The following definitions govern this chapter:

(a) “Commissioner” means the Insurance Commissioner of this state or the commissioner, director, or superintendent of insurance of any other state.

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(b) “Domicile,” for purposes of determining the state in which a purchasing group is domiciled, means the following:

(1) For a corporation, the state in which the purchasing group is incorporated and registered to do business pursuant to the federal Liability Risk Retention Act (15 U.S.C. § 3901 and following).

(2) For an unincorporated entity, the state of its principal place of business and in which it is registered to do business under the federal Liability Risk Retention Act (15 U.S.C. § 3901 and following).

(c) “Hazardous financial condition” means that, based on its present or reasonably anticipated financial condition, a risk retention group is unlikely to be able to do either of the following:

(1) Meet obligations to policyholders with respect to known claims and reasonably anticipated claims.

(2) Pay other obligations in the normal course of business.

(d) “Insurance” means primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for shifting and distributing risk that is determined to be insurance under the laws of this state.

(e) (1) “Liability” means legal liability for damages including costs of defense, legal costs and fees, and other claims expenses because of injuries to other persons, damage to their property, or other damage or loss to the other persons resulting from or arising out of any of the following:

(A) Any business, whether profit or nonprofit, trade, product, services, including professional services, premises, or operations.

(B) Any activity of any state or local government, or any agency or political subdivision thereof.

(2) “Liability” includes financial responsibility required by the state for any activity for which an individual is required to obtain a license or certificate to provide a service. For purposes of this subdivision, a state agency has discretion to accept or deny proof of financial responsibility.

(3) “Liability” does not include personal risk liability or an employer’s liability with respect to its employees other than legal liability under the Federal Employers’ Liability Act (45 U.S.C. § 51 et seq.).

(f) “Personal risk liability” means liability for damages because of injury to any person, damage to property, or other loss or damage resulting from any personal, familial, or household responsibilities or activities, rather than from responsibilities or activities referred to in subdivision (f).

(g) “Plan of operation or a feasibility study” with respect to risk retention groups chartered in California includes analysis which presents the expected activities and results of a risk retention group including, at a minimum, all of the following:

(1) Information to demonstrate that its members are engaged in businesses or activities similar or related with respect to the liability to which those members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations.

(2) For each state in which it intends to operate, the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer.

(3) Historical and expected loss experience of the proposed members and national experience of similar exposures, to the extent that this experience is reasonably available.

(4) Pro forma financial statements and projections.

(5) Appropriate opinions by a qualified, independent casualty actuary, including a determination of minimum premium or participation levels required to commence operations and to prevent a hazardous financial condition.

(6) Identification of management, underwriting and claims procedures, marketing methods, managerial oversight methods, investment policies and reinsurance agreements.

(h) “Public entity” includes the state, the Regents of the University of California, a county, city, district, public authority, public agency, and any other political subdivision or public corporation in the state.

(i) “Purchasing group” means any group which does all of the following:

(1) Has as one of its purposes the purchase of liability insurance on a group basis.

(2) Purchases that insurance only for its group members and only to cover their similar or related liability exposure, as described in paragraph (3).

(3) Is composed of members whose businesses or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations.

(4) Is domiciled in any state.

(j) “Risk Retention Administration Account” means an account within the Insurance Fund to be used as a depository of moneys received under this chapter or appropriated by the Legislature for the purpose of administering this chapter.

(k) “Risk retention group” means any corporation, public entity, or other limited liability association formed under the laws of any state, Bermuda, or the Cayman Islands that meets all of the following criteria:

(1) Whose primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members.

(2) Which is organized for the primary purpose of conducting the activity described under paragraph (1).

(3) Which is either of the following:

(A) Chartered and licensed as a liability insurance company and authorized to engage in the business of insurance under the laws of any state.

(B) Before January 1, 1985, was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before that date, has certified to the insurance commissioner of at least one state that it satisfied the capitalization requirements of that state, except that any group is considered to be a risk retention group only if it has been engaged in business continuously since that date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability as those terms were defined in the Product Liability Risk Retention Act of 1981 before the date of the enactment of the federal Liability Risk Retention Act of 1986.

(4) Does not exclude any person from membership in the group solely to provide for members of the group a competitive advantage over that person.

(5) Has as its members only persons who comprise the membership of the risk retention group and as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by that group.

(6) Whose members are engaged in businesses or activities similar or related with respect to the liability of which those members are exposed by virtue of any related, similar, or common business trade, product, services, premises, or operations.

(7) Whose activities do not include the provision of insurance other than for the following:

(A) Liability insurance for assuming and spreading all or any portion of the liability of its group members.

(B) Reinsurance with respect to the liability of any other risk retention group or any members of that other group that is engaged in businesses or activities so that the group or member meets the requirement described in paragraph (6) from membership in the risk retention group that provides that reinsurance.

(8) The name of which includes the phrase “risk retention group.”

(l) “State” means any state of the United States or the District of Columbia.

(Amended by Stats. 1995, Ch. 352, Sec. 1. Effective January 1, 1996.)