Free CAS Exam 6-U.S. (Regulation and Financial Reporting) Solvency, Specialty Markets & Emerging Regulation Practice Questions

C is correct. Under the Liability Risk Retention Act, a risk retention group is an insurer owned by its members who are engaged in similar businesses and share similar liability exposures. The group bears the members' risk, may write only liability coverage, is chartered and licensed in a single domiciliary state, and can then operate in other states largely exempt from non-domiciliary licensing and most host-state regulation. That single-license-plus-interstate-reach design is the defining feature of the RRG.

C is correct. The RBC ratio equals total adjusted capital divided by ACL RBC: $85/100 = 85\%$. A ratio between 70% and 100% of ACL RBC triggers the Authorized Control Level, at which the domiciliary regulator is permitted (but not yet required) to place the insurer under regulatory control in addition to the remedies available at higher levels.

E is correct. Under the federal Liability Risk Retention Act of 1986, a risk retention group is licensed and regulated for solvency solely by its chartering state, and that state's law governs delinquency proceedings and liquidation; non-chartering states are preempted from duplicating solvency oversight, so no ancillary proceeding carves out locally written business. The Act also excludes risk retention groups from state guaranty fund systems, which is why their policies and applications must carry a notice warning that the coverage is not protected by any state insurance insolvency guaranty fund. Registration, premium tax payment, designation of the commissioner for service of process, and compliance with unfair claims settlement practices laws are permitted host-state requirements, but none of them constitutes admission and none creates guaranty access. Members therefore stand as claimants in the chartering state's estate, with recoveries limited to estate assets and any assessment obligations under the group's own charter documents.