ÿþ<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <!-- saved from url=(0044)http://www.leg.state.nv.us/NAC/NAC-694C.html --><HTML><HEAD><TITLE>CHAPTER 694C</TITLE> <META content="text/html; charset=unicode" http-equiv=Content-Type> <STYLE>P.MsoNormal { FONT-FAMILY: "Times New Roman"; FONT-SIZE: 12pt; LINE-HEIGHT: 200%; MARGIN: 0in 0in 0pt } LI.MsoNormal { FONT-FAMILY: "Times New Roman"; FONT-SIZE: 12pt; LINE-HEIGHT: 200%; MARGIN: 0in 0in 0pt } DIV.MsoNormal { FONT-FAMILY: "Times New Roman"; FONT-SIZE: 12pt; LINE-HEIGHT: 200%; MARGIN: 0in 0in 0pt } H1 { FONT-FAMILY: "Times New Roman"; FONT-SIZE: 10pt; FONT-WEIGHT: normal; LINE-HEIGHT: 10pt; MARGIN: 0in 0in 10pt; TEXT-ALIGN: center } H2 { FONT-FAMILY: "Times New Roman"; FONT-SIZE: 10pt; FONT-VARIANT: small-caps; FONT-WEIGHT: normal; LINE-HEIGHT: 10pt; MARGIN: 0in 0in 10pt; TEXT-ALIGN: center } P.MsoToc1 { FONT-FAMILY: "Times New Roman"; FONT-SIZE: 9pt; FONT-WEIGHT: bold; LINE-HEIGHT: 9pt; MARGIN: 0.25in 0in 9pt; TEXT-ALIGN: center } LI.MsoToc1 { FONT-FAMILY: "Times New Roman"; 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Definitions.. .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">3</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.030..........  Commissioner defined........ .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">3</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.080&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  Work papers defined........ .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">3</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.090&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adoption by reference of certain publications........... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">3</SPAN></A></P> <P class=MsoToc1>LICENSING</P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.100&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Qualifying investigation or examination of applicant..... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">3</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.110&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Authority of commissioner to establish review panel for applications........... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">4</SPAN></A></P> <P class=MsoToc1>ADMINISTRATION</P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.200.......... Requirements for annual report of financial condition..... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">4</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.210&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Annual audit........... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">5</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.220.......... Designation of independent certified public accountant........... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">6</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.230.......... Availability and maintenance of work papers of independent certified public accountant........... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">6</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.240&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Security deposit or letter of credit........... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">6</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.250.......... Reinsurance and excess insurance.... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">7</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.260.......... Notification of certain changes in operations or organizational structure.... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">7</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.270&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prior approval required for change in nature of business; filing of certain changes in application information with commissioner......... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">7</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.280&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Officers and directors..... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">7</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.290&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Conflict of interest: Statement; disclosure.... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">7</SPAN></A></P> <P class=MsoToc1>MISCELLANEOUS PROVISIONS</P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.300&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acting as manager, broker or agent without authorization of commissioner prohibited.... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">8</SPAN></A></P> <P class=MsoToc3><SPAN style="TEXT-DECORATION: none">694C.310.......... Acquisition of control of or merger with captive insurer......... .......... </SPAN><SPAN style="DISPLAY: none; TEXT-DECORATION: none">8</SPAN></A></P> <P class=MsoToc3>&nbsp;</P></DIV><B><SPAN style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 9pt"><BR clear=all style="PAGE-BREAK-BEFORE: auto"></SPAN></B> <DIV class=Section2><BR clear=all style="PAGE-BREAK-BEFORE: always"> <P class=MsoToc3>&nbsp;</P></DIV><B><SPAN style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 9pt"><BR clear=all style="PAGE-BREAK-BEFORE: auto"></SPAN></B> <DIV class=Section3> <P class=MsoToc3>&nbsp;</P><B><SPAN style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 12pt"><BR clear=all style="PAGE-BREAK-BEFORE: always"></SPAN></B> <P class=NACLevel1>GENERAL PROVISIONS<A name=_Toc479406522></A></P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.010</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Definitions.</SPAN><SPAN class=NACLead><A name=_Toc479406523></A></SPAN><SPAN class=Empty>&nbsp;</SPAN>As used in this chapter, unless the context otherwise requires, the words and terms defined in NAC 694C.030 and 694C.080 have the meanings ascribed to them in those sections.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Supplied in codification)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.030</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead> Commissioner defined.</SPAN><SPAN class=NACLead><A name=_Toc479406524></A></SPAN><SPAN class=Empty>&nbsp;</SPAN> Commissioner means the commissioner of insurance.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Supplied in codification)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.080</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead> Work papers defined.</SPAN><SPAN class=NACLead><A name=_Toc479406525></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN><SPAN class=Empty>&nbsp;</SPAN> Work papers includes, without limitation, schedules, analyses, reconciliations, abstracts, memoranda, narratives, flow charts, copies of records of a captive insurer and any other documents prepared or obtained by an independent certified public accountant and his employees in the conduct of their examination of a captive insurer.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.090</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Adoption by reference of certain publications.</SPAN><SPAN class=NACLead><A name=_Toc479406526></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN><SPAN class=Empty>&nbsp;</SPAN>The commissioner hereby adopts the following publications by reference:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;The <I>Property/Casualty Insurance Annual Statement Blanks</I> and the <I>Annual Statement Instructions for the Property/Casualty Manual</I>, published by the National Association of Insurance Commissioners. A copy of these publications may be purchased from <BR>NAIC-Publications, P.O. Box 87-7870, Kansas City, Missouri 64187-7870, or by telephone at (816) 374-7259, for $125 and $175, respectively. </P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;The <I>AICPA Professional Standards</I>, published by the American Institute of Certified Public Accountants. A copy of this publication may be obtained from the American Institute of Certified Public Accountants, Order Department, P.O. Box 2209, Jersey City, New Jersey 07303-2209, or by telephone at (888) 777-7077, for $95 for members of the American Institute of Certified Public Accountants and $119 for nonmembers.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 3. &nbsp;<I>Original Pronouncements</I> and <I>Current Text</I>, published by the Financial Accounting Standards Board. A copy of:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (a) The <I>Original Pronouncements</I> may be obtained:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1) For members of the American Institute of Certified Public Accountants, from the American Institute of Certified Public Accountants, Order Department, P.O. Box 2209, Jersey City, New Jersey 07303-2209, or by telephone at (888) 777-7077, for $95.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2) For all others, from John Wiley and Sons, Inc., Distribution Center, 1 Wiley Drive, Somerset, New Jersey 08875-1272, or by telephone at (800) 225-5945, for $44.95.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (b) The <I>Current Text </I>may be obtained:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1) For members of the American Institute of Certified Public Accountants, from the American Institute of Certified Public Accountants, Order Department, P.O. Box 2209, Jersey City, New Jersey 07303-2209, or by telephone at (888) 777-7077, for $95.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2) For all others, from John Wiley and Sons, Inc., Distribution Center, 1 Wiley Drive, Somerset, New Jersey 08875-1272, or by telephone at (800) 225-5945, for $44.95.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACLevel1>LICENSING<A name=_Toc479406527></A></P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.100</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Qualifying investigation or examination of applicant.</SPAN><SPAN class=NACLead><A name=_Toc479406528></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN><SPAN class=Empty>&nbsp;</SPAN>In addition to the processing of an application of a captive insurer for licensure, the commissioner may perform a qualifying investigation or examination of the applicant before the applicant may receive the license. Such an investigation or examination may consist of a general survey of the corporate records of the applicant, including:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;The charter, bylaws and minute books of the applicant;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;Verification of the principal place of business of the applicant;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 3. &nbsp;A determination of the assets and liabilities of the applicant;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 4. &nbsp;A review of the accounting systems and rules for underwriting of the applicant; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 5. &nbsp;A review of such other factors as the commissioner deems necessary.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.110</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Authority of commissioner to establish review panel for applications.</SPAN><SPAN class=NACLead><A name=_Toc479406529></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN><SPAN class=Empty>&nbsp;</SPAN>In contracting with outside resources, including attorneys, accountants and actuaries, for the review of the applications for licenses for captive insurers pursuant to NRS 694C.220, the commissioner may establish a review panel from a pool of qualified members as determined by the commissioner.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACLevel1>ADMINISTRATION<A name=_Toc479406530></A></P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.200</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Requirements for annual report of financial condition.</SPAN><SPAN class=NACLead><A name=_Toc479406531></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170, 694C.400)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;A report of financial condition filed by an association captive insurer, an agency captive insurer or a rental captive insurer pursuant to NRS 694C.400 must be verified by the oath of two executive officers of the captive insurer.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;A captive insurer shall file with the commissioner an audited statement of its financial condition. The audited statement must be:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (a) Prepared in accordance with generally accepted accounting principles in the United States and stated in United States dollars, and must contain the footnotes and opinions of the independent certified public accountant who prepared the statement; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (b) Accompanied by a statement, prepared by the independent certified public accountant who prepared the audited statement, certifying that all financial requirements established by law and the articles of incorporation, bylaws and the business plan of the captive insurer have been met.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 3. &nbsp;In addition to any other statements and schedules which the captive insurer is required by law to file, the captive insurer shall submit to the commissioner the following exhibits and schedules from the <I>Property/Casualty Insurance Annual Statements Blanks</I>, published by the National Association of Insurance Commissioners, which is adopted by reference in <BR>NAC 694C.090:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (a) Exhibit 1 - Analysis of Nonadmitted Assets and Related Items;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (b) Schedule A - Real Estate;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (c) Schedule B - Mortgage Loans;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (d) Schedule BA - Other Long-Term Invested Assets;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (e) Schedule D - Bonds and Stocks;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (f) Schedule DA - Short-Term Investments; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (g) Schedule P - Parts 1 through 4 - Analysis of Losses and Loss Expenses.</P> <P class=NACBody>The exhibits and schedules must be prepared in accordance with the <I>Annual Statement Instructions for Property/Casualty Manual</I>, published by the National Association of Insurance Commissioners, which is adopted by reference in NAC 694C.090.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 4. &nbsp;A report of financial condition filed by a pure captive insurer pursuant to NRS 694C.400 must be verified by the oath of two executive officers of the pure captive insurer. The report must be on the form prescribed by the commissioner known as  Captive Annual Statement: Pure. </P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.210</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Annual audit.</SPAN><SPAN class=NACLead><A name=_Toc479406532></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;A captive insurer shall have an annual audit by an independent certified public accountant who is authorized by the commissioner to conduct the audit. The captive insurer shall file the audited financial report with the commissioner on or before June 30 for the year ending on the immediately preceding December 31.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;The commissioner will deem the annual audit conducted pursuant to this section to be a part of the annual report of financial condition of the captive insurer which is filed pursuant to NRS 694C.400.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 3. &nbsp;The annual audit required by this section must include:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (a) The opinion of the independent certified public accountant who conducted the audit which states that the financial statements of the captive insurer were examined in accordance with generally accepted auditing standards, as determined by the American Institute of Certified Public Accountants and included in the publication <I>AICPA Professional Standards</I>, which is adopted by reference in NAC 694C.090. The opinion must:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1) Cover all years presented in the audit;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2) Be addressed to the captive insurer on stationery of the accountant; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3) Include the address of the accountant issuing the opinion, original manual signatures and the date on which the opinion was issued.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (b) A report of an evaluation of the internal controls of the captive insurer relating to:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1) The methods and procedures used in the securing of assets; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2) The reliability of the financial records of the captive insurer, including, without limitation, the controls for the system of authorization and approval, and the separation of duties.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (c) A letter from the independent certified public accountant which includes:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1) A statement that the accountant is independent with respect to the captive insurer and that he conforms to the standards of his profession as set forth in the <I>AICPA Professional Standards</I>, published by the American Institute of Certified Public Accountants, and adopted by reference in NAC 694C.090, and the pronouncements of the Financial Accounting Standards Board;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2) A general description of the background and experience of the staff of the accountant engaged in the audit, including the experience of the staff in auditing captive insurers and other insurance companies;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3) A statement that the accountant understands that the audited annual report and his opinions thereon will be filed with the commissioner pursuant to this section;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (4) A statement that the accountant will comply with NAC 694C.230 and that he consents and agrees to make his work papers available for review by the commissioner or his designee; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (5) A statement that the accountant is properly licensed by the appropriate state licensing authority and that he is a member in good standing of the American Institute of Certified Public Accountants.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (d) Financial statements, including:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1) A balance sheet;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2) A statement of gain or loss from operations;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3) A statement of changes in financial position;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (4) A statement of changes in paid-up capital, gross paid-in contributed surplus and unassigned money or assets; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (5) Notes to financial statements required by generally accepted accounting principles, including:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (I) A reconciliation of differences, if any, between the audited financial report and the report filed with the commissioner pursuant to NRS 694C.400, if the captive insurer is reporting on a statutory accounting basis;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (II) A summary of ownership and relationships of the company and all affiliated corporations or companies insured by the captive insurer; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (III) A narrative explanation of all material transactions and balances with the captive insurer.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (e) An annual actuarial certification of loss reserves and loss expense reserves which includes an opinion of the adequacy of the loss reserves and loss expense reserves of the captive insurer, in a format acceptable to the commissioner. The person who certifies the adequacy of the reserves must be approved by the commissioner and must be a Fellow of the Casualty Actuarial Society, a member in good standing of the American Academy of Actuaries or a person who has otherwise demonstrated his competence in the evaluation of loss reserves to the commissioner. The annual actuarial certification must be in such form as the commissioner determines appropriate.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.220</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Designation of independent certified public accountant.</SPAN><SPAN class=NACLead><A name=_Toc479406533></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN><SPAN class=Empty>&nbsp;</SPAN>A captive insurer shall report to the commissioner in writing the name and address of the independent certified public accountant whom the captive insurer has retained to conduct the annual audit required to be filed pursuant to NAC 694C.210:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;Within 90 days after becoming subject to chapter 694C of NRS; and</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;If the captive insurer changes its independent certified public accountant, within 90 days after making that change.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.230</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Availability and maintenance of work papers of independent certified public accountant.</SPAN><SPAN class=NACLead><A name=_Toc479406534></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;A captive insurer shall ensure that its independent certified public accountant makes available for review by the commissioner or his designee the work papers of the accountant prepared in the conduct of the audit of the captive insurer. The captive insurer shall ensure that the accountant retains the audit work papers for not less than 5 years after the period reported upon in the audit.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;A review by the commissioner of the work papers of an independent certified public accountant is considered to be an examination of the captive insurer, and all work papers obtained during the course of such an examination are confidential. The captive insurer shall ensure that the independent certified public accountant provides to the division of insurance of the department of business and industry photocopies of any of the work papers which the division considers relevant. The division may retain any copies of work papers provided to it pursuant to this subsection.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.240</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Security deposit or letter of credit.</SPAN><SPAN class=NACLead><A name=_Toc479406535></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;If the commissioner determines that the financial condition of a captive insurer warrants additional security, he may require the captive insurer to:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (a) Deposit with the state treasurer:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1) Cash; or</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2) Securities which have been approved by the commissioner; or</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (b) Furnish the commissioner a clean irrevocable letter of credit issued by a bank chartered by the State of Nevada, or a bank that is a member of the United States Federal Reserve System, on a form approved by the commissioner.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;A captive insurer may:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (a) Receive interest or dividends from the security deposit; or</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (b) With the approval of the commissioner, exchange the deposit for other deposits of equal value.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 3. &nbsp;If the captive insurer discontinues business, the commissioner will return the deposit to the captive insurer only after being satisfied that all obligations of the captive insurer have been discharged.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P><SPAN class=Empty><SPAN style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 12pt"><BR clear=all style="PAGE-BREAK-BEFORE: always"></SPAN></SPAN> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; <SPAN class=NACSection>NAC 694C.250</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Reinsurance and excess insurance.</SPAN><SPAN class=NACLead><A name=_Toc479406536></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;A captive insurer shall give at least 90 days advance notice to the insured and the commissioner of the termination or modification of any reinsurance treaty or agreement held by the captive insurer. Upon notification of termination or modification of a reinsurance treaty or agreement held by a captive insurer, the commissioner may order the captive insurer to cease writing any new business until the commissioner approves the modification of the existing reinsurance treaty or agreement, or any replacement reinsurance treaty or agreement obtained by the captive insurer.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;Reinsurance and excess insurance must be effected through a written agreement of reinsurance, or a written contract setting forth the terms, provisions and conditions governing the reinsurance.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 3. &nbsp;The commissioner may require that complete copies of all reinsurance treaties, agreements and contracts entered into by a captive insurer be:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (a) Filed by the captive insurer with the commissioner;</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (b) Approved by the commissioner; or</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (c) Filed by the captive insurer with, and approved by, the commissioner.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.260</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Notification of certain changes in operations or organizational structure.</SPAN><SPAN class=NACLead><A name=_Toc479406537></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN><SPAN class=Empty>&nbsp;</SPAN>If any material change occurs in the operations of a captive insurer or in the organizational structure within the captive insurer, the manager, certified public accountant or actuary of the captive insurer shall notify the board of directors of the captive insurer of the material change within 60 days after the material change occurs.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.270</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Prior approval required for change in nature of business; filing of certain changes in application information with commissioner.</SPAN><SPAN class=NACLead><A name=_Toc479406538></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;A captive insurer shall not, without the prior approval of the commissioner, make any material change in the nature of its business from that stated in its plan of operation filed with the commissioner.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;Any change in any other information filed with the application must be filed with the commissioner as soon as practicable, but does not require the prior approval of the commissioner to make the change.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.280</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Officers and directors.</SPAN><SPAN class=NACLead><A name=_Toc479406539></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;Within 30 days after any change in the executive officers and directors of a captive insurer, the captive insurer shall report the change to the commissioner. The report must include a statement of the business and professional affiliations of the new executive officer or director. The new executive officer or director must meet the same standards that were indicated in the initial application of the captive insurer for that officer or director position.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;A director, an officer or an employee of a captive insurer shall not, except on behalf of the captive insurer, accept or be the beneficiary of any fee, brokerage, gift or other emolument because of any investment, loan, deposit, purchase, sale, payment or exchange made by or for the captive insurer, but such a person may receive reasonable compensation for necessary services rendered to the captive insurer in his usual private, professional or business capacity.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 3. &nbsp;Any profit or gain received by or on behalf of any person in violation of this section is recoverable by the captive insurer.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.290</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Conflict of interest: Statement; disclosure.</SPAN><SPAN class=NACLead><A name=_Toc479406540></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;A captive insurer chartered in this state shall adopt a statement for conflict of interest for its managers, officers, directors and key employees. The statement must provide for a disclosure that the manager, officer, director or employee has no outside commitments, personal or otherwise, that would divert him from his duty to further the interest of the captive insurer which he represents, except that the statement for conflict of interest must not preclude the manager, officer, director or employee from being a director or officer in more than one insurance company or captive insurer, or both.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;A manager, an officer, a director and a key employee of a captive insurer shall file a disclosure of his conflicts of interest with the board of directors of the captive insurer annually.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACLevel1>MISCELLANEOUS PROVISIONS<A name=_Toc479406541></A></P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.300</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Acting as manager, broker or agent without authorization of commissioner prohibited.</SPAN><SPAN class=NACLead><A name=_Toc479406542></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN><SPAN class=Empty>&nbsp;</SPAN>A person shall not act as a manager, a broker or an agent in this state for a captive insurer without authorization of the commissioner. An application for authorization to act as a manager, a broker or an agent must be made to the commissioner on a form prescribed by the commissioner.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=NACBody><SPAN class=Empty>&nbsp;&nbsp;&nbsp;&nbsp; </SPAN><SPAN class=NACSection>NAC 694C.310</SPAN><SPAN class=Empty>&nbsp;</SPAN><SPAN class=NACLead>Acquisition of control of or merger with captive insurer.</SPAN><SPAN class=NACLead><A name=_Toc479406543></A></SPAN><SPAN class=NACLead> (NRS 679B.130, 694C.170)</SPAN></P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 1. &nbsp;A person other than an issuer shall not:</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (a) Make a tender offer for, make a request or invitation for tenders of, or enter into any agreement to exchange securities for, any voting security of a domestic captive insurer; or</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; (b) Seek to acquire, or acquire in the open market or otherwise, any voting security of a domestic captive insurer,</P> <P class=NACBody>if, after the consummation thereof, the person would, directly or indirectly, or by conversion or exercise of any right acquired, be in control of the captive insurer.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 2. &nbsp;A person shall not enter into an agreement to merge with, or otherwise acquire control of, a domestic captive insurer without the prior written approval of the commissioner.</P> <P class=NACBody>&nbsp;&nbsp;&nbsp;&nbsp; 3. &nbsp;In considering an application for the acquisition of control or merger with a domestic captive insurer, the commissioner will consider all the facts and circumstances surrounding the application as well as the criteria for the establishment of a captive insurer set forth in this chapter and chapter 694C of NRS.</P> <P class=NACSource>&nbsp;&nbsp;&nbsp;&nbsp; (Added to NAC by Comm r of Insurance by R125 99, eff. 1 27 2000)</P> <P class=MsoNormal>&nbsp;</P></DIV></BODY></HTML>