1. A captive insurer must not be issued a license, and shall not hold a license, unless the captive insurer has and maintains, in addition to any other capital or surplus required to be maintained pursuant to subsection 3, unimpaired paid-in capital and unencumbered surplus of:

(a) For a pure captive insurer, not less than $200,000;

(b) For an association captive insurer, not less than $500,000;

(c) For an agency captive insurer, not less than $600,000;

(d) For a rental captive insurer, not less than $800,000;

(e) For a sponsored captive insurer, not less than $500,000; and

(f) For a state-chartered risk retention group, not less than $500,000.

2. Except as otherwise provided by the Commissioner pursuant to subsection 3, the capital and surplus required to be maintained pursuant to this section must be in the form of cash or an irrevocable letter of credit.

3. The Commissioner may prescribe additional requirements relating to capital or surplus based on the type, volume and nature of the insurance business that is transacted by the captive insurer and requirements regarding which capital and surplus, if any, may be in the form of an irrevocable letter of credit.

4. A letter of credit used by a captive insurer as evidence of capital and surplus required pursuant to this section must:

(a) Be issued by a bank chartered by this State or a bank that is a member of the United States Federal Reserve System and has been approved by the Commissioner; and

(b) Include a provision pursuant to which the letter of credit is automatically renewable each year, unless the issuer gives written notice to the Commissioner and the captive insurer at least 90 days before the expiration date.

5. A surplus note used by a captive insurer as evidence of capital and surplus required pursuant to this section must:

(a) Be subject to strict control by the Commissioner and have been approved by the Commissioner as to form and content.

(b) Be subordinate to:

(1) Policyholders;

(2) Claims by claimants and beneficiaries under policies; and

(3) All other classes of creditors pursuant to paragraph (k) of subsection 1 of NRS 696B.420.

(c) Require prior approval of the Commissioner for any:

(1) Payment of interest; and

(2) Repayment of principal.

(d) Be accompanied by proceeds which are received by the captive insurer in the form of:

(1) Cash; or

(2) Other assets that:

(I) Are acceptable to the Commissioner;

(II) Have values that are readily determined; and

(III) Have liquidity that is satisfactory to the Commissioner.

(e) Be accounted for in such a manner that interest shall not be recorded as a liability or an expense until approval for payment of such interest has been granted by the Commissioner.

(Added to NRS by 1999, 3211; A 2005, 2153; 2007, 3328; 2019, 1711)