All RRGs domiciled and licensed in this State shall comply
with the following corporate governance and operational standards.
1.
Board of Directors
A. The RRG's board of directors shall have a
majority of independent directors. A director does not qualify as independent
unless the board affirmatively determines that the director has no material
relationship with the RRG. The RRG shall review its determinations of
independence and disclose them to the Superintendent at least annually.
(1) A director has a material relationship with the RRG if
the director, an immediate family member, or any business with which the
director is affiliated has received compensation or other valuable
consideration from the RRG or from any consultant or service provider to the
RRG, during any consecutive 12-month period, beginning within the preceding 24
months, that is greater than or equal to 5% of the RRG's gross written premium
or 2% of its surplus, as measured at the end of any fiscal quarter ending
within that 12-month period.
(2) A director has a material relationship with the RRG if
the director or animmediate family member is, or has been within the past year,
affiliated with or employed in a professional capacity by a present or
formerinternal or external auditor of the RRG.
(3) A director has a material relationship with the RRG if
the director or an immediate family member is, or has been within the past
year, employed as anexecutive officer of a business entity whose board of
directors or management includes any of the RRG's current executives.
(4) The relationships described in Subparagraphs (1) through
(3) are examples, not an exhaustive list. The board shall regard any
relationship that would give a reasonable person comparable or greater concerns
about the director's independence as a material relationship.
(5) Membership in the RRG, direct or indirect ownership of a
member of the RRG, or service as an employee, director, or officer of a member
of the RRG or the direct or indirect parent of a member of the RRG, is not
considered a material relationship with the RRG and therefore does not, without
more, disqualify someone with such a relationship with a member of the RRG from
serving as an independent director of the RRG.
B. If an RRG is not organized as a stock or
mutual insurance corporation, the term "board of directors" shall refer to its
managers, subscribers' advisory committee, or similar governing body. If an
organization comprising the members of the RRG is the sole owner of the RRG and
the Superintendent determines that the parent organization's board possesses
and exercises effective control over the RRG, then the board of directors of
the parent organization shall be considered the board of directors of the RRG
for purposes of this Section; otherwise, both boards of directors are subject
to all applicable requirements of this Section.
C. If the RRG is a reciprocal insurer, its
attorney-in-fact shall adhere to the same standards regarding independence of
operation and governance as imposed on the RRG's subscribers' advisory
committee under this Section. The RRG's attorney-in-fact may not:
(1) Contract directly, rather than on behalf of the RRG, with
any service provider for services to the RRG; or
(2) Recruit, negotiate with, or make the decision to engage
any service provider with which the attorney-in-fact has a material
relationship.
2.
Service Provider Contracts. The term of a material service
provider contract with the RRG shall not exceed 5 years. Any such contract, or
its renewal, shall require the approval of the majority of the RRG's
independent directors. The board shall have the right to terminate any service
provider, audit, or actuarial contracts at any time for cause after providing
adequate notice as reasonably defined in the contract.
A. Service providers include captive
managers, auditors, accountants, actuaries, investment advisors, legal service
providers, managing general underwriters, and any other persons or entities
responsible for underwriting, determination of rates, collection of premium,
adjusting and settling claims, or the preparation of financial
statements.
B. A service provider
contract is material if the amount to be paid for the contract is greater than
or equal to 5% of the RRG's annual gross written premium or 2% of its surplus,
whichever is greater.
C. A lawyer
retained by the RRG to defend insurance claims is not considered the RRG's
legal service provider unless the lawyer also provides other legal services to
the RRG, or the lawyer has received material levels of compensation for claims
defense during three of the past five calendar years.
D. No material service provider contract may
take effect unless the RRG has notified the Superintendent in writing of its
intention to enter into the contract at least one month before the requested
effective date and the Superintendent has not disapproved it within the review
period.
3.
Plan of
Operation.A domestic RRG offering insurance in any jurisdiction shall
have in force, and shall adhere to, a plan of operation, adopted by the board
and approved by the Superintendent, that includes all the elements specified in
24-A M.R.S.A.
§6093(8) and satisfies
the requirements of this Subsection. The RRG shall file any material amendments
or revisions to the plan of operation with the Superintendent within ten days
after their adoption. The plan of operation shall obligate the board to:
A. Discharge its duties with the care, skill,
prudence, and diligence of prudent directors acting in a similar enterprise and
purpose;
B. Ensure that all insured
members of the RRG receive evidence of ownership interest in the RRG or its
parent organization;
C. Ensure that
the RRG's management is accountable for the RRG's compliance with the plan of
operation and with applicable law, including the obligation to write only
insurance to cover liabilities, incurred by its members, of the kinds described
in
24-A M.R.S.A.
§6093(6) and
15
U.S.C. §
3901(a)(2);
D. Develop a set of governance standards for
the RRG;
E. Oversee the evaluation
of the RRG's management, including but not limited to the performance of any
captive manager, managing general underwriter, or other party or parties
responsible for underwriting, determination of rates, collection of premium,
adjusting or settling claims, or the preparation of financial
statements;
F. Review and approve
the amount to be paid for all material service providers; and
G. Review and approve, at least annually:
(1) The RRG's goals and objectives, its expectations for the
performance of its officers and service providers in meeting those goals and
objectives, and a management compensation plan consistent with those
expectations;
(2) The officers' and service providers' performance in light
of those goals and objectives; and,
(3) The continued retention of the officers and material
service providers in light of their performance reviews.
4.
Governance
Standards.The board shall adopt and adhere to governance standards,
shall post them on the RRG's website or disclose them through other means the
board determines to be reasonable and effective, and shall provide copies to
the RRG's members on request. The governance standards shall include:
A. A process by which the directors are
elected by the RRG's insured members;
B. Director qualification
standards;
C. Director
responsibilities;
D. Director
access to management and, as necessary and appropriate, independent
advisors;
E. Director
compensation;
F. Director
orientation and continuing education;
G. Policies and procedures for management
succession; and
H. Policies and
procedures for annual performance evaluation of the board.
5.
Business Conduct and
Ethics.The board shall adopt and disclose a code of business conduct and
ethics for directors, officers, and employees. If the code contains any waiver
provisions, any waivers that are granted shall be promptly disclosed to all
directors. The code shall include the following topics:
A. Conflicts of interest;
B. Matters covered under this State's
corporate opportunities doctrine;
C. Confidentiality;
D. Fair dealing;
E. Protection and proper use of RRG
assets;
F. Compliance with all
applicable law; and
G. Requirements
to report any illegal or unethical behavior that affects the operation of the
RRG.
6.
Reporting
Noncompliance.The president or chief executive officer of the RRG, and
any captive manager or other service provider performing executive functions,
shall promptly notify the Superintendent in writing if any of them becomes
aware of any material noncompliance with the requirements of this Section or
standards adopted by the RRG pursuant to this Section.
7.
Transition.All domestic RRGs
currently doing business shall come into full compliance with this Section no
later than January 1, 2015, or such reasonable later date as the Superintendent
may approve at the request of the RRG for good cause shown. To the extent that
they attain compliance or substantial compliance with any provisions of this
section before that date, they shall maintain that level of compliance for the
remainder of the transition period.
