§386-197 Board of trustees; membership, powers, duties, and prohibitions. Each group shall be operated by a board of trustees, which shall consist of not less than five persons whom the members of a group elect for stated terms of office. At least two-thirds of the trustees shall be employees, officers, or directors of members of the group. The group's administrator, service company, or any owner, officer, employee of, or any other person affiliated with, the administrator or service company shall not serve on the board of trustees of the group. All trustees shall be residents of this State or officers of corporations authorized to do business in this State. The board of trustees of each group shall ensure that all claims are paid promptly and take all necessary precautions to safeguard the assets of the group, including all of the following:

(1) The board of trustees shall:

(A) Maintain responsibility for moneys collected or disbursed from the group and segregate all moneys into a claims fund account and an administrative fund account. At least seventy per cent of the net premium shall be placed into a designated depository for the sole purpose of paying claims, allocated claims expenses, reinsurance or excess insurance, and special compensation fund assessments. This account shall be called the claims fund account. The remaining net premium shall be placed in a designated depository for the payment of taxes, general regulatory fees and assessments, and administrative costs. This account shall be called the administrative fund account. The commissioner may approve an administrative fund account of more than thirty per cent and a claims fund account of less than seventy per cent only if the group shows to the insurance commissioner's satisfaction that more than thirty per cent is needed for an effective safety and loss control program or that the group's aggregate excess insurance attaches at less than seventy per cent;

(B) Maintain minutes of its meetings and make the minutes available to the insurance commissioner;

(C) Retain an independent certified public accountant to prepare the statement of financial condition required by section 386-201(a); and

(D) Designate an administrator to carry out the policies established by the board of trustees and to provide day to day management of the group and delineate in the written minutes of its meetings the areas of authority it delegates to the administrator.

(2) The board of trustees shall not:

(A) Extend credit to a member for payment of a premium, except pursuant to payment plans approved by the insurance commissioner; and

(B) Borrow moneys from the group or in the name of the group, except in the ordinary course of business, without first advising the insurance commissioner of the nature and purpose of the loan and obtaining prior approval from the insurance commissioner. [L 1986, c 304, pt of §1]