2021 -- H 5780 | |
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LC002093 | |
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STATE OF RHODE ISLAND | |
IN GENERAL ASSEMBLY | |
JANUARY SESSION, A.D. 2021 | |
____________ | |
A N A C T | |
RELATING TO INSURANCE -- FINANCIAL SERVICES | |
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Introduced By: Representatives Solomon, Kennedy, and Casey | |
Date Introduced: February 24, 2021 | |
Referred To: House Corporations | |
It is enacted by the General Assembly as follows: | |
1 | SECTION 1. Sections 27-1.1-1 and 27-1.1-4 of the General Laws in Chapter 27-1.1 entitled |
2 | "Credit for Reinsurance Act" are hereby amended to read as follows: |
3 | 27-1.1-1. Credit allowed a domestic ceding insurer. |
4 | (a) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a |
5 | reduction from liability on account of reinsurance ceded only when the reinsurer meets the |
6 | requirements of subsections (b), (c), (d), (e), (f), or (g), or (h) of this section; provided, further, that |
7 | the commissioner may adopt by regulation pursuant to § 27-1.1-4 specific additional requirements |
8 | relating to or setting forth: |
9 | (1) The valuation of assets or reserve credits; |
10 | (2) The amount and forms of security supporting reinsurance arrangements described in § |
11 | 27-1.1-4; and |
12 | (3) The circumstances pursuant to which credit will be reduced or eliminated. |
13 | Credit shall be allowed under subsections (b), (c), or (d) of this section only as respects |
14 | cessions of those kinds or classes of business which the assuming insurer is licensed or otherwise |
15 | permitted to write or assume in its state of domicile or, in the case of a U.S. branch of an alien |
16 | assuming insurer, in the state through which it is entered and licensed to transact insurance or |
17 | reinsurance. Credit shall be allowed under subsections (d) or (e) of this section only if the applicable |
18 | requirements of subsection (h)(i) of this section have been satisfied. |
19 | (b) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is |
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1 | licensed to transact insurance or reinsurance in this state. |
2 | (c) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is |
3 | accredited by the commissioner as a reinsurer in this state. In order to be eligible for an accreditation |
4 | a reinsurer must: |
5 | (1) File with the commissioner evidence of its submission to this state's jurisdiction; |
6 | (2) Submit to this state's authority to examine its books and records; |
7 | (3) Be licensed to transact insurance or reinsurance in at least one state, or in the case of a |
8 | United States branch of an alien assuming insurer, be entered through and licensed to transact |
9 | insurance or reinsurance in at least one state; |
10 | (4) Annually file with the commissioner a copy of its annual statement filed with the |
11 | insurance department of its state of domicile and a copy of its most recent audited financial |
12 | statement; and |
13 | (5) Demonstrate to the satisfaction of the commissioner that it has adequate financial |
14 | capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from |
15 | domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its |
16 | application if it maintains a surplus as regards policyholders in an amount not less than twenty |
17 | million dollars ($20,000,000) and its accreditation has not been denied by the commissioner within |
18 | ninety (90) days after submission of its application. |
19 | (d)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is |
20 | domiciled in, or in the case of a United States branch of an alien assuming insurer is entered |
21 | through, a state that employs standards regarding credit for reinsurance substantially similar to |
22 | those applicable under this statute and the assuming insurer or U.S. branch of an alien assuming |
23 | insurer: |
24 | (i) Maintains a surplus regarding policyholders in an amount not less than twenty million |
25 | dollars ($20,000,000); and |
26 | (ii) Submits to the authority of this state to examine its books and records. |
27 | (2) Provided, that the requirement of subsection (d)(1)(i) of this section does not apply to |
28 | reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same |
29 | holding company system. |
30 | (e)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that |
31 | maintains a trust fund in a qualified United States financial institution, as defined in § 27-1.1-3(b), |
32 | for the payment of the valid claims of its United States ceding insurers, their assigns, and successors |
33 | in interest. To enable the commissioner to determine the sufficiency of the trust fund, the assuming |
34 | insurer shall report annually to the commissioner information substantially the same as that required |
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1 | to be reported on the National Association of Insurance Commissioners (NAIC) annual statement |
2 | form by licensed insurers. The assuming insurer shall submit to examination of its books and |
3 | records by the commissioner and bear the expense of examination. |
4 | (2)(i) Credit for reinsurance shall not be granted under this subsection unless the form of |
5 | the trust and any amendments to the trust have been approved by: |
6 | (A) The commissioner of the state where the trust is domiciled; or |
7 | (B) The commissioner of another state who, pursuant to the terms of the trust instrument, |
8 | has accepted principal regulatory oversight of the trust. |
9 | (ii) The form of the trust and any trust amendments shall also be filed with the |
10 | commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. |
11 | The trust instrument shall provide that contested claims shall be valid and enforceable upon the |
12 | final order of any court of competent jurisdiction in the United States. The trust shall vest legal title |
13 | to its assets in its trustees for the benefit of the assuming insurer's U.S. ceding insurers, their assigns, |
14 | and successors in interest. The trust and the assuming insurer shall be subject to examination as |
15 | determined by the commissioner. |
16 | (iii) The trust shall remain in effect for as long as the assuming insurer has outstanding |
17 | obligations due under the reinsurance agreements subject to the trust. No later than February 28 of |
18 | each year the trustee of the trust shall report to the commissioner in writing the balance of the trust |
19 | and listing the trust's investments at the preceding year end and shall certify the date of termination |
20 | of the trust, if so planned, or certify that the trust will not expire prior to the following December |
21 | 31. |
22 | (3) The following requirements apply to the following categories of assuming insurer: |
23 | (i) The trust fund for a single assuming insurer shall consist of funds in trust in an amount |
24 | not less than the assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding |
25 | insurers, and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than |
26 | twenty million dollars ($20,000,000), except as provided in subsection (e)(3)(ii); |
27 | (ii) At any time after the assuming insurer has permanently discontinued underwriting new |
28 | business secured by the trust for at least three (3) full years, the commissioner with principal |
29 | regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only |
30 | after a finding, based on an assessment of the risk, that the new required surplus level is adequate |
31 | for the protection of U.S. ceding insurers, policyholders, and claimants in light of reasonably |
32 | foreseeable adverse loss development. The risk assessment may involve an actuarial review, |
33 | including an independent analysis of reserves and cash flows, and shall consider all material risk |
34 | factors, including, when applicable, the lines of business involved; the stability of the incurred loss |
| LC002093 - Page 3 of 29 |
1 | estimates; and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. |
2 | The minimum required trusteed surplus may not be reduced to an amount less than thirty percent |
3 | (30%) of the assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding insurers |
4 | covered by the trust; |
5 | (iii)(A) In the case of a group including incorporated and individual unincorporated |
6 | underwriters: |
7 | (B)(I) For reinsurance ceded under reinsurance agreements with an inception, amendment |
8 | or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an amount |
9 | not less than the respective underwriters' several liabilities attributable to business ceded by U.S. |
10 | domiciled ceding insurers to any underwriter of the group; |
11 | (C)(II) For reinsurance ceded under reinsurance agreements with an inception date on or |
12 | before December 31, 1992, and not amended or renewed after that date, notwithstanding the other |
13 | provisions of this chapter, the trust shall consist of a trusteed account in an amount not less than |
14 | the respective underwriters' several insurance and reinsurance liabilities attributable to business |
15 | written in the United States; |
16 | (D)(III) In addition to these trusts, the group shall maintain in trust a trusteed surplus of |
17 | which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of the U.S. |
18 | domiciled ceding insurers of any member of the group for all years of account; |
19 | (E)(B) The incorporated members of the group shall not be engaged in any business other |
20 | than underwriting as a member of the group and shall be subject to the same level of regulation and |
21 | solvency control by the group's domiciliary regulator as are the unincorporated members; |
22 | (F)(C) Within ninety (90) days after its financial statements are due to be filed with the |
23 | group's domiciliary regulator, the group shall provide to the commissioner an annual certification |
24 | by the group's domiciliary regulator of the solvency of each underwriter member; or if a |
25 | certification is unavailable, financial statements, prepared by independent public accountants, of |
26 | each underwriter member of the group; and |
27 | (iv) In the case of a group of incorporated underwriters under common administration the |
28 | group shall: |
29 | (A) Have continuously transacted an insurance business outside the United States for at |
30 | least three (3) years immediately prior to making application for accreditation; |
31 | (B) Maintain an aggregate policyholders surplus of ten billion dollars ($10,000,000,000); |
32 | (C) Maintain a trust fund in an amount not less than the group's several liabilities |
33 | attributable to business ceded by United States domiciled ceding insurers to any member of the |
34 | group pursuant to reinsurance contracts issued in the name of the group; |
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1 | (D) In addition, maintain a joint trusted surplus of which one hundred million dollars |
2 | ($100,000,000) shall be held jointly for the benefit of U.S. domiciled ceding insurers of any |
3 | member of the group as additional security for these liabilities; and |
4 | (E) Within ninety (90) days after its financial statements are due to be filed with the group's |
5 | domiciliary regulator, make available to the commissioner an annual certification of each |
6 | underwriter member's solvency by the member's domiciliary regulator and financial statements of |
7 | each underwriter member of the group prepared by its independent public accountant. |
8 | (f) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has |
9 | been certified by the commissioner as a reinsurer in this state and secures its obligations in |
10 | accordance with the requirements of this subsection. |
11 | (1) In order to be eligible for certification, the assuming insurer shall meet the following |
12 | requirements: |
13 | (i) The assuming insurer must be domiciled and licensed to transact insurance or |
14 | reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to paragraph |
15 | (f)(iii) of this subsection; |
16 | (ii) The assuming insurer must maintain minimum capital and surplus, or its equivalent, in |
17 | an amount to be determined by the commissioner pursuant to regulation; |
18 | (iii) The assuming insurer must maintain financial strength ratings from two or more rating |
19 | agencies deemed acceptable by the commissioner pursuant to regulation; |
20 | (iv) The assuming insurer must agree to submit to the jurisdiction of this state, appoint the |
21 | commissioner as its agent for service of process in this state, and agree to provide security for one |
22 | hundred percent (100%) of the assuming insurer's liabilities attributable to reinsurance ceded by |
23 | U.S. ceding insurers if it resists enforcement of a final U.S. judgment; |
24 | (v) The assuming insurer must agree to meet applicable information filing requirements as |
25 | determined by the commissioner, both with respect to an initial application for certification and on |
26 | an ongoing basis; and |
27 | (vi) The assuming insurer must satisfy any other requirements for certification deemed |
28 | relevant by the commissioner. |
29 | (2) An association including incorporated and individual unincorporated underwriters may |
30 | be a certified reinsurer. In order to be eligible for certification, in addition to satisfying requirements |
31 | of subsection (f)(1)(i) above: |
32 | (i) The association shall satisfy its minimum capital and surplus requirements through the |
33 | capital and surplus equivalents (net of liabilities) of the association and its members, which shall |
34 | include a joint central fund that may be applied to any unsatisfied obligation of the association or |
| LC002093 - Page 5 of 29 |
1 | any of its members, in an amount determined by the commissioner to provide adequate protection; |
2 | (ii) The incorporated members of the association shall not be engaged in any business other |
3 | than underwriting as a member of the association and shall be subject to the same level of regulation |
4 | and solvency control by the association's domiciliary regulator as are the unincorporated members; |
5 | and |
6 | (iii) Within ninety (90) days after its financial statements are due to be filed with the |
7 | association's domiciliary regulator, the association shall provide to the commissioner an annual |
8 | certification by the association's domiciliary regulator of the solvency of each underwriter member; |
9 | or if a certification is unavailable, financial statements, prepared by independent public |
10 | accountants, of each underwriter member of the association. |
11 | (3) The commissioner shall create and publish a list of qualified jurisdictions, under which |
12 | an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for |
13 | certification by the commissioner as a certified reinsurer. |
14 | (i) In order to determine whether the domiciliary jurisdiction of a non-U.S. assuming |
15 | insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the |
16 | appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both |
17 | initially and on an ongoing basis, and consider the rights, benefits, and the extent of reciprocal |
18 | recognition afforded by the non-U.S. jurisdiction to reinsurers licensed and domiciled in the U.S. |
19 | A qualified jurisdiction must agree to share information and cooperate with the commissioner with |
20 | respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be |
21 | recognized as a qualified jurisdiction if the commissioner has determined that the jurisdiction does |
22 | not adequately and promptly enforce final U.S. judgments and arbitration awards. Additional |
23 | factors may be considered in the discretion of the commissioner; |
24 | (ii) A list of qualified jurisdictions shall be published through the NAIC committee process. |
25 | The commissioner shall consider this list in determining qualified jurisdictions. If the commissioner |
26 | approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the |
27 | commissioner shall provide thoroughly documented justification in accordance with criteria to be |
28 | developed under regulations; |
29 | (iii) U.S. jurisdictions that meet the requirement for accreditation under the NAIC financial |
30 | standards and accreditation program shall be recognized as qualified jurisdictions; and |
31 | (iv) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, |
32 | the commissioner has the discretion to suspend the reinsurer's certification indefinitely, in lieu of |
33 | revocation. |
34 | (4) The commissioner shall assign a rating to each certified reinsurer, giving due |
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1 | consideration to the financial strength ratings that have been assigned by rating agencies deemed |
2 | acceptable to the commissioner pursuant to regulation. The commissioner shall publish a list of all |
3 | certified reinsurers and their ratings. |
4 | (5) A certified reinsurer shall secure obligations assumed from U.S. ceding insurers under |
5 | this subsection at a level consistent with its rating, as specified in regulations promulgated by the |
6 | commissioner. |
7 | (i) In order for a domestic ceding insurer to qualify for full financial statement credit for |
8 | reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form |
9 | acceptable to the commissioner and consistent with the provisions of section (3), or in a multi- |
10 | beneficiary trust in accordance with subsection (e) of this section, except as otherwise provided in |
11 | this subsection; |
12 | (ii) If a certified reinsurer maintains a trust to fully secure its obligations subject to |
13 | subsection (e) of this section, and chooses to secure its obligations incurred as a certified reinsurer |
14 | in the form of a multi-beneficiary trust, the certified reinsurer shall maintain separate trust accounts |
15 | for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer |
16 | with reduced security as permitted by this subsection or comparable laws of other U.S. jurisdictions |
17 | and for its obligations subject to subsection (e) of this section. It shall be a condition to the grant of |
18 | certification under subsection (f) of this section that the certified reinsurer shall have bound itself, |
19 | by the language of the trust and agreement with the commissioner with principal regulatory |
20 | oversight of each such trust account, to fund, upon termination of any such trust account, out of the |
21 | remaining surplus of such trust any deficiency of any other such trust account; |
22 | (iii) The minimum trusteed surplus requirements provided in subsection D are not |
23 | applicable with respect to a multi-beneficiary trust maintained by a certified reinsurer for the |
24 | purpose of securing obligations incurred under this subsection, except that such trust shall maintain |
25 | a minimum trusteed surplus of ten million dollars ($10,000,000); |
26 | (iv) With respect to obligations incurred by a certified reinsurer under this subsection, if |
27 | the security is insufficient, the commissioner shall reduce the allowable credit by an amount |
28 | proportionate to the deficiency, and has the discretion to impose further reductions in allowable |
29 | credit upon finding that there is a material risk that the certified reinsurer's obligations will not be |
30 | paid in full when due; and |
31 | (v) For purposes of this subsection, a certified reinsurer whose certification has been |
32 | terminated for any reason shall be treated as a certified reinsurer required to secure one hundred |
33 | percent (100%) of its obligations. |
34 | (A) As used in this subsection, the term "terminated" refers to revocation, suspension, |
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1 | voluntary surrender and inactive status; and |
2 | (B) If the commissioner continues to assign a higher rating as permitted by other provisions |
3 | of this section, this requirement does not apply to a certified reinsurer in inactive status or to a |
4 | reinsurer whose certification has been suspended. |
5 | (6) If an applicant for certification has been certified as a reinsurer in an NAIC-accredited |
6 | jurisdiction, the commissioner has the discretion to defer to that jurisdiction's certification, and has |
7 | the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall |
8 | be considered to be a certified reinsurer in this state. |
9 | (7) A certified reinsurer that ceases to assume new business in this state may request to |
10 | maintain its certification in inactive status in order to continue to qualify for a reduction in security |
11 | for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable |
12 | requirements of this subsection, and the commissioner shall assign a rating that takes into account, |
13 | if relevant, the reasons why the reinsurer is not assuming new business. |
14 | (g)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer, |
15 | meeting each of the conditions set forth below. |
16 | (i) The assuming insurer must have its head office or be domiciled in, as applicable, and |
17 | be licensed in a reciprocal jurisdiction. A "reciprocal jurisdiction" is a jurisdiction that meets one |
18 | of the following: |
19 | (A) A non-United States jurisdiction that is subject to an in-force covered agreement with |
20 | the United States, each within its legal authority, or, in the case of a covered agreement between |
21 | the United States and European Union, is a member state of the European Union. For purposes of |
22 | this subsection, a “covered agreement” is an agreement entered into, pursuant to Dodd-Frank Wall |
23 | Street Reform and Consumer Protection Act, 31 U.S.C. §§ 313 and 314, that is currently in effect |
24 | or in a period of provisional application and addresses the elimination, under specified conditions, |
25 | of collateral requirements, as a condition for entering into any reinsurance agreement with a ceding |
26 | insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance; |
27 | (B) A United States jurisdiction that meets the requirements for accreditation under the |
28 | NAIC financial standards and accreditation program; or |
29 | (C) A qualified jurisdiction, as determined by the commissioner pursuant to subsection |
30 | (f)(3) of this section, which is not otherwise described in subsection (g)(1)(i)(A) or (g)(1)(i)(B) of |
31 | this section and which meets certain additional requirements, consistent with the terms and |
32 | conditions of in-force covered agreements, as specified by the commissioner in regulation. |
33 | (ii) The assuming insurer must have and maintain, on an ongoing basis, minimum capital |
34 | and surplus, or its equivalent, calculated according to the methodology of its domiciliary |
| LC002093 - Page 8 of 29 |
1 | jurisdiction, in an amount to be set forth in regulation. If the assuming insurer is an association, |
2 | including incorporated and individual unincorporated underwriters, it must have and maintain, on |
3 | an ongoing basis, minimum capital and surplus equivalents (net of liabilities), calculated according |
4 | to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a |
5 | balance in amounts to be set forth in regulation. |
6 | (iii) The assuming insurer must have and maintain, on an ongoing basis, a minimum |
7 | solvency or capital ratio, as applicable, which will be set forth in regulation. If the assuming insurer |
8 | is an association, including incorporated and individual unincorporated underwriters, it must have |
9 | and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction |
10 | where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed. |
11 | (iv) The assuming insurer must agree and provide adequate assurance to the commissioner, |
12 | in a form specified by the commissioner, pursuant to regulation, as follows: |
13 | (A) The assuming insurer must provide prompt written notice and explanation to the |
14 | commissioner, if it falls below the minimum requirements set forth in subsections (g)(1)(ii) or |
15 | (g)(1)(iii) of this section, or if any regulatory action is taken against it, for serious noncompliance |
16 | with applicable law; |
17 | (B) The assuming insurer must consent in writing to the jurisdiction of the courts of this |
18 | state and to the appointment of the commissioner, as agent for service of process. The commissioner |
19 | may require that consent for service of process, be provided to the commissioner and included in |
20 | each reinsurance agreement. Nothing in this provision shall limit, or in any way alter, the capacity |
21 | of parties to a reinsurance agreement, to agree to alternative dispute resolution mechanisms, except |
22 | to the extent such agreements are unenforceable under applicable insolvency or delinquency laws; |
23 | (C) The assuming insurer must consent in writing to pay all final judgments, wherever |
24 | enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared |
25 | enforceable in the jurisdiction where the judgment was obtained; |
26 | (D) Each reinsurance agreement must include a provision requiring the assuming insurer |
27 | to provide security in an amount equal to one hundred percent (100%) of the assuming insurer’s |
28 | liabilities, attributable to reinsurance ceded pursuant to that agreement, if the assuming insurer |
29 | resists enforcement of a final judgment that is enforceable under the law of the jurisdiction, in |
30 | which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding |
31 | insurer or by its legal successor on behalf of its resolution estate; and |
32 | (E) The assuming insurer must confirm that it is not presently participating in any solvent |
33 | scheme of arrangement, which involves this state’s ceding insurers, and agree to notify the ceding |
34 | insurer and the commissioner and to provide security in an amount equal to one hundred percent |
| LC002093 - Page 9 of 29 |
1 | (100%) of the assuming insurer’s liabilities to the ceding insurer, should the assuming insurer enter |
2 | into such a solvent scheme of arrangement. Such security shall be in a form consistent with the |
3 | provisions of subsection (g) of this section and § 27-1.1-2 and as specified by the commissioner in |
4 | regulation. |
5 | (v) The assuming insurer or its legal successor must provide, if requested by the |
6 | commissioner, on behalf of itself and any legal predecessors, certain documentation to the |
7 | commissioner, as specified by the commissioner in regulation. |
8 | (vi) The assuming insurer must maintain a practice of prompt payment of claims under |
9 | reinsurance agreements, pursuant to criteria set forth in regulation. |
10 | (vii) The assuming insurer’s supervisory authority must confirm to the commissioner on |
11 | an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported |
12 | to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in |
13 | subsections (g)(1)(ii) and (g)(1)(iii) of this section. |
14 | (viii) Nothing in this provision precludes an assuming insurer from providing the |
15 | commissioner with information on a voluntary basis. |
16 | (2) The commissioner shall timely create and publish a list of reciprocal jurisdictions. |
17 | (i) A list of reciprocal jurisdictions is published through the NAIC committee process. The |
18 | commissioner’s list shall include any reciprocal jurisdiction as defined under subsections |
19 | (g)(1)(i)(A) and (g)(1)(i)(B) of this section, and shall consider any other reciprocal jurisdiction |
20 | included on the NAIC list. The commissioner may approve a jurisdiction that does not appear on |
21 | the NAIC list of reciprocal jurisdictions, in accordance with criteria to be developed under |
22 | regulations issued by the commissioner. |
23 | (ii) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions, |
24 | upon a determination that the jurisdiction no longer meets the requirements of a reciprocal |
25 | jurisdiction, in accordance with a process set forth in regulations issued by the commissioner, |
26 | except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined |
27 | under subsections (g)(1)(i)(A) and (g)(1)(i)(B) of this section. Upon removal of a reciprocal |
28 | jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home |
29 | office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to chapter |
30 | 1.1 of title 27. |
31 | (3) The commissioner shall timely create and publish a list of assuming insurers that have |
32 | satisfied the conditions, set forth in this subsection and to which cessions shall be granted credit, in |
33 | accordance with this subsection. The commissioner may add an assuming insurer to such list, if an |
34 | NAIC accredited jurisdiction has added such assuming insurer to a list of such assuming insurers |
| LC002093 - Page 10 of 29 |
1 | or if, upon initial eligibility, the assuming insurer submits the information to the commissioner, as |
2 | required under subsection (g)(1)(iv) of this section and complies with any additional requirements |
3 | that the commissioner may impose by regulation, except to the extent that they conflict with an |
4 | applicable covered agreement. |
5 | (4) If the commissioner determines that an assuming insurer no longer meets one or more |
6 | of the requirements under this subsection, the commissioner may revoke or suspend the eligibility |
7 | of the assuming insurer, for recognition under this subsection, in accordance with procedures set |
8 | forth in regulation. |
9 | (i) While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued, |
10 | amended or renewed after the effective date of the suspension, qualifies for credit except to the |
11 | extent that the assuming insurer’s obligations under the contract are secured, in accordance with § |
12 | 27-1.1-2. |
13 | (ii) If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted |
14 | after the effective date of the revocation, with respect to any reinsurance agreements entered into |
15 | by the assuming insurer, including reinsurance agreements entered into prior to the date of |
16 | revocation, except to the extent that the assuming insurer’s obligations, under the contract are |
17 | secured in a form acceptable to the commissioner and consistent with the provisions of § 27-1.1-2. |
18 | (5) If subject to a legal process of rehabilitation, liquidation or conservation, as applicable, |
19 | the ceding insurer, or its representative, may seek and, if determined appropriate by the court in |
20 | which the proceedings are pending, may obtain an order requiring that the assuming insurer post |
21 | security for all outstanding ceded liabilities. |
22 | (6) Nothing in this subsection shall limit or in any way alter the capacity of parties to a |
23 | reinsurance agreement to agree on requirements for security or other terms in that reinsurance |
24 | agreement, except as expressly prohibited by chapter 1.1 of title 27 or other applicable law or |
25 | regulation. |
26 | (7) Credit may be taken under this subsection, only for reinsurance agreements entered |
27 | into, amended, or renewed on or after the effective date of the statute adding this subsection, and |
28 | only with respect to losses incurred and reserves reported on or after the later of: |
29 | (i) The date on which the assuming insurer has met all eligibility requirements, pursuant to |
30 | subsection (g)(1) of this section; and |
31 | (ii) The effective date of the new reinsurance agreement, amendment, or renewal. |
32 | (A) This subsection does not alter or impair a ceding insurer’s right to take credit for |
33 | reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance |
34 | qualifies for credit, under any other applicable provision of chapter 1.1 of title 27. |
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1 | (B) Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce |
2 | the security provided under any reinsurance agreement, except as permitted by the terms of the |
3 | agreement. |
4 | (C) Nothing in this subsection shall limit, or in any way alter, the capacity of parties to any |
5 | reinsurance agreement to renegotiate the agreement. |
6 | (g)(h) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not |
7 | meeting the requirements of subsections (b), (c), (d), (e), or (f), or (g) of this section, but only as to |
8 | the insurance of risks located in jurisdictions where the reinsurance is required by applicable law |
9 | or regulation of that jurisdiction. |
10 | (h)(i) If the assuming insurer is not licensed, accredited, or certified to transact insurance |
11 | or reinsurance in this state, the credit permitted by subsections (d) and (e) of this section shall not |
12 | be allowed unless the assuming insurer agrees in the reinsurance agreements: |
13 | (1)(i) That in the event of the failure of the assuming insurer to perform its obligations |
14 | under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding |
15 | insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the |
16 | United States, will comply with all requirements necessary to give the court jurisdiction, and will |
17 | abide by the final decision of the court or of any appellate court in the event of an appeal; and |
18 | (ii) To designate the commissioner or a designated attorney as its true and lawful attorney |
19 | upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on |
20 | behalf of the ceding insurer. |
21 | (2) This subsection is not intended to conflict with or override the obligation of the parties |
22 | to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the agreement. |
23 | (i)(j) If the assuming insurer does not meet the requirements of subsections (b), (c), or (d), |
24 | or (g) the credit permitted by subsection (e) or (f) of this section shall not be allowed unless the |
25 | assuming insurer agrees in the trust agreements to the following conditions: |
26 | (1) Notwithstanding any other provisions in the trust instrument, if the trust fund is |
27 | inadequate because it contains an amount less than the amount required by subsection (e)(iii) of |
28 | this section, or if the grantor of the trust has been declared insolvent or placed into receivership, |
29 | rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, |
30 | the trustee shall comply with an order of the commissioner with regulatory oversight over the trust |
31 | or with an order of a court of competent jurisdiction directing the trustee to transfer to the |
32 | commissioner with regulatory oversight all of the assets of the trust fund; |
33 | (2) The assets shall be distributed by and claims shall be filed with and valued by the |
34 | commissioner with regulatory oversight in accordance with the laws of the state in which the trust |
| LC002093 - Page 12 of 29 |
1 | is domiciled that are applicable to the liquidation of domestic insurance companies; |
2 | (3) If the commissioner with regulatory oversight determines that the assets of the trust |
3 | fund or any part thereof are not necessary to satisfy the claims of the U.S. ceding insurers of the |
4 | grantor of the trust, the assets or part thereof shall be returned by the commissioner with regulatory |
5 | oversight to the trustee for distribution in accordance with the trust agreement; and |
6 | (4) The grantor shall waive any right otherwise available to it under U.S. law that is |
7 | inconsistent with this provision. |
8 | (j)(k) If an accredited or certified reinsurer ceases to meet the requirements for |
9 | accreditation or certification, the commissioner may suspend or revoke the reinsurer's accreditation |
10 | or certification. |
11 | (1) The commissioner must give the reinsurer notice and opportunity for hearing. The |
12 | suspension or revocation may not take effect until after the commissioner's order on hearing, unless: |
13 | (i) The reinsurer waives its right to hearing; |
14 | (ii) The commissioner's order is based on regulatory action by the reinsurer's domiciliary |
15 | jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact |
16 | insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of |
17 | the reinsurer under subparagraph (f)(vi) of this section; or |
18 | (iii) The commissioner finds that an emergency requires immediate action and a court of |
19 | competent jurisdiction has not stayed the commissioner's action. |
20 | (A) While a reinsurer's accreditation or certification is suspended, no reinsurance contract |
21 | issued or renewed after the effective date of the suspension qualifies for credit except to the extent |
22 | that the reinsurer's obligations under the contract are secured in accordance with Section 3. If a |
23 | reinsurer's accreditation or certification is revoked, no credit for reinsurance may be granted after |
24 | the effective date of the revocation except to the extent that the reinsurer's obligations under the |
25 | contract are secured in accordance with subsection (f)(v) or section 3 § 27-1.1-2. |
26 | (k)(l) Concentration Risk. |
27 | (1) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate |
28 | to its own book of business. A domestic ceding insurer shall notify the commissioner within thirty |
29 | (30) days after reinsurance recoverables from any single assuming insurer, or group of affiliated |
30 | assuming insurers, exceeds fifty percent (50%) of the domestic ceding insurer's last reported surplus |
31 | to policyholders, or after it is determined that reinsurance recoverables from any single assuming |
32 | insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall |
33 | demonstrate that the exposure is safely managed by the domestic ceding insurer. |
34 | (2) A ceding insurer shall take steps to diversify its reinsurance program. A domestic |
| LC002093 - Page 13 of 29 |
1 | ceding insurer shall notify the commissioner within thirty (30) days after ceding to any single |
2 | assuming insurer, or group of affiliated assuming insurers, more than twenty percent (20%) of the |
3 | ceding insurer's gross written premium in the prior calendar year, or after it has determined that the |
4 | reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is likely |
5 | to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the |
6 | domestic ceding insurer. |
7 | 27-1.1-4. Rules and regulations. |
8 | (a) The commissioner may adopt reasonable rules and regulations implementing the |
9 | provisions of this law. |
10 | (b) The commissioner is further authorized to adopt rules and regulations applicable to |
11 | reinsurance arrangements described in subsection (b)(1) of this section. |
12 | (1) A regulation adopted pursuant to this section may apply only to reinsurance relating to: |
13 | (i) Life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel |
14 | benefits; |
15 | (ii) Universal life insurance policies with provisions resulting in the ability of a |
16 | policyholder to keep a policy in force over a secondary guarantee period; |
17 | (iii) Variable annuities with guaranteed death or living benefits; |
18 | (iv) Long-term-care insurance policies; or |
19 | (v) Other life and health insurance and annuity products as to which the NAIC adopts |
20 | model regulatory requirements with respect to credit for reinsurance. |
21 | (2) A regulation adopted pursuant to subsection (b)(1)(i) or (b)(1)(ii) of this section may |
22 | apply to any treaty containing: |
23 | (i) Policies issued on or after January 1, 2015; and |
24 | (ii) Policies issued prior to January 1, 2015, if risk pertaining to the pre-2015 policies is |
25 | ceded in connection with the treaty, in whole or in part, on or after January 1, 2015. |
26 | (3) A regulation adopted pursuant to subsection (b) of this section may require the ceding |
27 | insurer, in calculating the amounts or forms of security required to be held under regulations |
28 | promulgated under this authority, to use the Valuation Manual adopted by the NAIC under Section |
29 | 11B(1) of the NAIC Standard Valuation Law, including all amendments adopted by the NAIC and |
30 | in effect on the date as which the calculation is made, to the extent applicable. |
31 | (4) A regulation adopted pursuant to subsection (b) of this section shall not apply to |
32 | cessions to an assuming insurer that: |
33 | (i) Meets the conditions set forth in § 27-1.1-1(g); or |
34 | (i)(ii) Is certified in this state; or |
| LC002093 - Page 14 of 29 |
1 | (ii)(iii) Maintains at least two hundred fifty million dollars ($250,000,000) in capital and |
2 | surplus when determined in accordance with the NAIC Accounting Practices and Procedures |
3 | Manual, including all amendments thereto adopted by the NAIC, excluding the impact of any |
4 | permitted or prescribed practices; and is: |
5 | (A) Licensed in at least twenty-six (26) states; or |
6 | (B) Licensed in at least ten (10) states, and licensed or accredited in a total of at least thirty- |
7 | five (35) states. |
8 | (5) The authority to adopt regulations pursuant to subsection (b) of this section does not |
9 | limit the commissioner's general authority to adopt regulations pursuant to subsection (a) of this |
10 | section. |
11 | SECTION 2. Section 27-4.6-3 of the General Laws in Chapter 27-4.6 entitled "Risk-Based |
12 | Capital (RBC) for Insurers Act" is hereby amended to read as follows: |
13 | 27-4.6-3. Company action level event. |
14 | (a) "Company action level event" means any of the following events: |
15 | (1) The filing of an RBC report by an insurer that indicates that: |
16 | (i) The insurer's total adjusted capital is greater than or equal to its regulatory action level |
17 | RBC but less than its company action level RBC; |
18 | (ii) If a life and/or health insurer, the insurer has total adjusted capital that is greater than |
19 | or equal to its company action level RBC but less than the product of its authorized control level |
20 | RBC and 2.5 3.0 and has a negative trend; or |
21 | (iii) If a property and casualty insurer, the insurer has total adjusted capital which is greater |
22 | than or equal to its company action level RBC but less than the product of its authorized control |
23 | level RBC and 3.0 and triggers the trend test determined in accordance with the trend test |
24 | calculation included in the property and casualty RBC instructions. |
25 | (2) The notification by the commissioner to the insurer of an adjusted RBC report that |
26 | indicates an event in subdivision (a)(1), provided the insurer does not challenge the adjusted RBC |
27 | report under § 27-4.6-7; or |
28 | (3) If, pursuant to § 27-4.6-7, an insurer challenges an adjusted RBC report that indicates |
29 | the event in subdivision (a)(1), the notification by the commissioner to the insurer that the |
30 | commissioner has, after a hearing, rejected the insurer's challenge. |
31 | (b) In the event of a company action level event, the insurer shall prepare and submit to the |
32 | commissioner an RBC plan which shall: |
33 | (1) Identify the conditions that contribute to the company action level event; |
34 | (2) Contain proposals of corrective actions that the insurer intends to take and would be |
| LC002093 - Page 15 of 29 |
1 | expected to result in the elimination of the company action level event; |
2 | (3) Provide projections of the insurer's financial results in the current year and at least the |
3 | four (4) succeeding years, both in the absence of proposed corrective actions and giving effect to |
4 | the proposed corrective actions, including projections of statutory operating income, net income, |
5 | capital and/or surplus. (The projections for both new and renewal business might include separate |
6 | projections for each major line of business and separately identify each significant income, expense |
7 | and benefit component); |
8 | (4) Identify the key assumptions impacting the insurer's projections and the sensitivity of |
9 | the projections to the assumptions; and |
10 | (5) Identify the quality of, and problems associated with, the insurer's business, including, |
11 | but not limited to, its assets, anticipated business growth and associated surplus strain, |
12 | extraordinary exposure to risk, mix of business and use of reinsurance, if any, in each case. |
13 | (c) The RBC plan shall be submitted: |
14 | (1) Within forty-five (45) days of the company action level event; or |
15 | (2) If the insurer challenges an adjusted RBC report pursuant to § 27-4.6-7, within forty- |
16 | five (45) days after notification to the insurer that the commissioner has, after a hearing, rejected |
17 | the insurer's challenge. |
18 | (d) Within sixty (60) days after the submission by an insurer of an RBC plan to the |
19 | commissioner, the commissioner shall notify the insurer whether the RBC plan shall be |
20 | implemented or is, in the judgment of the commissioner, unsatisfactory. If the commissioner |
21 | determines that the RBC plan is unsatisfactory, the notification to the insurer shall set forth the |
22 | reasons for the determination, and may set forth proposed revisions which will render the RBC plan |
23 | satisfactory in the judgment of the commissioner. Upon notification from the commissioner, the |
24 | insurer shall prepare a revised RBC plan, which may incorporate by reference any revisions |
25 | proposed by the commissioner, and shall submit the revised RBC plan to the commissioner: |
26 | (1) Within forty-five (45) days after the notification from the commissioner; or |
27 | (2) If the insurer challenges the notification from the commissioner under § 27-4.6-7, |
28 | within forty-five (45) days after a notification to the insurer that the commissioner has, after a |
29 | hearing, rejected the insurer's challenge. |
30 | (e) In the event of a notification by the commissioner to an insurer that the insurer's RBC |
31 | plan or revised RBC plan is unsatisfactory, the commissioner may at the commissioner's discretion, |
32 | subject to the insurer's right to a hearing under § 27-4.6-7, specify in the notification that the |
33 | notification constitutes a regulatory action level event. |
34 | (f) Every domestic insurer that files an RBC plan or revised RBC plan with the |
| LC002093 - Page 16 of 29 |
1 | commissioner shall file a copy of the RBC plan or revised RBC plan with the insurance |
2 | commissioner in any state in which the insurer is authorized to do business if: |
3 | (1) That state has an RBC provision substantially similar to § 27-4.6-8(a); and |
4 | (2) The insurance commissioner of that state has notified the insurer of its request for the |
5 | filing in writing, in which case the insurer shall file a copy of the RBC plan or revised RBC plan |
6 | in that state no later than the later of: |
7 | (i) Fifteen (15) days after the receipt of notice to file a copy of its RBC plan or revised |
8 | RBC plan with the state; or |
9 | (ii) The date on which the RBC plan or revised RBC plan is filed under subsections (c) and |
10 | (d) of this section. |
11 | SECTION 3. Sections 27-35-1, 27-35-3 and 27-35-6 of the General Laws in Chapter 27- |
12 | 35 entitled "Insurance Holding Company Systems" are hereby amended to read as follows: |
13 | 27-35-1. Definitions. |
14 | (a) "Affiliate." An "affiliate" of, or person "affiliated" with, a specific person, is a person |
15 | who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is |
16 | under common control with, the person specified. An "affiliate" does not include a protected cell |
17 | of a protected cell company organized under the protected cell companies act, chapter 64 of this |
18 | title. |
19 | (b) "Commissioner." The term "commissioner" means the director of the department of |
20 | business regulation and any assistant to the director definition prescribed by § 42-14-5 designated |
21 | and authorized by him or her while acting under that designation. |
22 | (c) "Control." The term "control" (including the terms "controlling," "controlled by," and |
23 | "under common control with"), means the possession, direct or indirect, of the power to direct or |
24 | cause the direction of the management and policies of a person, whether through the ownership of |
25 | voting securities, by contract other than a commercial contract for goods or management services, |
26 | or otherwise, unless the power is the result of an official position with or corporate office held by |
27 | the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, |
28 | holds with the power to vote, or holds proxies representing, ten percent (10%) or more of the voting |
29 | securities of any other person. This presumption may be rebutted by a showing made in the manner |
30 | provided by § 27-35-3(k) that control does not exist in fact. The commissioner may determine, after |
31 | furnishing all persons in interest notice and opportunity to be heard and making specific findings |
32 | of fact to support the determination, that control exists in fact, notwithstanding the absence of a |
33 | presumption to that effect. |
34 | (d) "Group capital calculation instructions" means the group capital calculation |
| LC002093 - Page 17 of 29 |
1 | instructions, as adopted by the NAIC and as amended by the NAIC from time to time, in accordance |
2 | with the procedures adopted by the NAIC. |
3 | (d)(e) "Group wide supervisor" means the regulatory official authorized to engage in |
4 | conducting and coordinating group wide supervision activities who is determined or acknowledged |
5 | by the commissioner under § 27-35-5.5(d) to have sufficient significant contacts with the |
6 | internationally active insurance group. |
7 | (e)(f) "Insurance holding company system." An "insurance holding company system" |
8 | consists of two (2) or more affiliated persons, one or more of which is an insurer. |
9 | (f)(g) "Insurer." The term "insurer" means any person or persons or corporation, |
10 | partnership, or company authorized by the laws of this state to transact the business of insurance in |
11 | this state, including entities organized or authorized to transact business in this state pursuant to |
12 | chapters 19, 20, 20.1, 20.2, 20.3, and 41 of this title, except that it shall not include agencies, |
13 | authorities, or instrumentalities of the United States, its possessions and territories, the |
14 | Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a |
15 | state. |
16 | (g)(h) "Internationally active insurance group" means an insurance holding company |
17 | system that: |
18 | (1) Includes an insurer registered under § 27-35-3; and |
19 | (2) Meets the following criteria: |
20 | (i) Premiums written in at least three (3) countries; |
21 | (ii) The percentage of gross premiums written outside the United States is at least ten |
22 | percent (10%) of the insurance holding company system's total gross written premiums; and |
23 | (iii) Based on a three-year (3) rolling average, the total assets of the insurance holding |
24 | company system are at least fifty billion dollars ($50,000,000,000) or the total gross written |
25 | premiums of the insurance holding company system are at least ten billion dollars |
26 | ($10,000,000,000). |
27 | (h)(i) "Enterprise Risk." "Enterprise Risk" means any activity, circumstance, event or series |
28 | of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to |
29 | have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance |
30 | holding company system as a whole, including, but not limited to, anything that would cause the |
31 | insurer's risk-based capital to fall into company action level as set forth in chapters 4.6 and 4.7 of |
32 | this title or would cause the insurer to be in a hazardous financial condition as set forth in chapter |
33 | 14.2 of this title. |
34 | (i)(j) "NAIC." means the National Association of Insurance Commissioners. |
| LC002093 - Page 18 of 29 |
1 | (k) “NAIC liquidity stress test framework.” The “NAIC liquidity stress test framework” is |
2 | a separate NAIC publication, which includes a history of the NAIC’s development of regulatory |
3 | liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress |
4 | test instructions and reporting templates for a specific data year, such scope criteria, instructions |
5 | and reporting template being as adopted by the NAIC and as amended by the NAIC from time to |
6 | time, in accordance with the procedures adopted by the NAIC. |
7 | (j)(l) "Person." A "person" is an individual, a corporation, a limited liability company, a |
8 | partnership, an association, a joint stock company, a trust, an unincorporated organization, or any |
9 | similar entity or any combination of the foregoing acting in concert, but shall not include any joint |
10 | venture partnership exclusively engaged in owning, managing, leasing or developing real or |
11 | tangible personal property. |
12 | (m) “Scope criteria.” The “scope criteria,” as detailed in the NAIC liquidity stress test |
13 | framework, are the designated exposure bases along with minimum magnitudes thereof for the |
14 | specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC |
15 | liquidity stress test framework for that data year. |
16 | (k)(n) "Securityholder." A "securityholder" of a specified person is one who owns any |
17 | security of such person, including common stock, preferred stock, debt obligations, and any other |
18 | security convertible into or evidencing the right to acquire any of the foregoing. |
19 | (l)(o) "Subsidiary." A "subsidiary" of a specified person is an affiliate controlled by such |
20 | person directly, or indirectly, through one or more intermediaries. |
21 | (m)(p) "Voting security." The term "voting security" shall include any security convertible |
22 | into or evidencing a right to acquire a voting security. |
23 | 27-35-3. Registration of insurers. |
24 | (a) Registration. Every insurer which is authorized to do business in this state and which is |
25 | a member of an insurance holding company system shall register with the commissioner, except a |
26 | foreign insurer subject to registration requirements and standards adopted by statute or regulation |
27 | in the jurisdiction of its domicile which are substantially similar to those contained in: |
28 | (1) this section; |
29 | (2) section 27-35-4(a)(1), (b) and (d) and |
30 | (3) Either § 27-35-4(a)(2) or a provision such as the following: Each registered insurer |
31 | shall keep current the information required to be disclosed in its registration statement by reporting |
32 | all material changes or additions within fifteen (15) days after the end of the month in which it |
33 | learns of each change or addition. |
34 | Any insurer which is subject to registration under this section shall register fifteen (15) |
| LC002093 - Page 19 of 29 |
1 | days after it becomes subject to registration, and annually thereafter by May 1 of each year for the |
2 | previous calendar year, unless the commissioner for good cause shown extends the time for |
3 | registration, and then within the extended time. The commissioner may require any insurer |
4 | authorized to do business in the state which is a member of an insurance holding company system |
5 | and which is not subject to registration under this section to furnish a copy of the registration |
6 | statement, the summary specified in subsection (c) of this section or other information filed by the |
7 | insurance company with the insurance regulatory authority of domiciliary jurisdiction. |
8 | (b) Information and form required. Every insurer subject to registration shall file a |
9 | registration statement with the commissioner on a form and in a format prescribed by the NAIC, |
10 | which shall contain the following current information: |
11 | (1) The capital structure, general financial condition, ownership, and management of the |
12 | insurer and any person controlling the insurer; |
13 | (2) The identity and relationship of every member of the insurance holding company |
14 | system; |
15 | (3) The following agreements in force and transactions currently outstanding or which have |
16 | occurred during the last calendar year between the insurer and its affiliates: |
17 | (i) Loans, other investments or purchases, sales or exchanges of securities of the affiliates |
18 | by the insurer or of the insurer by its affiliates; |
19 | (ii) Purchases, sales, or exchanges of assets; |
20 | (iii) Transactions not in the ordinary course of business; |
21 | (iv) Guarantees or undertakings for the benefit of an affiliate which result in an actual |
22 | contingent exposure of the insurer's assets to liability, other than insurance contracts entered into |
23 | in the ordinary course of the insurer's business; |
24 | (v) All management service contracts, service contracts and all cost sharing arrangements; |
25 | (vi) Reinsurance agreements; |
26 | (vii) Dividends and other distributions to shareholders; and |
27 | (viii) Consolidated tax allocation agreements; |
28 | (4) Any pledge of the insurer's stock, including stock of any subsidiary or controlling |
29 | affiliate, for a loan made to any member of the insurance holding company system; |
30 | (5) If requested by the commissioner, the insurer shall include financial statements of or |
31 | within an insurance holding company system, including all affiliates. Financial statements may |
32 | include, but are not limited to, annual audited financial statements filed with the U.S. Securities |
33 | and Exchange Commission (SEC) pursuant to the Securities Act of 1933, as amended, or the |
34 | Securities Exchange Act of 1934, as amended. An insurer required to file financial statements |
| LC002093 - Page 20 of 29 |
1 | pursuant to this paragraph may satisfy the request by providing the commissioner with the most |
2 | recently filed parent corporation financial statements that have been filed with the SEC; |
3 | (6) Other matters concerning transactions between registered insurers and any affiliates as |
4 | may be included from time to time in any registration forms adopted or approved by the |
5 | commissioner; |
6 | (7) Statements that the insurer's board of directors oversees corporate governance and |
7 | internal controls and that the insurer's officers or senior management have approved, implemented, |
8 | and continue to maintain and monitor corporate governance and internal control procedures; and |
9 | (8) Any other information required by the commissioner by rule or regulation. |
10 | (c) Summary of changes to registration statement. All registration statements shall contain |
11 | a summary outlining all items in the current registration statement representing changes from the |
12 | prior registration statement. |
13 | (d) Materiality. No information need be disclosed on the registration statement filed |
14 | pursuant to subsection (b) of this section if that information is not material for the purposes of this |
15 | section. Unless the commissioner by rule, regulation, or order provides otherwise, sales, purchases, |
16 | exchanges, loans, or extensions of credit, investments or guarantees involving one-half of one |
17 | percent (.5%) or less of an insurer's admitted assets as of the 31st day of December next preceding |
18 | shall not be deemed material for purposes of this section. The definition of materiality provided in |
19 | this subsection, shall not apply for purposes of the group capital calculation or the liquidity stress |
20 | test framework. |
21 | (e) Reporting of dividends to shareholders. Subject to § 27-35-4(b), each registered insurer |
22 | shall report to the commissioner all dividends and other distributions to shareholders within fifteen |
23 | (15) business days following the declaration thereof. |
24 | (f) Information of insurers. Any person within an insurance holding company system |
25 | subject to registration shall be required to provide complete and accurate information to an insurer, |
26 | where the information is reasonably necessary to enable the insurer to comply with the provisions |
27 | of this act. |
28 | (g) Termination of registration. The commissioner shall terminate the registration of any |
29 | insurer that demonstrates that it no longer is a member of an insurance holding company system. |
30 | (h) Consolidated filing. The commissioner may require or allow two (2) or more affiliated |
31 | insurers subject to registration to file a consolidated registration statement. |
32 | (i) Alternative registration. The commissioner may allow an insurer that is authorized to |
33 | do business in this state and which is part of an insurance holding company system to register on |
34 | behalf of any affiliated insurer which is required to register under subsection (a) and to file all |
| LC002093 - Page 21 of 29 |
1 | information and material required to be filed under this section. |
2 | (j) Exemptions. The provisions of this section shall not apply to any insurer, information, |
3 | or transaction if and to the extent that the commissioner by rule, regulation, or order shall exempt |
4 | from the provisions of this section. |
5 | (k) Disclaimer. Any person may file with commissioner a disclaimer of affiliation with any |
6 | authorized insurer or a disclaimer may be filed by the insurer or any member of an insurance |
7 | holding company system. The disclaimer shall fully disclose all material relationships and bases |
8 | for affiliation between the person and the insurer as well as the basis for disclaiming the affiliation. |
9 | A disclaimer of affiliation shall be deemed to have been granted unless the commissioner, |
10 | within thirty (30) days following receipt of a complete disclaimer, notifies the filing party that the |
11 | disclaimer is disallowed. In the event of disallowance, the disclaiming party may request an |
12 | administrative hearing, which shall be granted. The disclaiming party shall be relieved of its duty |
13 | to register under this section if approval of the disclaimer has been granted by the commissioner, |
14 | or if the disclaimer is deemed to have been approved. |
15 | (l) Enterprise risk filing filings. |
16 | (1) The ultimate controlling person of every insurer subject to registration shall also file an |
17 | annual enterprise risk report. The report shall, to the best of the ultimate controlling person's |
18 | knowledge and belief, identify the material risks within the insurance holding company system that |
19 | could pose enterprise risk to the insurer. The report shall be filed with the lead state commissioner |
20 | of the insurance holding company system as determined by the procedures within the financial |
21 | analysis handbook adopted by the national association of insurance commissioners. |
22 | (2) Group capital calculation. Except as provided below, the ultimate controlling person of |
23 | every insurer subject to registration, shall concurrently file with the registration an annual group |
24 | capital calculation, as directed by the lead state commissioner. The report shall be completed in |
25 | accordance with the NAIC group capital calculation instructions, which may permit the lead state |
26 | commissioner to allow a controlling person, that is not the ultimate controlling person, to file the |
27 | group capital calculation. The report shall be filed with the lead state commissioner of the insurance |
28 | holding company system, as determined by the commissioner, in accordance with the procedures |
29 | within the Financial Analysis Handbook adopted by the NAIC. Insurance holding company systems |
30 | described below are exempt from filing the group capital calculation: |
31 | (i) An insurance holding company system that has only one insurer within its holding |
32 | company structure, that only writes business in its domestic state, and assumes no business from |
33 | any other insurer; |
34 | (ii) An insurance holding company system that is required to perform a group capital |
| LC002093 - Page 22 of 29 |
1 | calculation, specified by the United States Federal Reserve Board. The lead state commissioner |
2 | shall request the calculation from the Federal Reserve Board, under the terms of information |
3 | sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the |
4 | lead state commissioner, the insurance holding company system is not exempt from the group |
5 | capital calculation filing; |
6 | (iii) An insurance holding company system whose non-United States group-wide |
7 | supervisor is located within a reciprocal jurisdiction, as described in § 27-1.1-1(g) that recognizes |
8 | the United States state regulatory approach to group supervision and group capital; |
9 | (iv) An insurance holding company system: |
10 | (A) That provides information to the lead state that meets the requirements for accreditation |
11 | under the NAIC financial standards and accreditation program, either directly or indirectly through |
12 | the group-wide supervisor, who has determined such information is satisfactory to allow the lead |
13 | state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial |
14 | Analysis Handbook; and |
15 | (B) Whose non-United States group-wide supervisor that is not in a Reciprocal Jurisdiction |
16 | recognizes and accepts, as specified by the commissioner in regulation, the group capital |
17 | calculation as the world-wide group capital assessment for U.S. insurance groups who operate in |
18 | that jurisdiction; |
19 | (v) Notwithstanding the provisions of §§ 27-35-3(l)(2)(c) and (d), a lead state |
20 | commissioner shall require the group capital calculation for United States operations of any non- |
21 | United States based insurance holding company system where, after any necessary consultation |
22 | with other supervisors or officials, it is deemed appropriate by the lead state commissioner for |
23 | prudential oversight and solvency monitoring purposes or for ensuring the competitiveness of the |
24 | insurance marketplace. |
25 | (vi) Notwithstanding the exemptions from filing the group capital calculation stated in §§ |
26 | 27-35-3(l)(2)(c) and (d), the lead state commissioner has the discretion to exempt the ultimate |
27 | controlling person, from filing the annual group capital calculation or to accept a limited group |
28 | capital filing or report, in accordance with criteria as specified by the commissioner in regulation. |
29 | (vii) If the lead state commissioner determines that an insurance holding company system |
30 | no longer meets one or more of the requirements for an exemption from filing the group capital |
31 | calculation under this section, the insurance holding company system shall file the group capital |
32 | calculation at the next annual filing date unless given an extension by the lead state commissioner |
33 | based on reasonable grounds shown. |
34 | (3) Liquidity stress test. The ultimate controlling person of every insurer subject to |
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1 | registration and also scoped into the NAIC liquidity stress test framework shall file the results of a |
2 | specific year’s liquidity stress test. The filing shall be made to the lead state insurance |
3 | commissioner of the insurance holding company system as determined by the procedures within |
4 | the financial analysis handbook adopted by the National Association of Insurance Commissioners: |
5 | (i) The NAIC liquidity stress test framework includes scope criteria applicable to a specific |
6 | data year. These scope criteria are reviewed at least annually by the financial stability task force or |
7 | its successor. Any change to the NAIC liquidity stress test framework or to the data year for which |
8 | the scope criteria are to be measured, shall be effective on January 1 of the year following the |
9 | calendar year when such changes are adopted. Insurers meeting at least one threshold of the scope |
10 | criteria, are considered scoped into the NAIC liquidity stress test framework for the specified data |
11 | year, unless the lead state insurance commissioner, in consultation with the NAIC financial stability |
12 | task force or its successor, determines the insurer should not be scoped into the framework for that |
13 | data year. Similarly, insurers that do not trigger at least one threshold of the scope criteria are |
14 | considered scoped out of the NAIC liquidity stress test framework for the specified data year, unless |
15 | the lead state insurance commissioner, in consultation with the NAIC financial stability task force |
16 | or its successor, determines the insurer should be scoped into the framework for that data year. |
17 | (A) Regulators wish to avoid having insurers scoped in and out of the NAIC liquidity stress |
18 | test framework on a frequent basis. The lead state insurance commissioner, in consultation with the |
19 | financial stability task force or its successor, will assess this concern as part of the determination |
20 | for an insurer. |
21 | (ii) The performance of, and filing of the results from, a specific year’s liquidity stress test |
22 | shall comply with the NAIC liquidity stress test framework’s instructions and reporting templates |
23 | for that year and any lead state insurance commissioner determinations, in conjunction with the |
24 | financial stability task force or its successor, provided within the framework. |
25 | (m) Violations. The failure to file a registration statement or any summary of the |
26 | registration statement or enterprise risk filing required by this section within the time specified for |
27 | the filing shall be a violation of this section. |
28 | 27-35-6. Confidential treatment. |
29 | (a) Documents, materials or other information in the possession or control of the |
30 | department of business regulation that are obtained by or disclosed to the commissioner or any |
31 | other person in the course of an examination or investigation made pursuant to § 27-35-5, and all |
32 | information reported pursuant to §§ 27-35-2(b)(xii), 27-35-2(b)(viii), 27-35-3, and 27-35-4, are |
33 | recognized by this state as being proprietary and to contain trade secrets, and shall be confidential |
34 | by law and privileged, shall not be subject to the access of public records act, shall not be subject |
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1 | to subpoena and shall not be subject to discovery or admissible in evidence in any private civil |
2 | action. However, the commissioner is authorized to use the documents, materials or other |
3 | information in the furtherance of any regulatory or legal action brought as part of the |
4 | commissioner's official duties. The commissioner shall not otherwise make the documents, |
5 | materials or other information public, without the prior written consent of the insurer to which it |
6 | pertains unless the commissioner, after giving the insurer and its affiliates who would be affected |
7 | thereby notice and opportunity to be heard, determines that the interests of policyholders, |
8 | shareholders, or the public will be served by the publication thereof, in which event the |
9 | commissioner may publish all or any part of it in a manner that he or she may deem appropriate. |
10 | (1) For purposes of the information reported and provided to the department of insurance, |
11 | pursuant to § 27-35-3 (l)(2), the commissioner shall maintain the confidentiality of the group capital |
12 | calculation and group capital ratio produced within the calculation and any group capital |
13 | information received from an insurance holding company supervised by the Federal Reserve Board |
14 | or any United States group wide supervisor. |
15 | (2) For purposes of the information reported and provided to the department pursuant to § |
16 | 27-35-3(l)(3), the commissioner shall maintain the confidentiality of the liquidity stress test results |
17 | and supporting disclosures and any liquidity stress test information received from an insurance |
18 | holding company supervised by the Federal Reserve Board and non-United States group wide |
19 | supervisors. |
20 | (b) Neither the commissioner nor any person who received documents, materials or other |
21 | information while acting under the authority of the commissioner or with whom such documents, |
22 | materials, or other information are shared pursuant to this chapter shall be permitted or required to |
23 | testify in any private civil action concerning any confidential documents, materials, or information |
24 | subject to subsection (a) of this section. |
25 | (c) In order to assist in the performance of the commissioner's duties, the commissioner: |
26 | (1) May share documents, materials or other information, including the confidential and |
27 | privileged documents, materials or information subject to subsection (a), including proprietary and |
28 | trade secret documents and materials with other state, federal and international regulatory agencies, |
29 | with the NAIC and its affiliates and subsidiaries, with any third-party consultants designated by the |
30 | commissioner, and with state, federal, and international law enforcement authorities, including |
31 | members of any supervisory college described in § 27-35-5.5, provided that the recipient agrees in |
32 | writing to maintain the confidentiality and privileged status of the document, material or other |
33 | information and has verified in writing the legal authority to maintain confidentiality. |
34 | (2) Notwithstanding subparagraph (c)(1) above, the commissioner may only share |
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1 | confidential and privileged documents, material, or information reported pursuant to § 27-35-3(l) |
2 | with commissioners of states having statutes or regulations substantially similar to subsection (a) |
3 | of this section and who have agreed in writing not to disclose such information. |
4 | (3) May receive documents, materials or information, including otherwise confidential and |
5 | privileged documents, materials or information including proprietary trade-secret information |
6 | from the NAIC and its affiliates and subsidiaries and from regulatory and law enforcement officials |
7 | of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any |
8 | document, material or information received with notice or the understanding that it is confidential |
9 | or privileged under the laws of the jurisdiction that is the source of the document, material or |
10 | information. |
11 | (4) Shall enter into written agreements with the NAIC and any third-party consultant |
12 | designated by the commissioner governing sharing and use of information provided pursuant to |
13 | this chapter consistent with this subsection that shall: |
14 | (i) Specify procedures and protocols regarding the confidentiality and security of |
15 | information shared with the NAIC and its affiliates and subsidiaries and any third-party consultant |
16 | designated by the commissioner pursuant to this chapter, including procedures and protocols for |
17 | sharing by the NAIC with other state, federal or international regulators. The agreement shall |
18 | provide that the recipient agrees in writing to maintain the confidentiality and privileged status of |
19 | the documents, materials or other information and has verified in writing the legal authority to |
20 | maintain such confidentiality; |
21 | (ii) Specify that ownership of information shared with the NAIC and its affiliates and |
22 | subsidiaries or any third-party consultant pursuant to this chapter remains with the commissioner |
23 | and the NAIC's or a third-party consultant’s, as designated by the commissioner, use of the |
24 | information is subject to the direction of the commissioner; |
25 | (iii) Excluding documents, material or information reported pursuant to § 27-35-3(l)(3), |
26 | prohibit the NAIC or third-party consultant designated by the commissioner from storing the |
27 | information shared pursuant to this chapter in a permanent database after the underlying analysis |
28 | is completed; |
29 | (iii)(iv) Require prompt notice to be given to an insurer whose confidential information in |
30 | the possession of the NAIC or a third-party consultant designated by the commissioner pursuant to |
31 | this chapter is subject to a request or subpoena to the NAIC or a third-party consultant designated |
32 | by the commissioner for disclosure or production; and |
33 | (iv)(v) Require the NAIC and its affiliates and subsidiaries or a third-party consultant |
34 | designated by the commissioner to consent to intervention by an insurer in any judicial or |
| LC002093 - Page 26 of 29 |
1 | administrative action in which the NAIC or a third-party consultant designated by the commissioner |
2 | and its affiliates and subsidiaries may be required to disclose confidential information about the |
3 | insurer shared with the NAIC and its affiliates and subsidiaries or a third-party consultant |
4 | designated by the commissioner pursuant to this chapter; and |
5 | (vi) For documents, material or information reporting pursuant to § 27-35-3(l)(3), in the |
6 | case of an agreement involving a third-party consultant, provide for notification of the identity of |
7 | the consultant to the applicable insurers. |
8 | (d) The sharing of information by the commissioner pursuant to this chapter shall not |
9 | constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely |
10 | responsible for the administration, execution and enforcement of the provisions of this chapter. |
11 | (e) No waiver of any applicable privilege or claim of confidentiality in the documents, |
12 | materials or information shall occur as a result of disclosure to the commissioner under this section |
13 | or as a result of sharing as authorized in subsection (c). |
14 | (f) Documents, materials or other information in the possession or control of the NAIC or |
15 | a third-party consultant pursuant to this chapter shall be confidential by law and privileged, shall |
16 | not be subject to § 38-2-3, shall not be subject to subpoena, and shall not be subject to discovery or |
17 | admissible in evidence in any private civil action. |
18 | (g) The group capital calculation and resulting group capital ratio required under § 27-35- |
19 | 3(l)(3) and the liquidity stress test, along with its results and supporting disclosures required under |
20 | § 27-35-3(l)(3), are regulatory tools for assessing group risks and capital adequacy and group |
21 | liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding |
22 | company systems generally. Therefore, except as otherwise may be required under the provisions |
23 | of this chapter, the making, publishing, disseminating, circulating or placing before the public, or |
24 | causing directly or indirectly to be made, published, disseminated, circulated or placed before the |
25 | public in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, |
26 | letter or poster, or over any radio or television station or any electronic means of communication |
27 | available to the public, or in any other way as an advertisement, announcement or statement |
28 | containing a representation or statement with regard to the group capital calculation, group capital |
29 | ratio, the liquidity stress test results, or supporting disclosures for the liquidity stress test of any |
30 | insurer or any insurer group, or of any component derived in the calculation by any insurer, broker, |
31 | or other person engaged in any manner in the insurance business would be misleading and is |
32 | therefore prohibited; provided, however, that if any materially false statement with respect to the |
33 | group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount |
34 | to an insurer’s or insurance group’s group capital calculation or resulting group capital ratio, |
| LC002093 - Page 27 of 29 |
1 | liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate |
2 | comparison of any amount to an insurer’s or insurance group’s liquidity stress test result or |
3 | supporting disclosures is published in any written publication and the insurer is able to demonstrate |
4 | to the commissioner, with substantial proof the falsity of such statement or the inappropriateness, |
5 | as the case may be, then the insurer may publish announcements in a written publication if the sole |
6 | purpose of the announcement is to rebut the materially false statement. |
7 | SECTION 4. This act shall take effect upon passage. |
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LC002093 | |
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EXPLANATION | |
BY THE LEGISLATIVE COUNCIL | |
OF | |
A N A C T | |
RELATING TO INSURANCE -- FINANCIAL SERVICES | |
*** | |
1 | This act would update the Credit for Reinsurance, Risk Based Capital and Insurance |
2 | Holding Company statutes to the current National Association of Insurance Commissioners |
3 | standard. All of these statutes relate to the financial standards applied to insurance companies |
4 | domiciled in this state. |
5 | This act would take effect upon passage. |
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LC002093 | |
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