RISK RETENTION AND RISK PURCHASING GROUPS

M.G.L. pt. Part I, tit. Title XXII, ch. c. 176L

in effect

M.G.L. c. 176L, § 1 Definitions

c. 176L, § 1. Definitions Section 1. As used in this chapter the following words shall, unless the context clearly requires otherwise, have the following meanings:— ''Authorized insurer'', an insurer licensed by or admitted to do business in the commonwealth or a surplus lines carrier approved to do business in the commonwealth. ''Commissioner'', the commissioner of insurance or his designee. ''Completed operations liability'', liability arising out of the installation, maintenance, or repair of any product at a site which is not owned or controlled by: (1) any person who performed that work; or (2) any person who hires an independent contractor to perform that work; but shall include liability for activities which are completed or abandoned before the date of the occurrence giving rise to the liability. ''Domicile'', for purposes of determining the state in which a purchasing group is domiciled, shall mean: (i) for a corporation, the state in which the purchasing group is incorporated; or (ii) for an unincorporated association, the state of its principal place of business. ''Hazardous financial condition'', based on its present or reasonably anticipated financial condition shall mean a risk retention group, although not yet financially impaired or insolvent, is unlikely to be able: (1) to meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or (2) to pay other obligations in the normal course of business. ''Insurance'', primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for shifting and distributing risk which is determined to be insurance under the laws of the commonwealth. ''Liability'', (1) 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 such other persons, resulting from or arising out of: (a) any business, whether profit or nonprofit, trade, product, services including professional services, premises, or operations; or (b) any activity of any state or local government or any agency or political subdivision thereof; and (2) does not include personal risk liability and an employer's liability with respect to its employees other than legal liability under the Federal Employers' Liability Act, 45 USC, section 51 et seq. ''Personal risk liability'', 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 the definition of liability. ''Plan of operation or feasibility study'', an analysis which presents the expected activities and results of a risk retention group including, at a minimum: (1) information sufficient to verify that its members are engaged in businesses or activities similar or related with respect to the liability to which such 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) detailed description of management, underwriting and claims procedures, marketing methods, managerial oversight methods, investment policies and reinsurance agreements; (7) identification of each state in which the risk retention group has obtained, or sought to obtain, a charter and license, and a description of its status in each state; and (8) such other matters as may be prescribed by the commissioner of the state where the risk retention group is chartered for liability insurance companies authorized by the insurance laws of that state. ''Product liability'', liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage, including damages resulting from the loss of use of property, arising out of the manufacture, design, importation, distribution, packaging, labeling, lease or sale of a product, but not including the liability of any person for those damages if the product involved was in the possession of such a person when the incident giving rise to the claim occurred. ''Purchasing group'', any group which: (1) has as one of its purposes the purchase of liability insurance on a group basis; (2) 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; (3) is domiciled in any state; and (4) purchases such insurance only for its group members and only to cover their similar or related liability exposure as described herein. ''Risk retention group'', any corporation or other limited liability association which: (1) has as its primary activity the assumption and spreading of all, or any portion, of the liability exposure of its group members; (2) is organized for the primary purpose of conducting the activity described under clause (1); (3)(a) is chartered and licensed as a liability insurance company and authorized to engage in the business of insurance under the laws of any state; or (b) before January first, nineteen hundred and eighty-five was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before such date, had certified to the commissioner of at least one state that it satisfied the capitalization requirements of such state, provided that any such group shall be considered to be a risk retention group only if it has been engaged in business continuously since such date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability as such terms were defined in the Product Liability Risk Retention Act of 1981, 15 USC, Section 3901 et seq., before the date of the enactment of the Liability Risk Retention Act of 1986, 15 USC, Section 3901 et seq.; (4) does not exclude any person from membership in the group solely to provide for members of such a group a competitive advantage over such a person; (5)(a) has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by such group; or (b) has as its sole owner an organization which: (i) has as its members only persons who comprise the membership or the risk retention group; and (ii) has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by such group; (6) whose members are engaged in businesses or activities similar or related with respect to the liability to which such 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: (a) liability insurance for issuing and spreading all of any portion of the liability of its group members; or (b) reinsurance with respect to the liability of any other risk retention group or any members of such other group which is engaged in businesses or activities so that such group or member meets the requirement described in clause (6) for membership in the risk retention group which provides such reinsurance; and (8) the name of which includes the phrase risk retention group. ''State'', any state or territory of the United States or the District of Columbia.

M.G.L. c. 176L, § 2 Charter and license; application; plan of operation or feasibility study

c. 176L, § 2. Charter and license; application; plan of operation or feasibility study Section 2. (A) A risk retention group shall be chartered and licensed under the laws of the commonwealth to write only liability insurance pursuant to the provisions of this chapter and, except as provided elsewhere in this chapter, must comply with (1) all of the laws, rules, regulations and requirements applicable to such insurers chartered and licensed in the commonwealth and with (2) section three to the extent such requirements of said section three are not a limitation on laws, rules, regulations or requirements of the commonwealth. (B) Before it may offer insurance in any state, a risk retention group shall submit to the commissioner for approval a plan of operation or a feasibility study. In the event of any subsequent material change in any item of the plan of operation or feasibility study, the risk retention group shall submit an appropriate revision or amendment to the commissioner for approval at least ten working days prior to the requested effective date of any such change. The group shall not offer any additional kinds of liability insurance, in the commonwealth or in any other state, until the commissioner approves a revision or amendment of such plan or study. (C) At the time of filing its application for charter, the risk retention group shall provide to the commissioner in summary form the following information: (1) the identity of the initial members of the group; (2) the identity of the persons who organized the group or who will provide administrative services or otherwise influence or control the activities of the group; (3) the amount and nature of initial capitalization; (4) the coverages to be afforded; and (5) the states in which the group intends to operate.

M.G.L. c. 176L, § 3 Out of state groups; submission of information to commissioner; notice

c. 176L, § 3. Out of state groups; submission of information to commissioner; notice Section 3. A risk retention group chartered and licensed in another state which seeks to do business as a risk retention group in the commonwealth shall comply with the laws of the commonwealth, and shall satisfy the following requirements: (A) Before offering insurance in the commonwealth, a risk retention group shall submit to the commissioner: (1) a statement identifying each state in which the risk retention group is chartered and licensed as a liability insurance company, its charter date, its principal place of business, and such other information on its membership, as the commissioner may require to verify that the risk retention group is qualified under the definition of ''Risk retention group'' in section one; and (2) a copy of its plan of operations or feasibility study and revisions of or amendments to such plan or study submitted to the state in which the risk retention group is chartered and licensed; provided, however, that the provisions relating to the submission of a plan of operation or feasibility study shall not apply with respect to any line or classification of liability insurance which: (a) was defined in the Product Liability Risk Retention Act of 1981, (15 USC, Section 3901 et seq.), before October twenty-seventh, nineteen hundred and eighty-six; and (b) was offered before such date by any risk retention group which had been chartered and operating for not less than three years before such date. The risk retention group shall submit a copy to the commissioner of any subsequent revision or amendment to its plan of operation or feasibility study of this chapter at the same time that such revision is submitted to the licensing authority of its chartering state; and (3) a statement of registration, for which a filing fee shall be determined pursuant to section fourteen of chapter one hundred and seventy-five, which designates the commissioner as its agent for the purpose of receiving service of legal process; and (4) such other information as the commissioner may require. (B) Any risk retention group which seeks to do business in the commonwealth shall submit to the commissioner: (1) a copy of the group's most recent financial statement submitted to the state in which the risk retention group is chartered and licensed which: (a) is certified by an independent public accountant; and (b) contains a statement of opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries or a loss reserve specialist qualified under criteria established by the commissioner; and (2) a copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination; and (3) upon request by the commissioner, a copy of any information or document pertaining to any outside audit performed with respect to the risk retention group; and (4) such information as may be required to verify its continuing qualification as a risk retention group under the definition of ''Risk retention group'' in section one; and (5) such other information as the commissioner may require. (C) Each risk retention group shall be liable for the payment of premium taxes and taxes on premiums of direct business for risks resident or located within the commonwealth, and shall report to the commissioner the net premiums written for risks resident or located within the commonwealth. Such risk retention group shall be subject to taxation, and any applicable fines and penalties related thereto, on the same basis as a foreign admitted insurer. (D) Any risk retention group, its agents, brokers and representatives shall be considered to be in the business of insurance for purposes of the applicability of chapter one hundred and seventy-six D. (E) Any risk retention group, its agents and representatives, shall comply with the laws of the commonwealth regarding false or fraudulent acts or practices. The commissioner shall have the same authority to enforce the General Laws against risk retention groups as he does against any insurance company. (F) Any risk retention group must submit to an examination by the commissioner to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered and licensed has not initiated an examination or does not initiate an examination within sixty days after a request by the commissioner. Any such examination shall be coordinated by the examining authorities to avoid unjustified repetition and conducted in an expeditious manner. (G) Every application form for insurance from a risk retention group, and every policy, certificate, contract or other document evidencing insurance coverage issued by or on behalf of a risk retention group shall, on its front and declaration pages, contain in ten point type the following notice: NOTICE This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for your risk retention group. (H) A risk retention group is hereby prohibited from: (1) solicitation or sale of insurance to any person who is not eligible for membership in such group; and (2) solicitation or sale of insurance by, or on behalf of, a risk retention group that is in hazardous financial condition or is financially impaired. (I) No risk retention group shall be allowed to do business in the commonwealth if an insurance company is directly or indirectly a member or owner of such risk retention group, other than in the case of a risk retention group which is all members are insurance companies. (J) The terms of any insurance policy issued by any risk retention group shall not provide, or be construed to provide, coverage prohibited generally by statutes of the commonwealth or declared unlawful by the highest court of a state whose law applies to such policy. (K) A risk retention group not chartered in the commonwealth and doing business in the commonwealth shall comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by a state insurance commissioner if there has been a finding of financial impairment after an examination under subsection (F). (L) A risk retention group that violates any provision of this chapter will be subject to fines and penalties applicable to licensed insurers generally, including revocation of its right to do business in the commonwealth. (M) In addition to complying with the other requirements of this section, any risk retention group operating in the commonwealth prior to enactment of this chapter shall, within thirty days after the effective date of this chapter, comply with the provision of subsection (A).

M.G.L. c. 176L, § 4 Insurance insolvency guaranty fund

c. 176L, § 4. Insurance insolvency guaranty fund Section 4. (A) No risk retention group shall be required or permitted to join or contribute financially to any insurance insolvency guaranty fund, or similar mechanism, in the commonwealth, nor shall any risk retention group, or its insureds or claimants against its insurers, receive any benefit from any such fund for claims arising under the insurance policies issued by such risk retention group. (B) When a purchasing group obtains insurance covering its members' risks from an insurer which is not required to participate in the Massachusetts Insurers Insolvency Fund established under chapter one hundred and seventy-five D, or a risk retention group, no such risks, wherever resident or located, shall be covered by any insurance guaranty fund or similar mechanism in the commonwealth. (C) When a purchasing group obtains insurance covering its members' risks from an admitted or licensed insurer, only risks resident or located in the commonwealth shall be covered by an insurance guaranty fund or similar mechanism in the commonwealth. (D) Notwithstanding the provisions of any general or special law to the contrary, the commissioner may require or exempt a risk retention group from participation in any joint underwriting association or other mechanism established or authorized under the laws of the commonwealth for the equitable apportionment among insurers of liability insurance losses and expenses incurred on policies written through such association or mechanism, and such risk retention group shall submit sufficient information to the commissioner to enable the commissioner to apportion on a nondiscriminatory basis the risk retention group's proportionate share of such losses and expenses.

M.G.L. c. 176L, § 5 Repealed, 2000, 96, Sec. 4

M.G.L. c. 176L, § 6 Purchasing groups; exemptions

c. 176L, § 6. Purchasing groups; exemptions Section 6. A purchasing group and its insurer or insurers shall be subject to all applicable laws of the commonwealth except that a purchasing group and its insurer or insurers shall be exempt, in regard to liability insurance for the purchasing group, from any law that would: (A) prohibit the establishment of a purchasing group; (B) make it unlawful for an insurer to provide or offer to provide insurance to a purchasing group or its members allowing advantages with respect to rates, policy forms, coverages or other matters, based on their loss and expense experience, which are not afforded to other persons; (C) prohibit a purchasing group or its members from purchasing insurance described in clause (B) on a group basis; (D) prohibit a purchasing group or its members from purchasing a group basis because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time; (E) require that a purchasing group must have a minimum number of members, common ownership or affiliation, or certain legal form; (F) require that a certain percentage of a purchasing group must obtain insurance on a group basis; (G) otherwise discriminate against a purchasing group or any of its members; or (H) require that any insurance policy issued to a purchasing group or any of its members be countersigned by an insurance agent or broker residing in the commonwealth.

M.G.L. c. 176L, § 7 Statement submitted to commissioner; designation of commissioner as agent for service of process

c. 176L, § 7. Statement submitted to commissioner; designation of commissioner as agent for service of process Section 7. (A) A purchasing group which intends to do business in the commonwealth shall, prior to doing business, submit to the commissioner a statement which shall: (1) identify the state in which the group is domiciled; (2) identify all other states in which the group does or intends to do business; (3) specify the lines and classifications of liability insurance which the purchasing group has purchased or intends to purchase; (4) identify the insurance company or companies from which the group has purchased or intends to purchase its insurance and the domicile of such company; (5) specify the method by which, and the person or persons, if any, through whom insurance will be offered to its members who are resident or whose risks are located in the commonwealth; (6) identify the principal place of business of the purchasing group; and (7) provide such other information as may be required by the commissioner to verify that the purchasing group is qualified under the definition of ''Purchasing group'' in section one. (B) A purchasing group shall notify the commissioner of any changes in any of the items set forth in subsection (A) at least ten business days prior to the date such change is to take effect. (C) The purchasing group shall register with and designate the commissioner as its agent solely for the purpose of receiving service of legal process, for which a filing fee shall be determined pursuant to section fourteen of chapter one hundred and seventy-five, except that such requirements shall not apply in the case of a purchasing group which only purchases insurance that was authorized under the Product Liability Risk Retention Act of 1981, 15 USC, Section 3901 et seq., and: (1) which in any state of the United States was domiciled before April first, nineteen hundred and eighty-six; and (2) which: (a) before October twenty-seventh, nineteen hundred and eighty-six purchased insurance from an insurance carrier licensed in any state; and (b) since October twenty-seventh, nineteen hundred and eighty-six purchased its insurance from an insurance carrier licensed in any state; or (3) which was a purchasing group under the requirements of the Product Liability Risk Retention Act of 1981, 15 USC, Section 3901, et seq., before October twenty-seventh, nineteen hundred and eighty-six. (D) Each purchasing group that is required to submit information pursuant to subsection (A) shall also furnish such information as may be required by the commissioner to: (1) verify that the entity qualifies as a purchasing group; (2) determine where the purchasing group is located; (3) determine appropriate tax treatment; and (4) determine compliance with the provisions of the Liability Risk Retention Act, 15 USC, Section 3901, et seq., and this chapter. (E) Any purchasing group which was doing business in the commonwealth prior to the enactment of this chapter shall, within thirty days after the effective date of this chapter, furnish notice to the commissioner pursuant to the provisions of subsection (A) and furnish such information as may be required pursuant to subsections (B) and (C).

M.G.L. c. 176L, § 8 Purchases of insurance by purchasing groups; agents or brokers; notice to members

c. 176L, § 8. Purchases of insurance by purchasing groups; agents or brokers; notice to members Section 8. (A) A purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in the state in which the purchasing group is located, unless the purchase is effected through a licensed agent or broker acting pursuant to the surplus lines laws and regulations of such state. For purposes of this chapter, the purchasing group shall be deemed to be located in any state in which its members are resident or conducting business which is to be insured through the risk purchasing group. (B) A purchasing group which obtains liability insurance from an insurer not admitted in the commonwealth or a risk retention group shall inform each of the members of such purchasing group which are resident in or have a risk located in the commonwealth that such risk is not protected by an insurance insolvency guaranty fund in the commonwealth, and that such risk retention group or such insurer may not be subject to all General Laws and regulations of the commonwealth. (C) No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole, however, coverage may provide for a deductible or self-insured retention applicable to individual members. (D) Purchases of insurance by purchasing groups are subject to the same standards regarding aggregate limits which are applicable to all purchases of group insurance.

M.G.L. c. 176L, § 9 Premium taxes

c. 176L, § 9. Premium taxes Section 9. Premium taxes and taxes on premiums paid for coverage of residents or risks located in the commonwealth by a purchasing group or any members of a purchasing group shall be: (A) imposed at the same rate and subject to the same interest, fines and penalties as are applicable to premium taxes and taxes on premiums paid for similar coverage from a similar insurance source by other insureds; and (B) paid first by such insurance source, and if not by such source by the agent or broker for the purchasing group, and if not by such agent or broker then by the purchasing group, and if not by such purchasing group then by each of its members.

M.G.L. c. 176L, § 10 Motor vehicle no-fault and financial responsibility laws

c. 176L, § 10. Motor vehicle no-fault and financial responsibility laws Section 10. Nothing in this chapter shall be construed to exempt a risk retention group or purchasing group from the policy form or coverage requirements of any motor vehicle no-fault or motor vehicle financial responsibility law of the commonwealth.

M.G.L. c. 176L, § 11 Enforcement by commissioner

c. 176L, § 11. Enforcement by commissioner Section 11. The commissioner is authorized to make use of any of the powers established under the laws governing insurance to enforce those laws not specifically preempted by the Risk Retention Act of 1986 including the commissioner's administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders, impose penalties and seek injunctive relief.

M.G.L. c. 176L, § 12 License requirement

c. 176L, § 12. License requirement Section 12. (A) No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating or procuring liability insurance in the commonwealth from a risk retention group unless such person, firm, association or corporation is licensed in accordance with the applicable provisions of chapter one hundred and seventy-five. (B)(1) No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating or procuring liability insurance in the commonwealth for a purchasing group from an authorized insurer or a risk retention group chartered in a state unless such person, firm, association or corporation is licensed in accordance with the applicable provisions of chapter one hundred and seventy-five. (2) No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating or procuring liability insurance coverage in the commonwealth for any member of a purchasing group under a purchasing group's policy unless such person, firm, association or corporation is licensed in accordance with the applicable provisions of chapter one hundred and seventy-five. (C) For purposes of acting as an agent or broker for a risk retention group or purchasing group pursuant to subsections (A) and (B), any requirement of residence in the commonwealth shall not apply. (D) Every person, firm, association or corporation licensed pursuant to the provisions of chapter one hundred and seventy-five, on business placed with risk retention groups or written through a purchasing group, shall inform each prospective insured of the provisions of the notice required by subsection (G) of section three in the case of a purchasing group and subsection (B) of section eight in the case of a purchasing group. (2) Each licensee who has placed business with or on behalf of a risk retention group not chartered in the commonwealth shall report to the commissioner the premiums for direct business on residents or risk located within the commonwealth. (3) Each licensee who places business with a risk retention group shall keep a complete and separate record of all policies procured from each such risk retention group, which record shall be open to examination by the commissioner, as provided in section five of chapter one hundred and seventy-six D. These records shall, for each policy and each kind of insurance provided thereunder, include the following: (a) the limit of liability; (b) the time period covered; (c) the effective date; (d) the name of the risk retention group which issued the policy; (e) the gross premium charged; and (f) the amount of return premiums, if any.

M.G.L. c. 176L, § 13 Enforcement of court orders

c. 176L, § 13. Enforcement of court orders Section 13. An order issued by any district court of the United States enjoining a risk retention group from soliciting or selling insurance, or operating in any state, or in all states or in any territory or possession of the United States, upon a finding that such a group is in hazardous financial or financially impaired condition shall be enforceable in the courts of the commonwealth.

M.G.L. c. 176L, § 14 Rules and regulations

c. 176L, § 14. Rules and regulations Section 14. The commissioner may in accordance with provisions of chapter thirty A, after notice of hearing, promulgate rules and regulations as are necessary or proper to carry out the provisions of this chapter.

Source: Massachusetts General Court (malegislature.gov)URL: https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXII/Chapter176LFetched: 10/20/2026