Okla. Stat. tit. 36, § 36-6454.1

A. For the purposes of this section:

1. "Board of Directors" or "Board" means the governing body of

the risk retention group elected by the shareholders or members to

establish policy, elect or appoint officers and committees, and make

other governing decisions;

2. "Director" means a natural person designated in the articles

of the risk retention group, or designated, elected or appointed by

any other manner, name or title to act as a director;

3. "Disclose" means making information available through

electronic or any other means the Board determines is necessary; and

4. "Service Providers" means captive managers, auditors,

accountants, actuaries, investment advisors, lawyers, managing

general underwriters or other parties responsible for underwriting,

determination of rates, collection of premiums, adjusting and

settling claims and/or the preparation of financial statements.

B. Existing risk retention groups shall comply with the

following governance standards within one year of the effective date

of this act. Risk retention groups licensed on or after the

effective date of this act shall be in compliance with the standards

at the time of licensure.

C. The Board of Directors of the risk retention group shall be

composed of a majority of independent directors. No director shall

qualify as independent unless the Board affirmatively determines

that the director has no material relationship with the risk

retention group. Each risk retention group shall disclose these

determinations to its domestic regulator at least annually.

Notwithstanding any other provision of law, a person that is a

direct or indirect owner of or subscriber in the risk retention

group, or is an officer, director or employee of such an owner and

insured, is considered to be independent unless some other position

Oklahoma Statutes - Title 36. Insurance Page 1197

of such officer, director or employee constitutes a material

relationship. Material relationship of a person with the risk

retention group shall include, but is not limited to:

1. The receipt in any one twelve (12) month period of

compensation or payment of any other item of value by such person, a

member of such person's immediate family or any business with which

the person is affiliated from the risk retention group or a

consultant or service provider to the risk retention group is

greater than or equal to five percent (5%) of the risk retention

group's gross written premium for the twelve (12) month period or

two percent (2%) of its surplus, whichever is greater, as measured

at the end of any fiscal quarter falling in the twelve (12) month

period. The person or immediate family member of such person is not

independent until one year after his or her compensation from the

risk retention group falls below the threshold provided in this

paragraph.

2. A relationship with a director or an immediate family member

of a director who is affiliated with or employed in a professional

capacity by a present or former internal or external auditor of the

risk retention group is not independent until one year after the end

of the affiliation, employment or auditing relationship.

3. A relationship with a director or immediate family member of

a director who is employed as an executive officer of another

company where any of the risk retention group's present executives

serve on the other company's Board of Directors is not independent

until one year after the end of such service or the employment

relationship.

D. The term of any material service provider contract with the

risk retention group shall not exceed five (5) years. Any such

contract, or its renewal, shall require the approval of the majority

of the risk retention group's independent directors. The risk

retention group's Board shall have the right to terminate any

service provider, audit or actuarial contract at any time for cause
onship.

D. The term of any material service provider contract with the

risk retention group shall not exceed five (5) years. Any such

contract, or its renewal, shall require the approval of the majority

of the risk retention group's independent directors. The risk

retention group's Board shall have the right to terminate any

service provider, audit or actuarial contract at any time for cause

after providing adequate notice as defined in the contract. The

service provider contract is deemed material if the amount to be

paid for the contract is greater than or equal to five percent (5%)

of the risk retention group's annual gross written premium or two

percent (2%) of its surplus, whichever is greater. For the purpose

of this section, lawyer shall not include defense counsel retained

by the risk retention group to defend claims, unless the amount of

fees paid to such lawyers are material. No service provider

contract violating the provisions prohibiting material

relationships, as specified in subsection B of this section, shall

be entered into unless the risk retention group has notified the

Commissioner in writing of its intention to enter into such contract

at least thirty (30) days prior and the Commissioner has not

disapproved it within such period. To the extent permissible under

Oklahoma Statutes - Title 36. Insurance Page 1198

state law, service providers of a reciprocal risk retention group

shall contract with the risk retention group.

If the risk retention group is a reciprocal risk retention

group, then the attorney-in-fact would be required to adhere to the

same standards regarding independence of operation and governance as

imposed on the Board's advisory committee created pursuant to this

section.

E. The risk retention group's Board shall adopt a written

policy in the plan of operation, as approved by the Board, that

requires the Board to:

1. Assure that all owners and insureds of the risk retention

group receive evidence of ownership interest;

2. Develop a set of governance standards applicable to the risk

retention group;

3. Oversee the evaluation of the risk retention group's

management including but not limited to the performance of the

captive manager, managing general underwriter or other party or

parties responsible for underwriting, determination of rates,

collection of premium, adjusting or settling claims or the

preparation of financial statements;

4. Review and approve the amount to be paid for all material

service providers; and

5. Review and approve, at least annually:

a. the risk retention group's goals and objectives

relevant to the compensation of officers and service

providers,

b. the officers' and service providers' performance

considering those goals and objectives, and

c. the continued engagement of the officers and material

service providers.

F. 1. The risk retention group shall have an audit committee

composed of at least three independent Board members, as specified

in subsection C of this section. A nonindependent Board member may

participate in the activities of the audit committee, if invited by

the members, but shall not be a member of the committee.

2. The audit committee shall have a written charter that

defines the purpose of the committee that includes but is not

limited to:

a. assisting Board oversight of:

i. the integrity of the financial statements,

ii. the compliance with legal and regulatory

requirements, and

iii. the qualifications, independence and performance

of the independent auditor and actuary,

b. discussing the annual audited financial statements and

quarterly financial statements with management,

Oklahoma Statutes - Title 36. Insurance Page 1199

c. discussing the annual audited financial statements

with its independent auditor and, if advisable,

discuss its quarterly financial statements with its

independent auditor,

d. discussing policies with respect to risk assessment

and risk management,
the annual audited financial statements and

quarterly financial statements with management,

Oklahoma Statutes - Title 36. Insurance Page 1199

c. discussing the annual audited financial statements

with its independent auditor and, if advisable,

discuss its quarterly financial statements with its

independent auditor,

d. discussing policies with respect to risk assessment

and risk management,

e. meeting separately and periodically, either directly

or through a designated representative of the

committee, with management and independent auditors,

f. reviewing with the independent auditor any audit

problems or difficulties and management's response,

g. setting clear hiring policies of the risk retention

group as to the hiring of employees or former

employees of the independent auditor,

h. requiring the external auditor to rotate the head

audit partner having primary responsibility for the

risk retention group's audit, as well as the audit

partner responsible for reviewing that audit so that

neither individual performs audit services for more

than five (5) consecutive fiscal years, and

i. reporting regularly to the Board.

3. The domestic regulator may waive the requirement to

establish an audit committee if the risk retention group is able to

demonstrate to the domestic regulator that it is impracticable to do

so and the risk retention group's Board is able to accomplish the

purposes of an audit committee described in this subsection.

G. The Board shall adopt and disclose governance standards and

provide the information to members and insureds upon request, which

shall include but not be limited to:

1. A process by which the directors are elected by the owner

and insureds;

2. Director qualification standards;

3. Director responsibilities;

4. Director access to management and, as necessary and

appropriate, independent advisors;

5. Director compensation;

6. Director orientation and continuing education;

7. The policies and procedures that are followed for management

succession; and

8. The policies and procedures that are followed for annual

performance evaluation of the Board.

H. The Board shall adopt and disclose a code of business

conduct and ethics for directors, officers and employees of the risk

retention group and shall promptly disclose to the Board any waivers

of the code for directors or executive officers, which shall include

the following topics:

1. Conflicts of interest;

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2. Matters covered under the corporate opportunities doctrine

under the state of domicile;

3. Confidentiality;

4. Fair dealing;

5. Protection and proper use of risk retention group assets;

6. Compliance with all applicable laws, rules and regulations;

and

7. Requiring the reporting of any illegal or unethical behavior

which affects the operation of the risk retention group.

I. The captive manager, president or chief executive officer of

the risk retention group shall promptly notify the domestic

regulator in writing if either becomes aware of any material

noncompliance with the governance standards specified in subsections

G and H of this section.