) “Assessment deficit” means the amount that the assessment for the previous year under 6
29	29	§ 27-14.5-5 is less than, and “assessment surplus” is the amount that the assessment for the previous 7
30	30	year exceeds: 8
31	31	(i) The run-off insurer’s proportionate share of regulatory expenditure for the previous 9
32	32	year, if the run-off insurer was domiciled in Rhode Island on March 15 of the previous year; or 10
33	33	(ii) The redomestication expenditure for the previous year attributable to the run-off 11
34	34	insurer, if the run-off insurer was not domiciled in Rhode Island on March 15 of the previous year. 12
35	35	(3) “Assumption policyholder” means a policyholder whose policy is reinsured under an 13
36	36	assumption reinsurance agreement between the applicant and a reinsurer. 14
37	37	(4) “Assumption reinsurance agreement” has the meaning given in § 27-53.1-3(b), subject 15
38	38	to the following: 16
39	39	(i) The agreement may be conditioned upon the court’s entry of an implementation order. 17
40	40	(ii) If any policy subject to the agreement is protected through a guarantee association, then 18
41	41
42	42
43	43	LC001777 - Page 2 of 25
44	44	the assuming insurer must have been and be licensed, and must have been and be a member of the 1
45	45	guarantee association, in all states known to the applicant in which either: (A) Any property covered 2
46	46	under the policy has a permanent situs; or (B) The policyholder resided while the policy was in 3
47	47	force. 4
48	48	(5) “Class of creditors” means: 5
49	49	(i) All voting policyholders, including those without known claims; 6
50	50	(ii) Voting creditors, other than policyholders; or 7
51	51	(iii) Any separate class of creditors as the court may in its discretion determine should 8
52	52	approve the commutation plan. 9
53	53	(6) “Commercial run-off insurer” means: 10
54	54	(i) A run-off insurer domiciled in Rhode Island, or the protected cell of the insurer, whose 11
55	55	business, excluding all business subject to an assumption reinsurance agreement, includes only the 12
56	56	reinsuring of any line(s) of business other than life and/or the insuring of any line(s) of business 13
57	57	other than life, workers’ compensation, and personal lines insurance; or 14
58	58	(ii) A Rhode Island domestic insurance company, or the protected cell of that insurer, 15
59	59	meeting the requirements of subsection (i) whose liabilities consist of commercial liabilities 16
60	60	transferred to said company with the approval of the commissioner and pursuant to the regulations 17
61	61	issued by the department under this chapter. The amount of the commercial liabilities transferred 18
62	62	must be less than or equal to the amount of assets transferred to the newly formed or re-activated 19
63	63	company. 20
64	64	(7) “Commissioner” means the director of the department or designee. 21
65	65	(8) “Commutation plan” means a plan for extinguishing the outstanding liabilities of a 22
66	66	commercial run-off insurer. 23
67	67	(9) “Creditor” means: 24
68	68	(i) Any person who has a claim against the applicant; or 25
69	69	(ii) A policyholder other than an assumption policyholder. 26
70	70	(10) “Department” means the department of business regulation. 27
71	71	(11) “Guarantee association” means a guarantee association or foreign guarantee 28
72	72	association, as those terms are defined in § 27-14.3-3(10), that is potentially obligated with respect 29
73	73	to the applicant’s policies. 30
74	74	(12) “Implementation order” means an order under § 27-14.5-4(c). 31
75	75	(13) “Insurer” has the meaning given in § 27-14.3-3(12). 32
76	76	(14) “Person” means an individual, corporation, partnership, association, joint stock 33
77	77	company, trust, unincorporated organization, or any similar entity or any combination of the 34
78	78
79	79
80	80	LC001777 - Page 3 of 25
81	81	foregoing acting in concert. 1
82	82	(15) “Personal lines insurance” means insurance issued for personal, family, or household 2
83	83	purposes. 3
84	84	(16) “Policy” means a contract of insurance or a contract of reinsurance. 4
85	85	(17) “Policyholder” means an insured or a reinsured of the insurer. 5
86	86	(18) “Proportionate share” means, for a particular run-off insurer as of December 31 of the 6
87	87	previous year, the ratio of: 7
88	88	(i) The gross assets of that run-off insurer; to 8
89	89	(ii) The gross assets of all run-off insurers, other than those that were not domiciled in 9
90	90	Rhode Island on March 15 of that calendar year. 10
91	91	(19) “Redomestication expenditure” means, for any calendar year: 11
92	92	(i) The amount that the department’s expenditures attributable to the regulation of run-off 12
93	93	insurers increases as a result of any run-off insurer redomiciling to Rhode Island on or after March 13
94	94	15 of that year; less 14
95	95	(ii) Filing fees, examination costs, and any other fees in relation to insurance regulation in 15
96	96	this state paid to this state by run-off insurers that redomiciled to Rhode Island on or after March 16
97	97	15 of that year, but excluding any premium taxes. 17
98	98	(20) “Regulatory expenditure” means, for any calendar year: 18
99	99	(i) The amount of the department’s expenditures attributable to the regulation of run-off 19
100	100	insurers domiciled in Rhode Island on March 15 of that year; less 20
101	101	(ii) Filing fees, examination costs, and any other fees in relation to insurance regulation in 21
102	102	this state paid to this state by run-off insurers domiciled in Rhode Island on March 15 of that year, 22
103	103	but excluding any premium taxes. 23
104	104	(21) “Run-off insurer” means an insurer that: 24
105	105	(i) Is domiciled in Rhode Island; 25
106	106	(ii) Has liabilities under policies for property and casualty lines of business; 26
107	107	(iii) Has ceased underwriting new business; and 27
108	108	(iv) Is only renewing ongoing business to the extent required by law or by contract. 28
109	109	(22) “Voluntary restructuring” means the act of reorganizing the legal ownership, 29
110	110	operational, governance, or other structures of a solvent insurer, for the purpose of enhancing 30
111	111	organization and maximizing efficiencies, and shall include the transfer of assets and liabilities to 31
112	112	or from an insurer, or the protected cell of an insurer pursuant to an insurance business transfer 32
113	113	plan. A voluntary restructuring under this chapter may be approved by the commissioner only if, 33
114	114	in the commissioner’s opinion, it would have no material adverse impact on the insurer’s 34
115	115
116	116
117	117	LC001777 - Page 4 of 25
118	118	policyholders, reinsureds, or claimants of policies subject to the restructuring. 1
119	119	SECTION 2. Sections 27-34-3, 27-34-5, 27-34-8 and 27-34-11.5 of the General Laws in 2
120	120	Chapter 27-34 entitled "Rhode Island Property and Casualty Insurance Guaranty Association" are 3
121	121	hereby amended to read as follows: 4
122	122	27-34-3. Scope. 5
123	123	This chapter shall apply to all kinds of direct insurance, but shall not be applicable to the 6
124	124	following: 7
125	125	(1) Life, annuity, health, or disability insurance; 8
126	126	(2) Mortgage guaranty, financial guaranty, or other forms of insurance offering protection 9
127	127	against investment risks. For purposes of this section, “financial guaranty insurance” includes any 10
128	128	insurance under which loss is payable upon proof of occurrence of any of the following events to 11
129	129	the damage of an insured claimant or obligee: 12
130	130	(i) Failure of any obligor or obligors on any debt instrument or other monetary obligation, 13
131	131	including common or preferred stock, to pay when due the principal, interest, dividend, or purchase 14
132	132	price of such instrument or obligation, whether failure is the result of a financial default or 15
133	133	insolvency and whether or not the obligation is incurred directly or as a guarantor by, or on behalf 16
134	134	of, another obligor which has also defaulted; 17
135	135	(ii) Changes in the level of interest rates whether short-term or long-term, or in the 18
136	136	difference between interest rates existing in various markets; 19
137	137	(iii) Changes in the rate of exchange of currency, or from the inconvertibility of one 20
138	138	currency into another for any reason; 21
139	139	(iv) Changes in the value of specific assets or commodities, or price levels in general; 22
140	140	(3) Fidelity or surety bonds, or any other bonding obligations; 23
141	141	(4) Credit insurance, vendors’ single interest insurance, or collateral protection insurance 24
142	142	or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor 25
143	143	transaction. For purposes of this section, “credit insurance” means insurance on accounts 26
144	144	receivable; 27
145	145	(5) Insurance Other than coverages that may be set forth in a cybersecurity insurance 28
146	146	policy, insurance of warranties or service contracts including insurance that provides for the repair, 29
147	147	replacement, or service of goods or property, indemnification for repair, replacement, or service 30
148	148	for the operational or structural failure of the goods or property due to a defect in materials, 31
149	149	workmanship, or normal wear and tear, or provides reimbursement for the liability incurred by the 32
150	150	issuer of agreements or service contracts that provide such benefits; 33
151	151	(6) Title insurance; 34
152	152
153	153
154	154	LC001777 - Page 5 of 25
155	155	(7) Ocean marine insurance, except that portion of the marine protection and indemnity 1
156	156	insurance covering liability of the insured for personal injury, illness, or death to employees and 2
157	157	insurance covering pleasure craft; 3
158	158	(8) Any transaction or combination of transactions between a person, including affiliates 4
159	159	of the person, and an insurer, including affiliates of such insurer, which involves the transfer of 5
160	160	investment or credit risk unaccompanied by transfer of insurance risk; 6
161	161	(9) Any insurance provided by or guaranteed by government; or 7
162	162	(10) Any transaction or combination of transactions between a protected cell and the 8
163	163	general account or another protected cell of a protected cell company organized under the Protected 9
164	164	Cell Companies Act, chapter 64 of this title, as those terms are defined in this chapter. 10
165	165	27-34-5. Definitions. 11
166	166	As used in this chapter: 12
167	167	(1) “Account” means any one of the three (3) accounts created by § 27-34-6. 13
168	168	(2) “Affiliate” means a person, who directly or indirectly, through one or more 14
169	169	intermediaries, controls, is controlled by, or is under common control with another on December 15
170	170	31 of the year immediately preceding the date the insurer becomes an insolvent insurer. 16
171	171	(3) “Association” means the Rhode Island insurance guaranty association created under § 17
172	172	27-34-6. 18
173	173	(4) “Association similar to the association” means any guaranty association, security fund, 19
174	174	or other insolvency mechanism that affords protection similar to that of the association. The term 20
175	175	shall also include any property and casualty insolvency mechanism that obtains assessments or 21
176	176	other contributions from insurers on a pre-insolvency basis. 22
177	177	(5) “Assumed claims transaction” means the following: 23
178	178	(i) Policy obligations that have been assumed by the insolvent insurer, prior to the entry of 24
179	179	a final order of liquidation, through a merger between the insolvent insurer and another entity 25
180	180	obligated under the policies, and for which assumption consideration has been paid to the applicable 26
181	181	guaranty associations, if the merged entity is a non-member insurer; 27
182	182	(ii) Policy obligations that have been assumed by the insolvent insurer, prior to the entry 28
183	183	of a final order of liquidation, pursuant to a plan, approved by the domestic commissioner of the 29
184	184	assuming insurer, which: 30
185	185	(A) Transfers the direct policy obligations and future policy renewals from one insurer to 31
186	186	another insurer; and 32
187	187	(B) For which assumption consideration has been paid to the applicable guaranty 33
188	188	associations, if the assumption is from a non-member insurer. 34
189	189
190	190
191	191	LC001777 - Page 6 of 25
192	192	(C) For purposes of this section, the term non-member insurer also includes a self-insurer, 1
193	193	non-admitted insurer, and risk retention group; or 2
194	194	(iii) An assumption reinsurance transaction in which all of the following has occurred: 3
195	195	(A) The insolvent insurer assumed, prior to the entry of a final order of liquidation, the 4
196	196	claim or policy obligations of another insurer or entity obligated under the claims or policies; 5
197	197	(B) The assumption of the claim or policy obligations has been approved, if such approval 6
198	198	is required, by the appropriate regulatory authorities; and 7
199	199	(C) As a result of the assumption, the claim or policy obligations became the direct 8
200	200	obligations of the insolvent insurer through a novation of the claims or policies. 9
201	201	(6) “Assumption consideration” shall mean the consideration received by a guaranty 10
202	202	association to extend coverage to the policies assumed by a member insurer from a non-member 11
203	203	insurer in any assumed claims transaction including liabilities that may have arisen prior to the date 12
204	204	of the transaction. The assumption consideration shall be in an amount equal to the amount that 13
205	205	would have been paid by the assuming insurer during the three (3) calendar years prior to the 14
206	206	effective date of the transaction to the applicable guaranty associations if the business had been 15
207	207	written directly by the assuming insurer. 16
208	208	(i) In the event that the amount of the premiums for the three-year (3) period cannot be 17
209	209	determined, the assumption consideration will be determined by multiplying one hundred thirty 18
210	210	percent (130%) against the sum of the unpaid losses, loss adjustment expenses, and incurred but 19
211	211	not reported losses, as of the effective date of the assumed claims transaction, and then multiplying 20
212	212	such sum times the applicable guaranty association assessment percentage for the calendar year of 21
213	213	the transaction. 22
214	214	(ii) The funds paid to a guaranty association shall be allocated in the same manner as any 23
215	215	assessments made during the three-year (3) period. The guaranty association receiving the 24
216	216	assumption consideration shall not be required to recalculate or adjust any assessments levied 25
217	217	during the prior three (3) calendar years as a result of receiving the assumption consideration. 26
218	218	Assumption consideration paid by an insurer may be recouped in the same manner as other 27
219	219	assessments made by a guaranty association. 28
220	220	(7) “Claimant” means any person instituting a covered claim; provided that no person who 29
221	221	is an affiliate of the insolvent insurer may be a claimant. 30
222	222	(8) “Commissioner” means the director of the department of business regulation or his or 31
223	223	her the commissioner’s designee. 32
224	224	(9) “Control” means the possession, direct or indirect, of the power to direct or cause the 33
225	225	direction of the management and policies of a person, whether through the ownership of voting 34
226	226
227	227
228	228	LC001777 - Page 7 of 25
229	229	securities, by contract other than a commercial contract for goods or nonmanagement services, or 1
230	230	otherwise, unless the power is the result of an official position with, or corporate office held by, the 2
231	231	person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds 3
232	232	with the power to vote, or holds proxies representing, ten percent (10%) or more of the voting 4
233	233	securities of any other person. This presumption may be rebutted by a showing that control does 5
234	234	not exist in fact. 6
235	235	(10) “Covered claim” means: 7
236	236	(i) An unpaid claim, including one for unearned premiums, submitted by a claimant, which 8
237	237	arises out of and is within the coverage and subject to the applicable limits of an insurance policy 9
238	238	to which this chapter applies, if the policy was issued by an insurer that becomes an insolvent 10
239	239	insurer after the effective date of this chapter and the policy was either issued by the insurer or 11
240	240	assumed by the insurer in an assumed claims transaction, and: 12
241	241	(A) The claimant or insured is a resident of this state at the time of the insured event; 13
242	242	provided, that for entities other than an individual, the residence of a claimant, insured, or 14
243	243	policyholder is the state in which its principal place of business is located at the time of the insured 15
244	244	event; or 16
245	245	(B) The claim is a first-party claim for damage to property with a permanent location in 17
246	246	this state. 18
247	247	(ii) Covered claim includes claim obligations that arose through the issuance of an 19
248	248	insurance policy by a member insurer, which are later allocated, transferred, merged into, novated, 20
249	249	assumed by, or otherwise made the sole responsibility of a member or non-member insurer if: 21
250	250	(A) The original member insurer has no remaining obligations on the policy after the 22
251	251	transfer; 23
252	252	(B) A final order of liquidation with a finding of insolvency has been entered against the 24
253	253	insurer that assumed the member’s coverage obligations by a court of competent jurisdiction in the 25
254	254	insurer’s state of domicile; 26
255	255	(C) The claim would have been a covered claim, as defined in this section, if the claim had 27
256	256	remained the responsibility of the original member insurer and the order of liquidation had been 28
257	257	entered against the original member insurer, with the same claim submission date and liquidation 29
258	258	date; and 30
259	259	(D) In cases where the member’s coverage obligations were assumed by a non-member 31
260	260	insurer, the transaction received prior regulatory or judicial approval. 32
261	261	(iii) Covered claim includes claim obligations that were originally covered by a non-33
262	262	member insurer including, but not limited to, a self-insurer, non-admitted insurer or risk retention 34
263	263
264	264
265	265	LC001777 - Page 8 of 25
266	266	group, but subsequently became the sole direct obligation of a member insurer before the entry of 1
267	267	a final order of liquidation with a finding of insolvency against the member insurer by a court of 2
268	268	competent jurisdiction in its state of domicile, if the claim obligations were assumed by the member 3
269	269	insurer in a transaction of one of the following types: 4
270	270	(A) A merger in which the surviving company was a member insurer immediately after the 5
271	271	merger; 6
272	272	(B) An assumption reinsurance transaction that received any required approvals from the 7
273	273	appropriate regulatory authorities; or 8
274	274	(C) A transaction entered into pursuant to a plan approved by the member insurer’s 9
275	275	domiciliary regulator. 10
276	276	(iv) Except as provided elsewhere in this section, “covered claim” shall not include: 11
277	277	(A) Any amount awarded as punitive or exemplary damages; 12
278	278	(B) Any amount sought as a return of premium under any retrospective rating plan; 13
279	279	(C) Any amount due any reinsurer, insurer, insurance pool, or underwriting association, 14
280	280	health maintenance organization, hospital plan corporation, professional health service corporation, 15
281	281	or self-insurer as subrogation recoveries, reinsurance recoveries, contribution, indemnification or 16
282	282	otherwise. No claim for any amount due any reinsurer, insurer, insurance pool, underwriting 17
283	283	association, health maintenance organization, hospital plan corporation, professional health service 18
284	284	corporation, or self-insurer may be asserted against a person insured under a policy issued by an 19
285	285	insolvent insurer other than to the extent the claim exceeds the association obligation limitations 20
286	286	set forth in § 27-34-8; 21
287	287	(D) Any claims excluded pursuant to § 27-34-11.5 due to the high net worth of an insured; 22
288	288	(E) Any first party claims by an insured that is an affiliate of the insolvent insurer; 23
289	289	(F) Any fee or other amount relating to goods or services sought by or on behalf of any 24
290	290	attorney or other provider of goods or services retained by the insolvent insurer or an insured prior 25
291	291	to the date it was determined to be insolvent; 26
292	292	(G) Any fee or other amount sought by or on behalf of any attorney or other provider of 27
293	293	goods or services retained by any insured or claimant in connection with the assertion or 28
294	294	prosecution of any claim, covered or otherwise, against the association; 29
295	295	(H) Any claims for interest; or 30
296	296	(I) Any claim filed with the association or a liquidator for protection afforded under the 31
297	297	insured’s policy for incurred-but-not-reported losses. 32
298	298	(11) “Cybersecurity insurance” means for purposes of this section includes first and third-33
299	299	party coverage, in a policy or endorsement, written on a direct, admitted basis for losses and loss 34
300	300
301	301
302	302	LC001777 - Page 9 of 25
303	303	mitigation arising out of or relating to data privacy breaches, unauthorized information network 1
304	304	security intrusions, computer viruses, ransomware, cyber extortion, identity theft, and similar 2
305	305	exposures. 3
306	306	(11)(12) “Insolvent insurer” means an insurer licensed to transact insurance in this state 4
307	307	either at the time the policy was issued; when the obligation with respect to the covered claim was 5
308	308	assumed under an assumed claims transaction; or when the insured event occurred, and against 6
309	309	whom a final order of liquidation has been entered after the effective date of this chapter with a 7
310	310	finding of insolvency by a court of competent jurisdiction in the insurer’s state of domicile. 8
311	311	(12)(13) “Insured” means any named insured, any additional insured, any vendor, lessor, 9
312	312	or any other party identified as an insured under the policy. 10
313	313	(13)(14) “Line of credit” means an irrevocable stand-by commitment whereby the 11
314	314	association or member insurer and a qualified financial institution or group of qualified financial 12
315	315	institutions enter into a formal and binding contract in which the qualified financial institution or 13
316	316	group of qualified financial institutions agree to lend a certain amount of money within a stated 14
317	317	period of time. 15
318	318	(14)(15)(i) “Member insurer” means any person who: 16
319	319	(A) Writes any kind of insurance to which this chapter applies, under § 27-34-3, including 17
320	320	the exchange of reciprocal or interinsurance contracts; 18
321	321	(B) Is licensed to transact insurance in this state; and 19
322	322	(C) Is not otherwise excepted from membership by statute or regulation. 20
323	323	(ii) An insurer shall cease to be a member insurer effective on the day following the 21
324	324	termination or expiration of its license to transact the kinds of insurance to which this chapter 22
325	325	applies, however, the insurer shall remain liable as a member insurer for any and all obligations, 23
326	326	including obligations for assessments levied prior to the termination or expiration of the insurer’s 24
327	327	license and assessments levied after the termination or expiration, which relate to any insurer that 25
328	328	became an insolvent insurer prior to the termination or expiration of the insurer’s license. 26
329	329	(15)(16) “Net direct written premiums” means direct gross premiums written in this state 27
330	330	on insurance policies to which this chapter applies, including policy and membership fees, less the 28
331	331	following amounts: (i) Return premiums; (ii) Premiums on policies not taken; and (iii) Dividends 29
332	332	paid or credited to policyholders on that direct business. “Net direct written premiums” does not 30
333	333	include premiums on contracts between insurers or reinsurers. 31
334	334	(16)(17) “Novation” means that the assumed claim or policy obligations became the direct 32
335	335	obligations of the insolvent insurer through consent of the policyholder and that thereafter the 33
336	336	ceding insurer or entity initially obligated under the claims or policies is released by the 34
337	337
338	338
339	339	LC001777 - Page 10 of 25
340	340	policyholder from performing its claim or policy obligations. Consent may be express or implied 1
341	341	based upon the circumstances, notice provided, and conduct of the parties. 2
342	342	(17)(18) “Ocean marine insurance” means any form of insurance, regardless of the name, 3
343	343	label, or marketing designation of the insurance policy, that insures against maritime perils or risks 4
344	344	and other related perils or risks, which are usually insured against by traditional marine insurance, 5
345	345	such as hull and machinery, marine builders risk, and marine protection and indemnity. Perils and 6
346	346	risk insured against include without limitation: loss, damage, expense, or legal liability of the 7
347	347	insured for loss, damage, or expense arising out of or incident to ownership, operation, chartering, 8
348	348	maintenance, use, repair, or construction of any vessel, craft, or instrumentality in use in ocean or 9
349	349	inland waterways for commercial purposes, including liability of the insured for personal injury, 10
350	350	injury, illness, or death or for loss or damage to the property of the insured or another person. 11
351	351	(18)(19) “Person” means any individual, aggregation of individuals, corporation, 12
352	352	partnership, or other entity. 13
353	353	(19)(20) “Qualified financial institution” shall have the same meaning as the term in § 27-14
354	354	1.1-3. 15
355	355	(20)(21) “Receiver” means liquidator, rehabilitator, conservator, or ancillary receiver, as 16
356	356	the context requires. 17
357	357	(21)(22) “Self-insurer” means a person that covers its liability through a qualified 18
358	358	individual or group self-insurance program or any other formal program created for the specific 19
359	359	purpose of covering liabilities typically covered by insurance. 20
360	360	(22)(23) “Self-insured retention” means: 21
361	361	(i) Any fund or other arrangement to pay claims other than by an insurance company; or 22
362	362	(ii) Any arrangement under which an insurance company has no obligation to pay claims 23
363	363	on behalf of an insured if it is not reimbursed by the insured. 24
364	364	27-34-8. Powers and duties of the association. 25
365	365	(a) The association shall: 26
366	366	(1)(i) Be obligated to pay covered claims existing prior to the order of liquidation; arising 27
367	367	within sixty (60) days after the order of liquidation or before the policy expiration date if less than 28
368	368	sixty (60) days after the order of liquidation or before the insured replaces the policy or causes its 29
369	369	cancellation if the insured does so within sixty (60) days of the order of liquidation. The obligations 30
370	370	shall be satisfied by paying to the claimant an amount as follows: 31
371	371	(A) The full amount of a covered claim for benefits under a workers’ compensation 32
372	372	insurance coverage; 33
373	373	(B) An amount not exceeding ten thousand dollars ($10,000), per policy for a covered 34
374	374
375	375
376	376	LC001777 - Page 11 of 25
377	377	claim for the return of unearned premium; 1
378	378	(C) An amount not exceeding one million dollars ($1,000,000) for all first-party property 2
379	379	loss claims arising from a single occurrence under a policy covering commercial or residential 3
380	380	property for all other covered claims for insolvencies occurring after January 1, 2026. An amount 4
381	381	not exceeding five hundred thousand dollars ($500,000), per claimant for all other covered claims 5
382	382	for insolvencies occurring on or after January 1, 2008, and an amount not exceeding three hundred 6
383	383	thousand dollars ($300,000) per claimant for all other covered claims for insolvencies occurring 7
384	384	prior to January 1, 2008. 8
385	385	(D) In no event shall the association be obligated to pay an amount in excess of five 9
386	386	hundred thousand dollars ($500,000) for all first and third-party claims under a policy or 10
387	387	endorsement providing, or that is found to provide, cybersecurity insurance coverage and arising 11
388	388	out of or related to a single insured event, regardless of the number of claims made or the number 12
389	389	of claimants. 13
390	390	(ii) In no event shall the association be obligated to pay a claimant an amount in excess of 14
391	391	the obligation of the insolvent insurer under the policy or coverage from which the claim arises. 15
392	392	Notwithstanding any other provision of this chapter, a covered claim shall not include a claim filed 16
393	393	with the guaranty association after the final date set by the court for the filing of claims against the 17
394	394	liquidator or receiver of an insolvent insurer. For the purpose of filing a claim under this subsection, 18
395	395	notice of claims to the liquidator of the insolvent insurer shall be deemed notice to the association 19
396	396	or its agent and a list of claims shall be periodically submitted to the association or association 20
397	397	similar to the association in another state by the liquidator. 21
398	398	(iii) Any obligation of the association to defend an insured shall cease upon the 22
399	399	association’s payment or tender of an amount equal to the lesser of the association’s covered claim 23
400	400	obligation limit or the applicable policy limit; 24
401	401	(2) Be deemed the insurer to the extent of its obligation on the covered claims and to that 25
402	402	extent, subject to the limitation provided in this chapter, shall have all rights, duties, and obligations 26
403	403	of the insolvent insurer as if the insurer had not become insolvent, including, but not limited to, the 27
404	404	right to pursue and retain salvage and subrogation recoverable on covered claim obligations to the 28
405	405	extent paid by the association. The association shall not be deemed the insolvent insurer for the 29
406	406	purpose of conferring jurisdiction; 30
407	407	(3) Allocate claims paid and expenses incurred among the three (3) accounts separately, 31
408	408	and assess member insurers separately for each account amounts necessary to pay the obligations 32
409	409	of the association under subdivision (a)(1) subsequent to an insolvency, the expenses of handling 33
410	410	covered claims subsequent to an insolvency, and other expenses authorized by this chapter. The 34
411	411
412	412
413	413	LC001777 - Page 12 of 25
414	414	assessments of each member insurer shall be in the proportion that the net direct written premiums 1
415	415	of the member insurer for the calendar year preceding the assessment on the kinds of insurance in 2
416	416	the account bears to the net direct written premiums of all member insurers for the calendar year 3
417	417	preceding the assessment on the kinds of insurance in the account. Each member insurer shall be 4
418	418	notified of the assessment not later than thirty (30) days before it is due. 5
419	419	A member insurer may not be assessed in any one year on any account an amount greater 6
420	420	than two percent (2%) of that member insurer’s net direct written premiums for the calendar year 7
421	421	preceding the assessment on the kinds of insurance in the account. If the maximum assessment, 8
422	422	together with the other assets of the association in any account, does not provide in any one year in 9
423	423	any account an amount sufficient to make all necessary payments from that account, each member 10
424	424	insurer shall be assessed the additional amount that must be obtained to make all necessary 11
425	425	payments of the underfunded account from the other two accounts, subject to the same limitation 12
426	426	of two percent (2%) of that member insurer’s net direct written premiums for the calendar year 13
427	427	preceding the assessment on the kinds of insurance in the account. The additional assessments shall 14
428	428	be considered loans by and between the separate accounts. Amounts borrowed under this 15
429	429	subsection shall be paid back to the separate accounts from which they were borrowed, out of 16
430	430	assets, including, but not limited to, existing and future assessments in the account receiving the 17
431	431	loan. An interest charge shall be levied on all amounts borrowed under this subsection based on the 18
432	432	average prime rate of interest for each year the money remains unpaid. If the amounts borrowed 19
433	433	remain unpaid on the seventh yearly anniversary as a result of the inability of the borrowing account 20
434	434	to make repayment, then the amount borrowed and interest which is not repaid, starting with the 21
435	435	principal and interest of the first year, shall be considered uncollectible. The funds available shall 22
436	436	be prorated and the unpaid portion shall be paid as soon after this as funds become available. The 23
437	437	association may exempt or defer, in whole or in part, the assessment of any member insurer if the 24
438	438	assessment would cause the member insurer’s financial statement to reflect amounts of capital or 25
439	439	surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in 26
440	440	which the member insurer is authorized to transact insurance. However, during the period of 27
441	441	deferment, no dividends shall be paid to shareholders or policyholders. Deferred assessments shall 28
442	442	be paid when the payment will not reduce capital or surplus below required minimums. Payments 29
443	443	shall be refunded to those companies receiving larger assessments by virtue of the deferment, or, 30
444	444	at the election of any company, credited against future assessments; 31
445	445	(4) Investigate claims brought against the association and adjust, compromise, settle, and 32
446	446	pay covered claims to the extent of the association’s obligation and deny all other claims. The 33
447	447	association shall pay claims in any order that it may deem reasonable, including the payment of 34
448	448
449	449
450	450	LC001777 - Page 13 of 25
451	451	claims as they are received from the claimants or in groups or categories of claims. The association 1
452	452	shall have the right to appoint and to direct legal counsel retained under liability insurance policies 2
453	453	for the defense of covered claims and to appoint and direct other service providers for covered 3
454	454	services; 4
455	455	(5) Notify claimants in this state as deemed necessary by the commissioner and upon the 5
456	456	commissioner’s request, to the extent records are available to the association; 6
457	457	(6)(i) Have the right to review and contest as set forth in this subsection settlements, 7
458	458	releases, compromises, waivers, and judgments to which the insolvent insurer or its insureds were 8
459	459	parties prior to the entry of the order of liquidation. In an action to enforce settlements, releases, 9
460	460	and judgments to which the insolvent insurer or its insureds were parties prior to the entry of the 10
461	461	order of liquidation, the association shall have the right to assert the following defenses, in addition 11
462	462	to the defenses available to the insurer: 12
463	463	(A) The association is not bound by a settlement, release, compromise, or waiver executed 13
464	464	by an insured or the insurer, or any judgment entered against an insured or the insurer by consent 14
465	465	or through a failure to exhaust all appeals, if the settlement, release, compromise, waiver, or 15
466	466	judgment was: 16
467	467	(I) Executed or entered into within one hundred twenty (120) days prior to the entry of an 17
468	468	order of liquidation, and the insured or the insurer did not use reasonable care in entering into the 18
469	469	settlement, release, compromise, waiver, or judgment, or did not pursue all reasonable appeals of 19
470	470	an adverse judgment; or 20
471	471	(II) Executed by or taken against an insured or the insurer based on default, fraud, collusion, 21
472	472	or the insurer’s failure to defend. 22
473	473	(B) If a court of competent jurisdiction finds that the association is not bound by a 23
474	474	settlement, release, compromise, waiver, or judgment for the reasons described in subparagraph 24
475	475	(i)(A), the settlement, release, compromise, waiver, or judgment shall be set aside, and the 25
476	476	association shall be permitted to defend any covered claim on the merits. The settlement, release, 26
477	477	compromise, waiver, or judgment may not be considered as evidence of liability or damages in 27
478	478	connection with any claim brought against the association or any other party under this chapter. 28
479	479	(C) The association shall have the right to assert any statutory defenses or rights of offset 29
480	480	against any settlement, release, compromise, or waiver executed by an insured or the insurer, or 30
481	481	any judgment taken against the insured or the insurer. 31
482	482	(ii) As to any covered claims arising from a judgment under any decision, verdict, or 32
483	483	finding based on the default of the insolvent insurer or its failure to defend, the association, either 33
484	484	on its own behalf or on behalf of an insured, may apply to have the judgment, order, decision, 34
485	485
486	486
487	487	LC001777 - Page 14 of 25
488	488	verdict, or finding set aside by the same court or administrator that entered the judgment, order, 1
489	489	decision, verdict, or finding and shall be permitted to defend the claim on the merits; 2
490	490	(7) Handle claims through its employees or through one or more insurers or other persons 3
491	491	designated as servicing facilities. Designation of a servicing facility is subject to the approval of 4
492	492	the commissioner, but the designation may be declined by a member insurer; 5
493	493	(8) Reimburse each servicing facility for obligations of the association paid by the facility 6
494	494	and for expenses incurred by the facility while handling claims on behalf of the association and 7
495	495	shall pay the other expenses of the association authorized by this chapter; 8
496	496	(9)(i) The association shall obtain a line of credit for the benefit of each account, in an 9
497	497	amount not to exceed the applicable maximum to ensure the immediate availability of funds for 10
498	498	purposes of future claims and expenses attributable to an insurer insolvency in that account. The 11
499	499	line of credit shall be obtained from qualified financial institutions. The line of credit shall provide 12
500	500	for a thirty-day (30) notice of termination or nonrenewal to the commissioner and the association 13
501	501	and shall provide funding to the association within three (3) business days of receipt of written 14
502	502	notice from the commissioner of an insolvent insurer in that account. Each member insurer upon 15
503	503	receipt of notice from the association shall make immediate payment for its proportionate share of 16
504	504	the amount borrowed based on the premium for the preceding calendar year. The maximum line of 17
505	505	credit or preinsolvency assessment for each account shall be subject to prior review and approval 18
506	506	by the commissioner at the time of origination. 19
507	507	(ii) If the association cannot obtain a line of credit, the association may obtain an 20
508	508	irrevocable line of credit agreement from each member insurer in an amount not to exceed the 21
509	509	member insurer’s maximum assessment pursuant to subdivision (a)(3) to ensure the immediate 22
510	510	availability of funds for the purposes of future claims and expenses attributable to an insurer 23
511	511	insolvency. 24
512	512	Any amount drawn under any line of credit shall be considered a payment toward the 25
513	513	member insurer’s assessment provided for in subdivision (a)(3). 26
514	514	The member insurer shall provide funding to the association under the line of credit within 27
515	515	three (3) business days of receipt of a written request from the association for a draw-down under 28
516	516	the line of credit. 29
517	517	The line of credit agreement shall be subject to prior review and approval by the 30
518	518	commissioner at the time of origination and any subsequent renewal. It shall include any 31
519	519	commercially reasonable provisions the association or the commissioner may deem advisable, 32
520	520	including a provision that the line of credit is irrevocable or for a stated period of time and provides 33
521	521	for thirty-day (30) notice to the association and the commissioner that the line is being terminated 34
522	522
523	523
524	524	LC001777 - Page 15 of 25
525	525	or not renewed. 1
526	526	(iii) If a line of credit is not given as provided for in this section, the member insurer shall 2
527	527	be responsible for the payment of an assessment of up to the member’s proportionate share of the 3
528	528	applicable maximum as set forth in this subsection which shall be paid into a pre-insolvency 4
529	529	assessment fund in each account; 5
530	530	(10) Submit, not later than ninety (90) days after the end of the association’s fiscal year, a 6
531	531	financial report for the preceding fiscal year in a form approved by the commissioner. 7
532	532	(b) The association may: 8
533	533	(1) Employ or retain persons as are necessary to handle claims and perform other duties of 9
534	534	the association; 10
535	535	(2) Borrow funds necessary to effect the purposes of this chapter in accordance with the 11
536	536	plan of operation; 12
537	537	(3) Sue or be sued; 13
538	538	(4) Negotiate and become a party to any contracts necessary to carry out the purpose of 14
539	539	this chapter; 15
540	540	(5) Perform any other acts necessary or proper to effectuate the purpose of this chapter; 16
541	541	and 17
542	542	(6) Refund to the member insurers in proportion to the contribution of each member insurer 18
543	543	to that account that amount by which the assets of the account exceed the liabilities, if, at the end 19
544	544	of any calendar year, the board of directors finds that the assets of the association in any account 20
545	545	exceed the liabilities of that account as estimated by the board of directors for the coming year. 21
546	546	(c) Suits involving the association: 22
547	547	(1) Except for actions by the receiver, all actions relating to or arising out of this chapter 23
548	548	against the association shall be brought in the courts in this state. The courts shall have exclusive 24
549	549	jurisdiction over all actions relating to or arising out of this chapter against the association. 25
550	550	(2) The exclusive venue in any action by or against the association is in the Providence 26
551	551	county superior court. The association may, at its option, waive this venue as to specific actions. 27
552	552	27-34-11.5. Net worth exclusion. 28
553	553	(a) For purposes of this section, “high net worth insured” shall mean any insured, excluding 29
554	554	state and local governments, whose net worth exceeds fifty million dollars ($50,000,000) on 30
555	555	December 31 of the year prior to the year in which the insurer becomes an insolvent insurer; 31
556	556	provided that an insured’s net worth on that date shall be deemed to include the aggregate net worth 32
557	557	of the insured and all of its subsidiaries and affiliates as calculated on a consolidated basis. 33
558	558	(b)(1) The association shall not be obligated to pay any first-party claims by a high net 34
559	559
560	560
561	561	LC001777 - Page 16 of 25
562	562	worth insured. 1
563	563	(2) The association shall have the right to recover from the high net worth insured all 2
564	564	amounts paid by the association to or on behalf of such insured, whether for indemnity, defense, or 3
565	565	otherwise. 4
566	566	(3) The association may also, at its sole discretion and without assumption of any ongoing 5
567	567	duty to do so, pay any cybersecurity insurance obligations covered by a policy or endorsement of 6
568	568	an insolvent company on behalf of a high net worth insured as defined in subsection (a) of this 7
569	569	section. In that case, the association shall recover from the high net worth insured under this section 8
570	570	all amounts paid on its behalf, all allocated claim adjusted expenses related to such claims, the 9
571	571	association’s attorneys’ fees, and all court costs in any action necessary to collect the full amount 10
572	572	to the association’s reimbursement under this section. 11
573	573	(c) The association shall not be obligated to pay any claim that would otherwise be a 12
574	574	covered claim that is an obligation to or on behalf of a person who has a net worth greater than that 13
575	575	allowed by the insurance guaranty association law of the state of residence of the claimant at the 14
576	576	time specified by that state’s applicable law, and which association has denied coverage to that 15
577	577	claimant on that basis. 16
578	578	(d) The association shall establish reasonable procedures subject to the approval of the 17
579	579	commissioner for requesting financial information from insureds on a confidential basis for 18
580	580	purposes of applying this section, provided that the financial information may be shared with any 19
581	581	other association similar to the association and the liquidator for the insolvent insurer on the same 20
582	582	confidential basis. Any request to an insured seeking financial information must advise the insured 21
583	583	of the consequences of failing to provide the financial information. If an insured refuses to provide 22
584	584	the requested financial information where it is requested and available, the association may, until 23
585	585	such time as the information is provided, provisionally deem the insured to be a high net worth 24
586	586	insured for the purpose of denying a claim under subsection (b). 25
587	587	(e) In any lawsuit contesting the applicability of this section where the insured has refused 26
588	588	to provide financial information under the procedure established pursuant to subsection (d), the 27
589	589	insured shall bear the burden of proof concerning its net worth at the relevant time. If the insured 28
590	590	fails to prove that its net worth at the relevant time was less than the applicable amount, the court 29
591	591	shall award the association its full costs, expenses, and reasonable attorney’s fees in contesting the 30
592	592	claim. 31
593	593	SECTION 3. Chapter 27-17 of the General Laws entitled "Reciprocal Exchanges and 32
594	594	Interinsurers" is hereby repealed in its entirety. 33
595	595	CHAPTER 27-17 34
596	596
597	597
598	598	LC001777 - Page 17 of 25
599	599	Reciprocal Exchanges and Interinsurers 1
600	600	27-17-1. Admission of foreign exchanges and interinsurers. 2
601	601	Any reciprocal exchange or interinsurer formed and doing business under the laws of any 3
602	602	state of the United States, other than the state of Rhode Island, for the purpose of transacting any 4
603	603	or all of the kinds of insurance which an insurance company may be authorized to transact in this 5
604	604	state, other than life or title insurance, may be permitted to transact that business in this state upon 6
605	605	complying with the provisions of this chapter. 7
606	606	27-17-2. Power of subscribers to exchange reciprocal and interinsurance contracts. 8
607	607	(a) Individuals, partnerships, trustees, and all corporations of this state, designated 9
608	608	throughout this chapter as “subscribers”, are authorized to exchange reciprocal or interinsurance 10
609	609	contracts with each other and with individuals, partnerships, trustees, and corporations of other 11
610	610	states. 12
611	611	(b) The right of a corporation to exchange those contracts is declared to be incidental to the 13
612	612	purpose for which the corporation is organized and as much granted as the rights and powers 14
613	613	expressly conferred. Whenever a trustee acting in a representative capacity insures property held 15
614	614	in trust at a reciprocal exchange, the trustee may assume the liability and be entitled to the rights of 16
615	615	a subscriber, but in doing this shall not personally or individually be liable under the power of 17
616	616	attorney executed on behalf of the trust. 18
617	617	(c) The contracts and the exchange of contracts and the subscribers, their attorneys in fact, 19
618	618	and representatives, shall be regulated by this chapter and by no other statute of this state relating 20
619	619	to insurance, except as otherwise specifically provided in this chapter. 21
620	620	27-17-3. Execution by attorney — Office in state. 22
621	621	The contracts shall be executed by an attorney in fact, designated in this chapter as 23
622	622	“attorney”, duly authorized and acting for the subscribers, and the attorney may be a foreign 24
623	623	corporation. An office or offices of the attorney, referred to in this chapter as a reciprocal exchange 25
624	624	or interinsurer, acting for subscribers in issuing contracts or policies insuring property or interests 26
625	625	in this state, shall be maintained in this state. 27
626	626	27-17-4. Declaration filed by attorney — Requirements for admission. 28
627	627	The attorney shall file with the insurance commissioner, referred to in this chapter as the 29
628	628	“commissioner”, a declaration verified by the oath of the attorney, or when the attorney is a 30
629	629	corporation, by the oath of its president or oaths of its treasurer and secretary setting forth: 31
630	630	(1) The name of the attorney and the name or designation of the exchange under which the 32
631	631	contracts are to be issued, which name or designation shall not be so similar to any other name or 33
632	632	designation previously adopted by an attorney or by any insurance organization in this state so as 34
633	633
634	634
635	635	LC001777 - Page 18 of 25
636	636	to confuse or mislead; 1
637	637	(2) The kind or kinds of insurance to be effected or exchanged; 2
638	638	(3) A copy of the form of policy contract or agreement under or by which the insurance is 3
639	639	to be effected or exchanged and forms of application for that insurance; 4
640	640	(4) A certified copy of the power of attorney or other authorization of the attorney under 5
641	641	or by which the attorney is to effect or exchange the insurance contracts; 6
642	642	(5) The location of the office or offices from which the contracts or agreements are to be 7
643	643	issued; 8
644	644	(6)(i) That, except as to the kinds of insurance specifically mentioned in this subdivision, 9
645	645	applications have been made for insurance upon at least one hundred (100) separate risks, the 10
646	646	liability to the exchange for premiums due on the risks shall aggregate not less than six hundred 11
647	647	thousand dollars ($600,000), represented by executed contracts or bona fide applications to become 12
648	648	concurrently effective, or, in lieu of this amount, the exchange or interinsurer is possessed of a 13
649	649	surplus of not less than three hundred thousand dollars ($300,000). The minimum amount of 14
650	650	surplus established as a requirement for the writing of other lines of insurance as specified in this 15
651	651	section shall be in addition to that required by the provisions of this subdivision; 16
652	652	(ii) In the case of employers’ liability or workers’ compensation insurance, applications 17
653	653	shall have been made for indemnity upon at least one hundred (100) separate risks having a total 18
654	654	annual premium of not less than two million five hundred thousand dollars ($2,500,000), as 19
655	655	represented by executed contracts or bona fide applications to become concurrently effective, or, 20
656	656	in lieu of this amount, the exchange or interinsurer is possessed of a surplus of not less than one 21
657	657	hundred thousand dollars ($100,000); 22
658	658	(iii) In the case of automobile insurance, applications shall have been made for insurance 23
659	659	for at least two hundred (200) separate risks, or for insurance the premiums due the exchange on 24
660	660	the risks shall aggregate not less than two hundred thousand dollars ($200,000) represented by 25
661	661	executed contracts or bona fide applications to become concurrently effective on any or all classes 26
662	662	of automobile insurance effected by the subscribers through the attorney, or, in lieu of this amount, 27
663	663	the exchange or interinsurer is possessed of a surplus of not less than one hundred thousand dollars 28
664	664	($100,000); 29
665	665	(iv) The surplus as provided in this subdivision shall not be acceptable unless invested in 30
666	666	securities of the United States of America, the state of Rhode Island, or any other state of the United 31
667	667	States or political subdivision of the state; 32
668	668	(7) That there shall be maintained at the exchange, available for the payment of losses, 33
669	669	assets conforming to the requirements of §§ 27-17-7 — 27-17-12; 34
670	670
671	671
672	672	LC001777 - Page 19 of 25
673	673	(8) A financial statement under oath in the form prescribed by the commissioner; 1
674	674	(9) An instrument authorizing the service of process as provided for in this chapter; and 2
675	675	(10) A certificate from the proper official of the state where the principal office is 3
676	676	maintained, that the subscribers and the attorney have complied with all provisions of law and are 4
677	677	authorized in that state to transact the classes of business which are sought to be transacted in this 5
678	678	state. 6
679	679	27-17-5. Service of process. 7
680	680	Concurrently with the filing of the declaration provided for by the terms of § 27-17-4, the 8
681	681	attorney shall file with the commissioner an instrument in writing duly executed by the attorney for 9
682	682	the subscribers, conditioned that upon the issuance of the certificate of authority provided for in § 10
683	683	27-17-6, an action may be brought in any county in which the cause of action arises or where the 11
684	684	claimant resides, and service of process may be had upon the commissioner in all suits in this state 12
685	685	arising out of any policies, contracts, or agreements issued, which service shall be valid and binding 13
686	686	upon all subscribers exchanging at any time reciprocal or interinsurance contracts through the 14
687	687	attorney. Three (3) copies of the process shall be served, and the commissioner shall file one copy 15
688	688	in his or her office, forward one copy to the attorney, and return one copy with his or her admission 16
689	689	of service. Service of process may also be had upon all subscribers by serving the attorney at the 17
690	690	office. Service of process shall not be had upon subscribers or any of them in any suit or proceeding 18
691	691	in this state, except in the manner provided in this section, and any suit or other proceeding may be 19
692	692	begun and prosecuted or defended by them under the name or designation adopted by them. A 20
693	693	service fee of five dollars ($5.00) shall accompany each service and be paid to the commissioner. 21
694	694	27-17-6. Certificate of authority to do business. 22
695	695	If it shall appear upon examination by the commissioner that an exchange or interinsurer 23
696	696	has complied with all of the requirements of this chapter and that the persons holding positions of 24
697	697	executive and managerial authority are of good repute and will conduct the affairs of the exchange 25
698	698	with safety to the public and its policyholders, the commissioner shall issue a certificate stating that 26
699	699	the exchange or interinsurer has complied with all of the requirements of this chapter which shall 27
700	700	authorize the exchange or interinsurer to transact the kind of business specifically provided in the 28
701	701	certificate. The certificate shall expire on the first day of April of the following year, and shall be 29
702	702	renewed every year as of the first day of April of that year. The commissioner may, after a hearing, 30
703	703	revoke or suspend any certificate of authority issued pursuant to this section, in the case of violation 31
704	704	of any of the provisions of this chapter, after reasonable notice of the hearing has been given to the 32
705	705	attorney in fact in writing, which notice shall be sufficiently adequate to allow the attorney in fact 33
706	706	to appear and show cause why the action should not be taken. 34
707	707
708	708
709	709	LC001777 - Page 20 of 25
710	710	27-17-7. Reinsurance reserve. 1
711	711	There shall be maintained at all times by the exchange a reinsurance reserve in cash or 2
712	712	securities authorized by the laws of the state in which the principal office of the attorney is located 3
713	713	for the investment of similar funds of insurance companies doing the same kind of business, in an 4
714	714	amount equal to fifty percent (50%) of the net annual premium deposits collected and credited to 5
715	715	the accounts of subscribers on policies having one year or less to run and pro rata on those for 6
716	716	longer periods or, in lieu of this amount, one hundred percent (100%) of the net unearned premium 7
717	717	deposits collected and credited to the accounts of subscribers calculated separately for each policy 8
718	718	in force as of any given date. 9
719	719	27-17-8. “Net premium deposits” defined. 10
720	720	“Net premium deposits,” as used in this chapter, mean the premium deposits made by 11
721	721	subscribers after deduction from them of the amount paid as return premiums upon cancelled 12
722	722	contracts and reinsurance in companies or associations licensed to do business in this state. 13
723	723	27-17-9. Contingent reserve. 14
724	724	In addition to the reserves provided for in §§ 27-17-7 and 27-17-10, there shall also be 15
725	725	maintained at all times by the exchange, as assets, a contingent reserve in cash or securities as stated 16
726	726	in § 27-17-7 of not less than the amount of minimum capital required of a stock insurance company 17
727	727	incorporated under the law of any other state of the United States to do the kind or kinds of 18
728	728	insurance which the exchange is authorized to write under § 27-17-1. 19
729	729	27-17-10. Claim or loss reserve. 20
730	730	There shall also be maintained at all times in the hands of the attorney, as a claim or loss 21
731	731	reserve, in cash or securities as stated in § 27-17-7, assets sufficient to discharge all liabilities on 22
732	732	all outstanding or accrued losses arising under policies issued, which are to be calculated in 23
733	733	accordance with the laws of this state relating to similar reserves for companies insuring similar 24
734	734	risks. 25
735	735	27-17-11. Advance of funds for reserves — Maintenance. 26
736	736	If it appears that the amount of funds required in §§ 27-17-7 — 27-17-10 has not been 27
737	737	accumulated or maintained, then the subscribers, or the attorney for them, shall immediately 28
738	738	advance any sums needed to comply with the provisions of §§ 27-17-7 — 27-17-10 and the 29
739	739	advanced funds shall not be treated as a liability of the exchange, and the advances shall be repaid 30
740	740	only out of the surplus over and above the minimum required by §§ 27-17-7 — 27-17-10. If the 31
741	741	subscribers, or their attorneys for them, shall fail to advance sums necessary for the maintenance 32
742	742	of the minimum reserves and surplus within thirty (30) days after receipt of notice from the 33
743	743	commissioner, the commissioner may revoke its license to transact business in this state. 34
744	744
745	745
746	746	LC001777 - Page 21 of 25
747	747	27-17-12. Deficiencies in reserves. 1
748	748	If at any time the amounts on hand are less than the requirements specified in this chapter, 2
749	749	the subscribers, or their attorney for them, shall make up the deficiency. 3
750	750	27-17-13. Certificate of deposit by foreign exchange or interinsurer. 4
751	751	A foreign reciprocal exchange or interinsurer shall, before being authorized to do business 5
752	752	in this state, furnish to the commissioner a certificate issued by a state treasurer or other state 6
753	753	financial officer of the state where its principal place of business is located, that there has been 7
754	754	deposited with him or her either in cash or securities the sum of one hundred thousand dollars 8
755	755	($100,000) for the benefit of all policyholders. 9
756	756	27-17-14. Cash premium deposit and contingent liability of subscriber. 10
757	757	The power of attorney under which any contracts of insurance are exchanged pursuant to 11
758	758	this chapter shall provide for a cash premium deposit and a contingent liability of the subscriber 12
759	759	during each annual period of the term of each contract of insurance issued to the subscriber to be 13
760	760	fixed in the power of attorney, but in an amount not less than one nor more than ten (10) times the 14
761	761	amount of the annual portion of the cash premium deposit stated in the contract, except that 15
762	762	exchanges which have a required surplus equal to three hundred fifty thousand dollars ($350,000) 16
763	763	or to the minimum capital, if any, required of a stock insurance company transacting the same kind 17
764	764	or kinds of business, whichever is greater, may issue policies without contingent liability; provided, 18
765	765	that the exchange which shall have issued policies without contingent liability after the acquisition 19
766	766	of the surplus may continue to do so only so long as it maintains a surplus in the amount required 20
767	767	by this section, and no exchange shall issue any non-assessable policies, except during a time as it 21
768	768	shall continue to maintain the surplus. 22
769	769	27-17-15. Reports and examination of affairs of exchanges. 23
770	770	The attorney shall, within the time limited for filing the annual statement by insurance 24
771	771	companies transacting the same kind of business, make a report under oath to the commissioner for 25
772	772	each calendar year in any form the commissioner may prescribe, showing the financial condition 26
773	773	of the affairs at the office where the contracts are issued, and shall at any reasonable time furnish 27
774	774	any additional information and reports required by the commissioner. The records, affairs, and 28
775	775	financial condition of the exchange shall be subject to examination by the commissioner, and the 29
776	776	examination shall be at the expense of the office examined. The commissioner may, in lieu of the 30
777	777	examination provided for in this section, accept a certified copy of the report of examination made 31
778	778	by the insurance department of the state where the principal office is located. 32
779	779	27-17-16. Penalty for doing business without compliance. 33
780	780	Any attorney who exchanges any contracts of insurance of the kind and character specified 34
781	781
782	782
783	783	LC001777 - Page 22 of 25
784	784	in this chapter, or any attorney or representative of the attorney who solicits or negotiates any 1
785	785	applications for the attorney without the attorney first complying with the provisions of this chapter, 2
786	786	shall be deemed guilty of a misdemeanor, and upon conviction shall be subjected to a fine of not 3
787	787	less than one hundred dollars ($100) nor more than one thousand dollars ($1,000). 4
788	788	27-17-17. Permits to solicit powers of attorney and applications. 5
789	789	For the purposes of complying with the requirements of this chapter as set forth in § 27-6
790	790	17-4(6) and upon issuance of a permit by the commissioner and under any conditions as he or she 7
791	791	may impose, powers of attorney and applications for the insurance contracts may be solicited 8
792	792	without compliance with the provisions of this chapter, but no attorney or other person shall execute 9
793	793	or issue the contracts of insurance until all of the provisions of this chapter have been complied 10
794	794	with and a certificate of authority issued by the commissioner. 11
795	795	27-17-18. Insertion of provisions in standard policies. 12
796	796	The attorney may insert in any form of policy prescribed by the laws of this state or adopted 13
797	797	by this state, any provisions or conditions required by the plan of reciprocal or interinsurance; 14
798	798	provided, that the provisions or conditions shall not be in conflict with the laws of this state. 15
799	799	27-17-19. Fees and taxes. 16
800	800	The exchanges shall be subject to the same fees and taxes provided by the laws of this state, 17
801	801	now or after this enacted, applicable to insurance companies organized or admitted to do the same 18
802	802	kind or kinds of business under the laws of this state. 19
803	803	27-17-20. Applicability of insurance producers’ laws. 20
804	804	The provisions of the general insurance laws of this state regarding the appointment, 21
805	805	licensing, qualification, and regulation of insurance producers shall not apply to an exchange or its 22
806	806	attorney, or to a traveling salaried employee, or to an executive officer or the attorney if a 23
807	807	corporation, but shall apply to any other person, partnership, or corporation representing the 24
808	808	reciprocal or interinsurance exchange in soliciting, negotiating, or effecting of business in this state. 25
809	809	27-17-21. Applicability of rating laws. 26
810	810	The provisions of the laws of this state regulating the making and applying of insurance 27
811	811	rates and providing for the licensing of rating organizations as set forth in chapters 6 and 9 of this 28
812	812	title and §§ 27-2-13, 27-5-1 — 27-5-11 and 27-8-4 — 27-8-6 shall apply to reciprocal or 29
813	813	interinsurance contracts, but nothing contained in those sections shall be construed to prohibit the 30
814	814	return of savings or dividends to subscribers or policyholders. 31
815	815	27-17-22. Maximum liability on policy. 32
816	816	No reciprocal exchange or interinsurer shall issue or deliver any policy insuring property 33
817	817	or interests in this state, the liability on which shall exceed an amount equivalent to ten percent 34
818	818
819	819
820	820	LC001777 - Page 23 of 25
821	821	(10%) of its surplus, unless the excess of liability over the ten percent (10%) is reinsured in a 1
822	822	company which maintains financial standards at least equal to those required by the laws of this 2
823	823	state. 3
824	824	27-17-23. Exchange of workers’ compensation insurance. 4
825	825	Employers are expressly authorized to exchange contracts of workers’ compensation 5
826	826	insurance, at any reciprocal exchange licensed in this state to do that kind of business, but all these 6
827	827	exchanges shall be subject to the provisions of the laws of this state relating to the business of 7
828	828	workers’ compensation insurance. 8
829	829	27-17-24. Retaliatory laws. 9
830	830	The retaliatory laws of this state shall be applicable to reciprocal or interinsurance 10
831	831	exchanges. 11
832	832	27-17-25. Hearings on rules and decisions of commissioner. 12
833	833	Any party in interest aggrieved by any order or decision of the commissioner or by any 13
834	834	rule or regulation adopted and promulgated by the commissioner may, within thirty (30) days after 14
835	835	notice of it to other known parties in interest, make written request to the commissioner for a 15
836	836	hearing. Within twenty (20) days after receipt of the written request, the commissioner shall hear 16
837	837	the party or parties and shall give not less than ten (10) days’ written notice of the time and place 17
838	838	of the hearing. Within fifteen (15) days after the hearing, the commissioner shall affirm, reverse, 18
839	839	or modify his or her previous action, specifying his or her reasons for the action. Pending the 19
840	840	hearing and decision on the hearing, the commissioner may suspend or postpone the effective date 20
841	841	of his or her previous action. At any hearing before the commissioner, observance of formal rules 21
842	842	of pleading or evidence shall not be required. 22
843	843	27-17-26. Judicial review of orders and decisions of commissioner. 23
844	844	Any final order or decision of the commissioner shall be subject to review by petition filed 24
845	845	within twenty (20) days after notice of it at the instance of any party in interest in the superior court 25
846	846	for the counties of Providence and Bristol, and the matter shall be heard de novo in the superior 26
847	847	court and decisions on issues of fact shall be in accordance with the preponderance of the evidence 27
848	848	presented there. The court shall determine whether the order or decision of the commissioner shall 28
849	849	be stayed pending the review. The court may, in disposing of the issue before it, modify, affirm, or 29
850	850	reverse the order or decision of the commissioner in whole or in part. Appeal may be taken from 30
851	851	the decision of the superior court to the supreme court, and the appeal shall follow the course of 31
852	852	equity. 32
853	853	27-17-27. Severability. 33
854	854	In the event any section, part, or provisions of this chapter is held to be illegal, that section, 34
855	855
856	856
857	857	LC001777 - Page 24 of 25
858	858	part, or provision shall not affect any other section, part, or provision of the chapter, but the 1
859	859	remaining sections, parts, and provisions shall be and remain in full force and effect. 2
860	860	SECTION 4. This act shall take effect on January 1, 2026. 3
861	861	========
862	862	LC001777
863	863	========
864	864
865	865
866	866	LC001777 - Page 25 of 25
867	867	EXPLANATION
868	868	BY THE LEGISLATIVE COUNCIL
869	869	OF
870	870	A N A C T
871	871	RELATING TO INSURANCE -- VOLUNTARY RESTR UCTURING OF SOLVENT
872	872	INSURERS
873	873	***
874	874	This act would make numerous technical corrections related to insurance, provides a 1
875	875	definition for "cybersecurity insurance", and would repeal the chapter relating to reciprocal 2
876	876	exchanges and interinsurers. 3
877	877	This act would take effect on January 1, 2026. 4
878	878	========
879	879	LC001777
880	880	========
881	881