2009 California Insurance Code - Section 10719-10729 :: Article 3. Voluntary Reinsurance Mechanism

10719.  The California Small Group Reinsurance Fund is hereby
authorized to be created solely to allow carriers to share in
financing the cost of covering high risk small employer groups. It
shall be organized as a nonprofit corporation, which consists of all
small employer carriers and small employer health care service plans
which elect to participate in the fund pursuant to subdivision (d) of
Section 10720. These carriers may cede that portion of risk to the
fund that the fund has agreed to accept.

10719.1.  Any person or entity subject to the requirements of this
chapter shall comply with the standards set forth in Chapter 7
(commencing with Section 3750) of Part 1 of Division 9 of the Family
Code and Section 14124.94 of the Welfare and Institutions Code.

10720.  (a) The fund shall be governed by a board of directors,
which shall initially be elected by small employer carriers and small
employer health care service plans. The initial board shall be
elected by a weighted vote based on net health insurance premiums
derived from the state in the previous calendar year in the small
employer market. The initial board shall consist of at least five and
not more than nine representatives of small employer carriers and
small employer health care service plans.
   (b) Within 180 days of the election of the initial board, the
board shall adopt a plan of operation which provides for the
reasonable and equitable administration of the fund.
   (c) The plan of operation shall, among other things, do all of the
following:
   (1) Establish procedures to assure the fair, reasonable, and
equitable administration of the fund and provide for the sharing of
fund gains or losses on an equitable and proportionate basis.
   (2) Establish procedures for handling and accounting of program
assets and moneys.
   (3) Establish terms of office and procedures for filling vacancies
on the board.
   (4) Establish procedures for reinsuring risks in accordance with
the provisions of this chapter.
   (5) Establish procedures for collecting assessments from members
to provide for claims reinsured by the fund and for administrative
expenses incurred or estimated to be incurred during the period for
which the assessment is made.
   (d) Within 60 days of the board's adoption of the plan of
operation, small employer carriers and small employer health care
service plans shall elect to be either a participant or
nonparticipant of the fund. All participants of the fund shall be
members of the fund, and only members of the fund shall continue to
be members of the board. Members may elect new members of the board,
if necessary, to replace initial board members who elect to be
nonparticipants of the fund, subject to subdivision (a). The election
shall be binding for a three-year period. Thereafter, each small
employer carrier shall notify the board 90 days prior to the end of
the election period whether or not they will be a member of the fund.

10720.1.  The fund shall have the general powers and authority
granted under the laws of California to insurance companies and
health care service plans licensed to transact business, except the
power to issue health benefit plans directly to either groups or
individuals. In addition, thereto, the fund shall have the specific
authority to:
   (a) Enter into contracts as are necessary or proper to carry out
the provisions and purposes of this chapter, including the authority
to enter into contracts with similar programs of other states for the
joint performance of common functions or with persons or other
organizations for the performance of administrative functions.
   (b) Sue or be sued, including taking any legal actions necessary
or proper for recovering any assessments and penalties for, on behalf
of, or against the fund.
   (c) Take any legal action necessary to avoid the payment of
improper claims against the fund.
   (d) Issue reinsurance policies, in accordance with the
requirements of this chapter.
   (e) Establish rules, conditions, and procedures pertaining to the
reinsurance of members' risk by the fund.
   (f) Establish actuarial functions as appropriate for the operation
of the fund.
   (g) Assess members of the fund and take advance interim
assessments as may be reasonable and necessary for organizational and
interim operating expenses. Any interim assessments shall be
credited as offsets against any regular assessments due following the
close of the fiscal year.
   (h) Appoint from among fund members appropriate legal, actuarial,
and other committees as necessary to provide technical assistance in
the operation of the fund, policy and contract design, and any other
function within the authority of the fund.
   (i) Borrow money to effect the purposes of the fund. Any notes or
other evidence of indebtedness of the fund not in default shall be
legal investments for fund members and may be carried as admitted
assets.

10721.  The fund shall provide for the financing of its reinsurance
and operating costs, including actuarially sound reserves for unpaid
losses, by charging members a reinsurance contribution and, as
necessary, making assessments and collections from members in
proportion to their participation in the program. Neither the state
or any officer, agent, or employee shall be liable for any costs of
the fund, or for any debts or liabilities incurred by the fund.

10722.  If assessments exceed actual losses and administrative
expenses of the fund, the excess shall be held at interest and used
by the fund to offset future losses or to reduce fund premiums. As
used in this paragraph, "future losses" includes reserves for
incurred but not reported claims.

10723.  Any unsatisfied net liability or outstanding assessment owed
by an insolvent member participating in the fund shall be assumed by
and apportioned among the remaining members in the fund in the same
manner in which assessments are levied by the fund. The fund shall
have all rights allowed by law on behalf of the remaining members
against the insolvent member for sums due the fund.

10724.  Carriers choosing to participate shall comply with all
requirements for participation established by the fund.

10725.  The fund's board of directors shall establish the rules,
conditions, and procedures pertaining to the reinsurance of members'
risks by the fund.

10726.  Nothing in this article relieves members of participating in
the fund from complying with the underwriting and rating provisions
included in Article 1 (commencing with Section 10700) and Article 2
(commencing with Section 10702) in the case of small employer
carriers, or in Article 3.1 (commencing with Section 1357) and with
Article 3.14 (commencing with Section 1357.50) of the Health and
Safety Code, in the case of small employer health care service plans.

10727.  The fund shall be exempt from any and all taxes.

10728.  For purposes of agreements entered into pursuant to this
article, the fund, and its officers, directors, agents, and employees
shall have no liability for any damages other than actual damages.

10729.  The fund shall establish rules, conditions, and procedures
relating to the indemnification of any person or member of the fund
made a party to any claim, action, suit, or proceeding because the
person or member served on the board of directors of the fund, or on
a committee, or was an officer or employee of the fund, provided,
such rules, conditions, and procedures do not authorize
indemnification in excess of that expressly permitted by Section 317
of the Corporations Code.