It is enacted by the General Assembly as follows:

SECTION 1. Section 27-1-37 of the General Laws in Chapter 27-1 entitled "Domestic Insurance Companies" is hereby amended to read as follows:

27-1-37. Minimum capital and surplus requirements -- Charters. -- (a) No domestic insurance corporation shall commence business and write, issue, or effect any policy of insurance unless the capital stock of the company amounts to the sum of one million dollars ($1,000,000) paid in capital and two million dollars ($2,000,000) surplus, or, if a mutual company, its net assets over all liabilities amount to not less than three million dollars ($3,000,000), or, if a mono line business company has a combined capital and surplus of two million dollars ($2,000,000), and until it has secured from the commissioner of insurance a certificate in compliance with the provisions of its charter and this section. "Commence business" as used in this section shall be defined as the date of issuance of a certificate in compliance by the insurance commissioner.

(b) The provisions of this section relating to capital and surplus requirements shall also apply to all charters for domestic insurance companies which have not commenced business prior to June 18, 1991. {ADD The provisions of this section relating to capital and surplus requirements shall also apply to domestic insurance companies which have undergone a change in control subsequent to August 1, 1995, except that the commissioner of insurance may require such lesser capital and surplus, but in no event less than one million dollars ($1,000,000) as he/she deems appropriate for the protection of all policyholders and the general public, based upon his/her review of the transaction resulting in the change in control of such insurer. "Control" as used in this section shall be defined in accordance with section 27-35-1(c). ADD}

SECTION 2. Chapter 27-1 of the General Laws entitled "Domestic Insurance Companies" is hereby amended by adding thereto the following sections:

{ADD27-1-43. Applicability. -- ADD} {ADD The general provisions of law relating to the duties, obligations, prohibitions, or penalties which appertain to insurance companies incorporated under the authority of this state, and defining the powers and duties of the insurance commissioner in reference thereto, shall be and are applicable to all corporations, companies and associations incorporated under the authority of this state, and to all partnerships and individuals, doing, as principals or otherwise, in this state, any insurance business of any name, kind or description whatsoever, including the transaction of reinsurance. ADD}

{ADD 27-1-44. Prohibition on the pledging of stock. -- No domestic insurance company, and no holding company as defined in section 27-35-1(d), shall pledge its own stock, or any stock of any domestic insurance company subsidiary, for the benefit of the domestic insurance company. The provisions of this section shall not apply to any such pledge in effect prior to the effective date of this act. ADD}

SECTION 3. Sections 27-3-38, 27-3-40 and 27-3-50 of the General Laws in Chapter 27-3 entitled "Agents, Brokers and Solicitors" are hereby amended to read as follows:

27-3-38. Surplus line brokers -- License -- Affidavit of inability to obtain insurance -- Records -- Premium tax. {ADD 27-3-38. Surplus line brokers -- License -- Affidavit of inability to obtain insurance -- Records -- Premium tax -- Notice to purchasers. -- ADD} (a) The insurance commissioner may issue a surplus line broker's license to any person, firm, or corporation who or which is licensed as an insurance agent in this state, authorizing the licensee to procure, subject to the restrictions herein provided, policies of insurance, except life and health and accident, from insurers which are not authorized to transact business {ADD on the commissioner's list of approved surplus insurers ADD} in this state. This license may be suspended or revoked by the insurance commissioner whenever, in the commissioner's judgment, a suspension or revocation will best promote the interest of the people of this state. Before any license shall be issued by the insurance commissioner and before each renewal thereof, there shall be filed in his or her office a written application by the person, firm, or corporation desiring the license in such form or forms and supplements thereto, and containing such information, as the insurance commissioner may prescribe.

(b) When any policy of insurance is procured under the authority of that license, there shall be executed, both by the licensee and by the insured, affidavits setting forth facts showing that the insured and the licensee were unable, after diligent effort, to procure from any authorized insurer or insurers the full amount of insurance required to protect the property owned or controlled by the insured or the risks insured, and further showing that the amount of insurance procured from an unauthorized {ADD approved surplus lines ADD} insurer or insurers is only the excess over the amount, if any, so procurable from authorized insurers and that the purpose of obtaining that insurance from unauthorized {ADD approved surplus lines ADD} insurers is not to procure insurance on forms different from those which would be used by authorized insurers writing insurance against the same risks or hazards. These affidavits shall be filed by the licensee with the insurance commissioner within thirty (30) days after the policies have been procured and the insurance commissioner, if not satisfied therewith, may order the licensee to take such further action to obtain the insurance from authorized insurers as he or she may deem necessary.

(c) The licensee shall keep a complete and separate record of all policies procured from unauthorized {ADD approved surplus lines ADD} insurers under the license and these records shall be open to the examination of the insurance commissioner at all reasonable times and shall show the exact amount of each kind of insurance permitted under this section which has been procured for each insured, the gross premiums charged by the insurers for each kind of insurance permitted under this section which were returned to each insured, the name of the insurer or insurers which issued each of these policies, the effective dates of these policies, and the terms for which these policies were issued.

(d) Every person, firm, or corporation licensed pursuant to the provisions of this section shall file with the insurance commissioner, not later than April 1 of each year, a certificate of the tax administrator, on a blank furnished by the insurance commissioner, certifying that the licensee has paid to the tax administrator, for all policies procured by the licensee pursuant to the license during the next preceding calendar year, a tax, computed at the rate of three per cent (3%) on the gross premiums charged the insured by the insurers, less the amount of premiums returned to the insureds.

{ADD (e) Every application form for insurance from a surplus lines insurer, every affidavit form executed by the insured, and every policy (on its front and declaration pages) issued by the surplus lines insurer, shall contain in ten (10) point type the following notice:

THIS INSURANCE CONTRACT HAS BEEN PLACED WITH AN INSURER NOT LICENSED TO DO BUSINESS IN THE STATE OF RHODE ISLAND BUT ELIGIBLE AS A SURPLUS LINES INSURER. THE INSURER IS NOT A MEMBER OF THE RHODE ISLAND INSURERS INSOLVENCY FUND. SHOULD THE INSURER BECOME INSOLVENT, THE PROTECTION AND BENEFITS OF THE RHODE ISLAND INSURERS INSOLVENCY FUND ARE NOT AVAILABLE. ADD}

27-3-40. Limitations on placing insurance with unauthorized insurers. {ADD 27-3-40. Limitations on placing insurance with approved surplus lines insurers. -- ADD} No person licensed to act as a surplus line broker, in the state shall place any insurance with an unauthorized {ADD approved surplus lines ADD} insurer unless such insurer has furnished the commissioner with a certified copy of its current annual statement or documentary evidence that it has investments in the amount of at least two hundred fifty thousand dollars ($250,000) market value of bonds of the United States, or of any state, county or municipality of the United States and in the event of an alien insurer, a trust fund must be established and maintained in the United States in the amount of not less than two hundred fifty thousand dollars ($250,000), for the protection of all of its policyholders in the United States, {ADD and met any other requirements as determined by the insurance commissioner to be placed on Rhode Island's list of approved surplus lines insurers. ADD} If at any time the commissioner shall determine, in his judgment, that an unauthorized {ADD approved surplus lines ADD} insurer is not in a safe or solvent financial condition, or has refused to pay just claims, he shall direct that no such insurance shall be placed with such insurer; upon his written notice to that effect mailed to licensees under this chapter, no insurance shall be placed with that insurer.

27-3-50. Examinations. -- The director of business regulation {ADD or his or her designee ADD} may, at such time or times as the director may see fit, make an examination of the financial condition and/or market conduct of every person licensed pursuant to this chapter and chapter 2.3. The expenses of examinations under this section shall be assessed against the licensee being examined and remitted to and for the use of the insurance division of the department of business regulation. The total cost of the examinations shall be the same amount as provided for in section 27-13-1. The assessment shall be in addition to any taxes and fees otherwise payable to the state. In instances where the examination is performed by outside consultants, the expenses shall be borne by the licensee so examined.

SECTION 4. Section 27-5-3.4 of the General Laws in Chapter 27-5 entitled "Fire Insurance Policies and Reserves" is hereby amended to read as follows:

27-5-3.4. Cancellation or nonrenewal of standard fire insurance policy. -- (a) A company issuing any policy of insurance which is subject to cancellation or nonrenewal by the company shall effect cancellation or nonrenewal by serving the notice thereof provided by the policy. That notice shall be delivered in hand to the named insured, or be left at his or her last address as shown by the company's records, or, if its records contain no last address, at his or her last business, residence, or other address known to the company, or be forwarded to that address by certified mail, return receipt requested. {ADD A return receipt from the United States postal service showing receipt of the notice at the address of the insured stated in the policy shall be sufficient proof of notice. If the company does not receive a return receipt from the United States postal service within ten (10) days, then the company may forward such notice by first class mail and maintain proof of mailing of the notice to the insured in the ordinary course of the insurer's business, and such proof of mailing shall be sufficient proof of notice. ADD} No written notice of cancellation or intent not to renew shall be effective when mailed by the insurer unless the insurer obtains a written receipt of the United States postal service showing the name and address of the insured stated in the policy.

(b) If a policy is made payable to a mortgagee or any person other than the named insured, notice shall be given as above provided to the payee as well as to the named insured.

(c) Policies subject to cancellation by the named insured upon giving notice to the company may be cancelled by serving notice in the manner herein provided upon the company or upon its insurance producer who issued the policy.

SECTION 5. Section 27-12-1 of the General Laws in Chapter 27-12 entitled "Annual Reports of Insurance Companies" is hereby amended to read as follows:

27-12-1. Time of filing -- Contents of report. -- (a) Every insurance company of whatever name or kind, doing business in this state, shall annually on the first day of January, or within two (2) months thereafter, file with the insurance commissioner an annual national association of insurance commissioners statement convention blank, prepared in accordance with the national association of insurance commissioners annual statement instructions and accounting practices and procedures manuals{ADD , examiners' handbook, securities valuation manual and such other manuals published by the National Association of Insurance Commissioners ADD} as may be amended from time to time, signed and sworn to by its president and secretary, of its exact condition specifying that the company is a fire, marine, fire and marine, life, health, accident, or other insurance company, as the case may be; stating the amount of its capital and the manner of its investment; designating the amount invested respectively in mortgages, in what companies, particularizing each item of investment; the amount of marine risks not terminated, and the premium paid thereon; the amount of fire risks not terminated, and the premium paid thereon; the amount of liabilities, specifying therein the amount of outstanding claims, adjusted or unadjusted, due or not due; and in case the company is incorporated on the mutual principle, the statement shall set forth, in addition to the foregoing, the amount of risks insured by the company, the amount of premium thereon, what portion of it has been paid in cash, what security has been taken for the remainder, and what is the largest sum insured in any one risk; and, except in the case of a company writing less than one million dollars ($1,000,000) of total direct plus assumed written premiums during a calendar year or which has less than one thousand (1,000) policyholders or certificate holders at the end of a calendar year, a statement of actuarial opinion relating to loss and loss adjustment expense reserves; and, except in the case of a company having direct premiums written of less than one million dollars ($1,000,000) in any calendar year and less than one thousand (1,000) policyholders or certificate holders at the end of a calendar year, an audited financial report prepared by an independent certified public accountant; and the statement herein required to be made, so far as applicable, shall be made of each class in companies authorized to take risks in classes, and in all cases the returns may be varied by the commissioner to obtain more definite information of the company; and shall pay a filing fee of one hundred dollars ($100).

(b) Companies may be required to file quarterly statements upon request by the insurance commissioner, in accordance with the National Association of Insurance Commissioners' guidelines and procedures, due on or before forty-five (45) days after the quarter ending. Annual and quarterly statements shall be available for inspection by the public.

{ADD (c) The commissioner may assess a late fee of one hundred dollars ($100) per day for each day the insurer is late in filing its annual or quarterly statement, except that the insurer may request and receive a reasonable extension of the filing date without penalty.

(d) Provisions of this chapter shall apply to corporations organized under chapters 19, 20, 20.1, 20.2 and 20.3. ADD}

SECTION 6. Section 27-12.1-2 of the General Laws in Chapter 27-12.1 entitled "National Association of Insurance Commissioners (NAIC) Insurance Regulatory Information System Act" is hereby amended to read as follows:

27-12.1-2. Filing requirements. -- (a) Each domestic, foreign, and alien insurer who is authorized to transact insurance in this state shall annually on or before March 1, of each year, file with the National Association of Insurance Commissioners a hard copy of its annual statement convention blank, including diskette, along with such additional filings as prescribed by the commissioner for the preceding year. The information filed with the National Association of Insurance Commissioners shall be in the same format and scope as that required by the commissioner and shall include the signed jurat page and the actuarial certification. Quarterly statements on hard copy and on diskette must also be filed with the National Association of Insurance Commissioners due on or before forty-five (45) days after the quarter ending. Any amendments and addendum to the annual or quarterly statement filing subsequently filed with the commissioner shall also be filed with the National Association of Insurance Commissioners.

(b) Foreign insurers that are domiciled in a state which has a law substantially similar to subsection (a) of this section shall be deemed in compliance with this section.

{ADD (c) Provisions of this chapter shall apply to corporations organized under chapters 19, 20, 20.1, 20.2 and 20.3. ADD}

SECTION 7. Sections 27-13.1-4 and 27-13.1-5 of the General Laws in Chapter 27-13.1 entitled "Examinations" are hereby amended to read as follows:

27-13.1-4. Conduct of examinations. -- (a) Upon determining that an examination should be conducted, the director or the director's designee shall issue an examination warrant appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the examiners' handbook {ADD in effect at the time of the examination ADD} adopted by the National Association of Insurance Commissioners. The director may also employ such other guidelines or procedures as the director may deem appropriate.

(b) Every company or person from whom information is sought, its officers, directors, and agents must provide to the examiners appointed under subsection (d) timely, convenient and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, and any or all computer or other recordings relating to the property, assets, business, and affairs of the company being examined. The officers, directors, employees, and agents of the company or person must facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal of any company, by its officers, directors, employees, or agents, to submit to examination or to comply with any reasonable written request of the examiners shall be grounds for suspension or refusal of, or nonrenewal of any license or authority held by the company to engage in an insurance or other business subject to the director's jurisdiction. Any proceedings for suspension, revocation, or refusal of any license or authority shall be conducted pursuant to that section of the administrative procedures act, chapter 35 of title 42, governing emergency suspensions. Nothing herein shall preclude the director from initiating action pursuant to chapter 14.1 of this title.

(c) The director or any of his examiners shall have the power to issue subpoenas, to administer oaths, and to examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of any person to obey a subpoena, the director may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court.

(d) When making an examination under this chapter, the director may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners, the cost of which shall be borne by the company which is the subject of the examination.

(e) Nothing contained in this chapter shall be construed to limit the director's authority to terminate or suspend any examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

(f) Nothing contained in this chapter shall be construed to limit the director's authority to use and, if appropriate, to make public any final or preliminary examination report, any examiner or company workpapers or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action which the director may, in his or her sole discretion, deem appropriate.

27-13.1-5. Examination reports. -- (a) General description. -- All examination reports shall be comprised of only facts appearing upon the books, records, or other documents of the company, its agents or other persons examined, or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs, and the conclusions and recommendations as the examiners find reasonably warranted from the facts.

(b) Filing of examination report. -- No later than sixty (60) days following completion of the examination, the examiner in charge shall file with the department a verified written report of examination under oath. Upon receipt of the verified report, the department shall transmit the report to the company examined, together with a notice which shall afford {ADD require that ADD} the company examined a reasonable opportunity of not more than thirty (30) days to make {ADD file with the commissioner ADD} a written submission or rebuttal with respect {ADD response ADD} to any matters {ADD all comments and recommendations ADD} contained in the examination report.

{ADD The response shall include a written plan of how and when the comments and recommendations contained in the examination report will be corrected and/or implemented. For each comment and recommendation, the response must include an implementation date and a completion date for each corrective action. In lieu of the above, the company may submit a rebuttal to any comment or recommendation contained in the examination report. ADD}

(c) {ADD Adoption of report on examination. -- ADD} Within thirty (30) days of the end of the period allowed for the receipt of written submissions {ADD responses ADD} or rebuttals, the director shall fully consider and review the report, together with any written submissions {ADD responses ADD} or rebuttals and any relevant portions of the examiner's workpapers and enter an order:

(1) Adopting the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, regulation, or prior order of the director, the director may order the company to take any action the director considers necessary and appropriate to cure the violation; or

(2) Rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation, or information, and refiling pursuant to this section; and

(3) Calling for an investigatory hearing with no less than twenty (20) days notice to the company for purposes of obtaining additional documentation, data, information, and testimony.

(d) Orders and procedures. -- (1) All orders entered pursuant to this section shall be accompanied by findings and conclusions resulting from the director's consideration and review of the examination report, relevant examiner workpapers, and any written submissions {ADD responses ADD} or rebuttals. Any order shall be considered a final administrative decision and may be appealed pursuant to the Administrative Procedures Act, chapter 35 of title 42, and shall be served upon the company by certified mail, together with a copy of the adopted examination report. Within thirty (30) days of the issuance of the adopted report, the company shall file affidavits executed by each of its directors stating under oath that they have received a copy of the adopted report and related orders.

(2) Any hearing conducted under this section by the director or authorized representative shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies, or disputed issues apparent upon the face of the filed examination report or raised by or as a result of the director's review of relevant workpapers or by the written submission {ADD response ADD} or rebuttal of the company. Within twenty (20) days of the conclusion of any hearing, the director shall enter an order pursuant to this section;

(i) The director may appoint legal counsel and a member of the insurance division's examination section as authorized representatives to conduct the hearing. The hearing shall proceed expeditiously with discovery by the company limited to the examiner's workpapers which tend to substantiate any assertions set forth in any written submission {ADD response ADD} or rebuttal. The director or his or her representative may issue subpoenas for the attendance of any witnesses or the production of any documents deemed relevant to the investigation whether under the control of the department, the company, or other persons. The documents produced shall be included in the record and testimony taken by the director or his or her representative shall be under oath and preserved for the record;

(ii) Nothing contained in this section shall require the department to disclose any information or records which would indicate or show the existence or content of any investigation or activity of a criminal justice agency;

(iii) The hearing shall proceed with the director or his or her representative posing questions to the persons subpoenaed. Thereafter, the company and the department may present testimony relevant to the investigation. Cross examination shall be conducted only by the director or his or her representatives. The company and the department shall be permitted to make closing statements and may be represented by counsel of their choice.

(e) {ADD Publication and use. -- ADD} (1) Upon the adoption of the examination report under this section, the director shall continue to hold the content of the examination report as private and confidential information for a period of thirty (30) days following the mailing of the notice of order, except to the extent provided in subsection (b). Thereafter, the commissioner may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication;

(2) Nothing contained in title 27, or any other provision of law, shall prevent or be construed as prohibiting the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the insurance department of this or any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, so long as the agency or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this chapter;

(3) In the event the director determines that regulatory action is appropriate as a result of any examination, he or she may initiate any proceedings or actions as provided by law.

(f) {ADD Confidentiality of ancillary information. -- ADD} All working papers, recorded information, documents, and copies thereof, produced by, obtained by, or disclosed to the director or any other person in the course of an examination made under this chapter must be given confidential treatment and are not subject to subpoena and may not be made public by the director or any other person, except to the extent provided in subsection (e). Access may also be granted to the National Association of Insurance Commissioners. The parties must agree in writing prior to receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the company to which it pertains has been obtained.

SECTION 8. Section 27-16-1.2 of the General Laws in Chapter 27-16 entitled "Unauthorized Insurance Business" is hereby amended to read as follows:

27-16-1.2. Certificate of compliance -- Exceptions. -- (a) It shall be unlawful for any insurer to transact insurance business in this state as set forth in subsection (b) without a certificate of compliance from the commissioner; provided, however, that this section shall not apply to:

(1) The lawful transaction of surplus lines insurance;

(2) The lawful transaction of reinsurance by insurers;

(3) Transactions in this state involving a policy lawfully solicited, written, and delivered outside of this state covering only subjects of insurance not resident, located, or expressly to be performed in this state at the time of issuance, and which transactions are subsequent to the issuance of the policy;

(4) Attorneys acting in the ordinary relation of attorney and client in the adjustment of claims or losses;

(5) Transactions in this state involving group life and group sickness and accident or blanket sickness and accident insurance or group annuities where the master policy of the groups was lawfully issued and delivered in and pursuant to the laws of a state in which the insurer was authorized to do an insurance business, to a group organized for purposes other than the procurement of insurance, and where the policyholder is domiciled or otherwise has a bona fide situs;

(6) Transactions in this state involving any policy of insurance or annuity contract issued prior to May 15, 1973;

(7) Transactions in this state relative to a policy issued outside this state involving insurance on vessels, craft, or hulls, cargoes, marine protection and indemnity or other risk,

(8) Transactions in this state involving contracts of insurance issued to one or more industrial insureds. An industrial insured is defined as an insured:

(i) Which procures the insurance of any risk by the use of the services of a full-time employee acting as insurance manager or buyer or the services of a regularly and continuously retained qualified insurance consultant;

(ii) Whose aggregate annual premiums on all risks excluding worker's compensation and group total at least twenty-five thousand dollars ($25,000); and

(iii) Which has at least twenty-five (25) full-time employees; and

(9)(i) Transactions in this state involving life insurance, health insurance, or annuities provided to educational or religious or charitable institutions organized and operated without profit to any private shareholder or individual for the benefit of the institutions and individuals engaged in the service of the institutions;

(ii) But this exemption shall be conditional upon the company complying with the following requirements:

(A) Payment of an annual registration fee of five hundred dollars ($500);

(B) Filing a copy of any policy or contract form{ADD , including annuities ADD} issued to any Rhode Island residents with the commissioner of insurance ; {ADD . Effective January 1, 1997, each policy and contract form, including annuities, shall contain (on its front and declaration page) in at least twelve (12) point type the following notice:

THIS CONTRACT HAS BEEN PLACED WITH AN INSURER NOT LICENSED TO DO BUSINESS IN THE STATE OF RHODE ISLAND BUT ELIGIBLE AS AN UNLICENSED REGISTERED INSURER PURSUANT TO THE UNAUTHORIZED BUSINESS STATUTE. THE INSURER IS NOT A MEMBER OF THE RHODE ISLAND LIFE AND HEALTH GUARANTY ASSOCIATION. SHOULD THE INSURER BECOME INSOLVENT, THE PROTECTION AND BENEFITS OF THE ASSOCIATION ARE NOT AVAILABLE. ADD}

(C) Filing a copy of its annual statement, prepared pursuant to the laws of its state of domicile, as well as such other financial material as may be requested by the commissioner; and further,

(D) Provided the company agrees to appoint the commissioner of insurance, and his or her successors in office, as its attorney to receive service of legal process issued against it in Rhode Island. The appointment is to be irrevocable and to bind the commissioner, and any successors in interest, and to remain in effect as long as there is in force in this state any contract issued by the company or any obligations arising therefrom.

(b) Any of the following acts in this state effected by mail or otherwise, by or on behalf of an insurer, is deemed to constitute the transaction of an insurance business in this state. The venue of an act committed by mail is at the point where the matter transmitted by mail is delivered and takes effect. Unless otherwise indicated, the term "insurer" as used in this section includes all corporations, associations, partnerships, and individuals engaged as principals in the business of insurance and also includes interinsurance exchanges and mutual benefit societies:

(1) The making or proposing to make, as an insurer an insurance contract;

(2) The making of or proposing to make, as guarantor or surety, any contract of guaranty or suretyship as a vocation and not merely incidental to any other legitimate business or activity of the guarantor or surety;

(3) The taking or receiving of any application for insurance;

(4) The receiving or collection of any premium, commission, membership fees, assessments, dues or other consideration for an insurance or any part thereof;

(5) The issuance or delivery of contracts of insurance to residents of this state or to persons authorized to do business in this state;

(6) Directly or indirectly acting as an agent or insurance producer for or otherwise representing or aiding on behalf of another any person or insurer in the solicitation, negotiation, procurement or effectuation of insurance or renewals thereof or in the dissemination of information as to coverage or rates, forwarding of applications, delivery of policies or contracts, inspection of risks, fixing of rates or investigation or adjustment of claims or losses, or in the transaction of matters subsequent to effectuation of the contract and arising out of it, or in any other manner representing or assisting a person or insurer in the transaction of insurance with respect to subjects of insurance, resident, located, or to be performed in this state. The provisions of this subsection shall not operate to prohibit full time salaried employees of a corporate insured from acting in the capacity of an insurance manager or buyer in placing insurance in behalf of the employer;

(7) The transaction of any kind of insurance business specifically recognized as transacting an insurance business within the meaning of the statutes relating to insurance; or

(8) The transacting or proposing to transact any insurance business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of the statutes.

(c) The failure of an insurer transacting insurance business in this state to obtain a certificate of compliance shall not impair the validity of any act or contract of the insurer and shall not prevent the insurer from defending any action at law or suit in equity in any court of this state, but no insurer transacting insurance business in this state without a certificate of authority shall be permitted to maintain an action in any court of this state to enforce any right, claim, or demand arising out of the transaction of insurance business until the insurer shall have obtained a certificate of authority.

(d) In the event of the failure of any unauthorized insurer to pay any claim or loss within the provisions of the insurance contract, any person who assisted or in any manner aided directly or indirectly in the procurement of the insurance contract shall be liable to the insured for the full amount of the claim or loss in the manner provided by the provisions of the insurance contract.

SECTION 9. Section 27-19-8 of the General Laws in Chapter 27-19 entitled "Nonprofit Hospital Service Corporations" is hereby amended to read as follows:

27-19-8. Annual and quarterly statements. -- Every nonprofit hospital service corporation shall annually, on or before the first day of March in each year, file in the office of the commissioner of insurance a statement, verified by at least two (2) of the principal officers of the corporation, of its condition on the thirty-first day of December then next preceding, which statement shall be in general form and context as approved by the National Association of Insurance Commissioners and contain such matters as the commissioner shall prescribe and shall be available for inspection by the public.

(b) Every such corporation shall also file quarterly statements with the insurance commissioner, due on or before forty-five (45) days after the quarter ending in accordance with the National Association of Insurance Commissioners' guidelines and procedures, and shall be available for inspection by the public.

(c) The insurance commissioner shall also require compliance with chapter{ADD s 12 and ADD} 12.1 of title 27.

SECTION 10. Section 27-20-8 of the General Laws in Chapter 27-20 entitled "Nonprofit Medical Service Corporations" is hereby amended to read as follows:

27-20-8. Annual and quarterly statements. -- (a) Every nonprofit medical service corporation shall annually, on or before the first day of March in each year, file in the office of the director of business regulation {ADD commissioner of insurance ADD} a statement, verified by at least two (2) of the principal officers of the corporation, of its condition on the thirty-first day of December then next preceding, which statement shall be in general form and context as approved by the national association of insurance commissioners and contain such matters as the director of business regulation shall prescribe and shall be available for inspection by the public.

(b) Every such corporation shall also file quarterly statements with the insurance commissioner, due on or before forty-five (45) days after the quarter ending in accordance with the national association of insurance commissioners' guidelines and procedures, and shall be available for inspection by the public.

(c) The insurance commissioner shall also require compliance with chapter{ADD s 12 and ADD} 12.1 of title 27.

SECTION 11. Section 27-20.1-4 of the General Laws in Chapter 27-20.1 entitled "Nonprofit Dental Service Corporations" is hereby amended to read as follows:

27-20.1-4. Annual statement. -- (a) Every such nonprofit dental service corporation and any nonprofit dental service plan operated by a nonprofit hospital service corporation shall annually, on or before the first day of March in each year, file in the office of the commissioner of insurance a statement, verified by at least two (2) of the principal officers of the corporation, of the condition of such nonprofit dental service corporation or plan on the 31st day of December then next preceding, which statement shall be in general form and context as approved by the national association of insurance commissioners and contain such matters as the director of business regulation shall prescribe including, but not limited to premiums earned, claims expense, operating expenses, other income and expenses, net gain or loss, reserves, enrollment and enrollment changes separately for dental business for such corporations and shall be available for inspection by the public.

(b) Every such corporation shall also file quarterly statements with the insurance commissioner, due on or before forty-five (45) days after the quarter ending in accordance with the national association of insurance commissioners' guidelines and procedures and contain such matters as the director of business regulation shall prescribe, including, but not limited to premiums earned, claims expense, operating expenses, other income and expenses, net gain or loss, reserves, enrollment and enrollment changes separately for dental business for such corporations and shall be available for inspection by the public.

(c) The insurance commissioner shall also require compliance with chapter{ADD s 12 and ADD} 12.1 of title 27.

SECTION 12. Section 27-20.2-4 of the General Laws in Chapter 27-20.2 entitled "Nonprofit Optometric Service Corporations" is hereby amended to read as follows:

27-20.2-4. Annual and quarterly statements. -- (a) Every nonprofit optometric service corporation shall annually, on or before the first day of March in each year, file in the office of the director of business regulation {ADD commissioner of insurance ADD} a statement, verified by at least two (2) of the principal officers of the corporation, of its condition on the 31st day of December then next preceding, which statement shall contain such matters as the director of business regulation shall prescribe and shall be available for inspection by the public.

(b) Every such corporation shall also file quarterly statements with the insurance commissioner, due on or before forty-five (45) days after the quarter ending in accordance with the National Association of Insurance Commissioners' guidelines and procedures, and shall be available for inspection by the public.

(c) The insurance commissioner shall also require compliance with chapter{ADD s 12 and ADD} 12.1 of title 27.

SECTION 13. Section 27-20.3-4 of the General Laws in Chapter 27-20.3 entitled "Nonprofit Legal Service Corporations" is hereby amended to read as follows:

27-20.3-4. Annual and quarterly statements. -- (a) Every nonprofit prepaid legal service corporation shall annually, on or before the first day of March in each year, file in the office of the director of business regulation {ADD commissioner of insurance ADD} a statement verified by at least two (2) of the principal officers of the corporation, of its condition on the thirty-first day of December then next preceding, which statement shall contain such matters relating to its financial operation, financial condition, and reserves as the director of business regulation shall prescribe, and shall be available for inspection by the public.

(b) Every such corporation shall also file quarterly statements with the insurance commissioner, due on or before forty-five (45) days after the quarter ending in accordance with the National Association of Insurance Commissioners' guidelines and procedures, and shall be available for inspection by the public.

(c) The insurance commissioner shall also require compliance with chapter{ADD s 12 and ADD} 12.1 of title 27.

SECTION 14. Section 27-34-10 of the General Laws in Chapter 27-34 entitled "Rhode Island Insurers' Insolvency Fund" is hereby amended to read as follows:

27-34-10. Duties and powers of the commissioner. -- (a) The commissioner shall:

(1) Notify the fund of the existence of an insolvent insurer not later than three (3) days after he or she receives notice of the determination of the insolvency. The fund shall be entitled to a copy of any complaint seeking an order of liquidation with a funding of insolvency against a member insurer at the same time that the complaint is filed with a court of competent jurisdiction; and

(2) Upon request of the board of directors, provide the fund with a statement of the net direct written premiums of each member insurer . {ADD ; and ADD}

{ADD (3) Notify the fund of all filings made under section 27-35-2 except as prohibited under section 27-35-6. The commissioner shall provide copies of all such filings to the fund upon request. ADD}

(b) The commissioner may:

(1) Require that the fund notify the insureds of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this chapter. The notification shall be by mail at their last known address, where available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation shall be sufficient;

(2) Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation; and

(3) Revoke the designation of any servicing facility if he or she finds claims are being handled unsatisfactorily.

(c) Any final action or order of the commissioner under this chapter shall be subject to judicial review in a court of competent jurisdiction.

SECTION 15. Section 27-35-3 of the General Laws in Chapter 27-35 entitled "Insurance Holding Company Systems" is hereby amended to read as follows:

27-35-3. Registration of insurers. -- (a) {ADD Registration. ADD} Every insurer which is authorized to do business in this state and which is a member of an insurance holding company system shall annually register with the commissioner, except a foreign insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in this section {ADD chapter ADD} . Any insurer which is subject to registration under this section shall register within sixty (60) days after July 16, 1971 or fifteen (15) days after it becomes subject to registration, whichever is later, unless the commissioner for good cause shown extends the time for registration, and then within such extended time. The commissioner may require any authorized insurer which is a member of a holding company system which is not subject to registration under this section to furnish a copy of the registration statement or other information filed by the insurance company with the insurance regulatory authority of domiciliary jurisdiction.

(b) {ADD Information and form required. ADD} Every insurer subject to registration shall file a registration statement on a form provided by the commissioner, which shall contain current information about:

(1) The capital structure, general financial condition, ownership and management of the insurer and any person controlling the insurer;

(2) The identity of every member of the insurance holding company system.

(3) The following agreements in force, relationships subsisting, and transactions currently outstanding between the insurer and its affiliates:

(i) Loans, other investments or purchases, and sales or

exchanges of securities of the affiliates by the insurer or

of the insurer by its affiliates;

(ii) Purchases, sales, or exchanges of assets;

(iii) Transactions not in the ordinary course of business;

(iv) Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer's assets to liability, other than insurance

contracts entered into in the ordinary course of the insurer's business;

(v) All management and service contracts and all cost sharing arrangements, other than cost allocation arrangements based upon generally accepted accounting

principles; and

(vi) Reinsurance agreements covering all or substantially all of one or more lines of insurance of the ceding company; and

(4) Other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the commissioner.

(c) {ADD Materiality. ADD} No information need be disclosed on the registration statement filed pursuant to subsection (b) if that information is not material for the purposes of this section. Unless the commissioner by rule, regulation, or order provides otherwise, sales, purchases, exchanges, loans, or extensions of credit or investments involving one-half of one percent (.5%) or less of an insurer's admitted assets as of the thirty-first day of December next preceding shall not be deemed material for purposes of this section.

(d) {ADD Amendments to registration statements. ADD} Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on amendment forms provided by the commissioner within fifteen (15) days after the end of the month in which it learns of each change or addition; provided, however, that subject to section 27-35-4(c), each registered insurer shall so report all dividends and other distributions to shareholders within two (2) business days following the declaration thereof.

(e) {ADD Termination of registration. ADD} The commissioner shall terminate the registration of any insurer which demonstrates that it no longer is a member of an insurance holding company system.

(f) {ADD Consolidated filing. ADD} The commissioner may require or allow two or more affiliated insurers subject to registration hereunder to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements.

(g) {ADD Alternative registration. ADD} The commissioner may allow an insurer which is authorized to do business in this state and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection (a) and to file all information and material required to be filed under this section.

(h) {ADD Exemptions. ADD} The provisions of this section shall not apply to any insurer, information, or transaction if and to the extent that the commissioner by rule, regulation, or order shall exempt the same from the provisions of this section.

(i) {ADD Disclaimer. ADD} Any person may file with commissioner a disclaimer of affiliation with any authorized insurer or the disclaimer may be filed by the insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases {ADD basis ADD} for affiliation between the person and the insurer as well as the basis for disclaiming the affiliation. After a disclaimer has been filed, the insurer shall be relieved of any duty to register or report under this section which may arise out of the insurer's relationship with the person unless and until the commissioner disallows the disclaimer. The commissioner shall disallow the disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support the disallowance.

(j) {ADD Violations. ADD} The failure to file a registration statement or any amendment thereto required by this section within the time specified for the filing shall be a violation of this section.

(k) {ADD Summary of registration statement. ADD} All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.

(l) {ADD Information of insurers. ADD} Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, where the information is reasonably necessary to enable the insurer to comply with the provisions of this chapter.

SECTION 16. Section 27-41-9 of the General Laws in Chapter 27-41 entitled "Health Maintenance Organizations" is hereby amended to read as follows:

27-41-9. Required reports. -- (a) Every health maintenance organization shall annually, on or before the first day of March, file a report verified by at least two (2) principal officers with the director, with a copy to the director of health, covering the preceding calendar year.

(b) The annual report shall be on forms prescribed by the director in consultation with the director of health and shall include:

(1) A financial statement of the organization, including its balance sheet and receipts and disbursements for the preceding year certified by an independent public accountant;

(2) Any material changes in the information submitted pursuant to section 27-41-3(c);

(3) The number of persons enrolled during the year, the number of enrollees as of the end of the year, and the number of enrollments terminated during the year;

(4) A summary of information compiled pursuant to section 27-41-4(a)(2) (iv) in such form as required by the director of health; and

(5) Such other information relating to the performance of the health maintenance organization as is necessary to enable the director to carry out his or her duties under this chapter.

(c) In addition to the reports required in subsection (a), every health maintenance organization shall on a form prescribed by the director report on or before September 30 of each year a filing that shall set forth the amount of uncovered and covered expenses that are payable and are more than ninety (90) days past due. That report shall cover the period January 1 through July 31 of that year. Further, at the time of the filing of the annual report as required in subsection (a), a report shall be filed setting forth the amount of uncovered and covered expenses that are payable and are more than ninety (90) days past due; that report shall cover the preceding period of August 1 through December 31 of that year.

(d) Every health maintenance organization shall also file quarterly statements with the insurance commissioner, due on or before forty-five (45) days after the quarter ending in accordance with the national association of insurance commissioner{ADD s' ADD} guidelines and procedures, and shall be available for inspection by the public.

(e) The insurance commissioner shall also require compliance with chapter{ADD s 12 and ADD} 12.1 of title 27.

SECTION 17. Section 27-46-4 of the General Laws in Chapter 27-46 entitled "Risk Retention Act" is hereby amended to read as follows:

27-46-4. Risk retention groups not chartered in this state. -- Risk retention groups chartered and licensed in states other than this state and seeking to do business as a risk retention group in this state shall comply with the laws of this state as follows:

(1) Notice of operations and designation of commissioner as agent.

(i) Before offering insurance in this state, a risk retention group shall submit to the commissioner:

(A) A statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, charter date, its principal place of business, and such other information, including information on its membership, as the commissioner of this state may require to verify that the risk retention group is qualified under section 27-46-2(11);

(B) A copy of its plan of operations or feasibility study and revisions of the plan or study submitted to the state in which the risk retention group is chartered and licensed; provided, however, that the provision relating to the submission of a plan of operation or feasibility study shall not apply with respect to any line or classification of liability insurance which:

(I) Was defined in section 3901 et seq. before October 27, 1986; and

(II) Was offered before that date by any risk retention group which had been chartered and operating for not less than three (3) years before that date; and

(ii) The risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required by section 27-46-3(b) at the same time that the revisions is submitted to the commissioner of its chartering state; and.

(iii) The risk retention group shall submit a statement of registration , for which a filing fee shall be determined by the commissioner, which designates the commissioner as its agents for the purpose of receiving service of legal documents or process;

(2) Financial condition. Any risk retention group doing business in this state shall submit to the commissioner:

(i) A copy of the group's financial statement submitted {ADD annually ADD} to the state in which the risk retention group is chartered and licensed which shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries or a qualified loss reserve specialist, under criteria established by the National Association of Insurance Commissioners;

(ii) A copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination;

(iii) Upon request by the commissioner, a copy of any information or document pertaining to any outside audit performed with respect to the risk retention group; and

(iv) Such information as may be required to verify its continuing qualification as a risk retention group under section 27-46-2(ii);

(3) Taxation.

(i) Each risk retention group shall be liable for the payment of premium taxes and taxes on premiums of direct business for risks resident or located within this state, and shall report to the commissioner the net premiums written for risks resident or located within this state. The risk retention group shall be subject to taxation, and any applicable fines and penalties related thereto, on the same basis as a foreign admitted insurer;

(ii) To the extent licensed agents or brokers or insurance producers are utilized pursuant to section 27-46-12, they shall report to the commissioner the premiums for direct business for risks resident or located within this state which those licensees have placed with or on behalf of a risk retention group not chartered in this state;

(iii) To the extent that insurance agents or brokers or producers are utilized pursuant to section 27-46-12, the agent or broker or insurance producers shall keep a complete and separate record of all policies procured from each risk retention group, which record shall be open to examination by the commissioner. {ADD The total cost of such examinations shall be paid for in the same manner as set forth in section 27-13-1. ADD} These records shall, for each policy and each kind of insurance provided thereunder, include the following:

(A) The limit of liability;

(B) The time period covered;

(C) The effective date;

(D) The name of the risk retention group which issued the policy;

(E) The gross premium charged; and

(F) The amount of return premiums, if any;

(4) Adherence to Fair Claims Settlement Practices. Any risk retention group, its agents, and representatives shall comply with any law or regulations regarding claims settlement practices;

(5) Deceptive, false, or fraudulent practices. Any risk retention group shall comply with and be subject to the laws of this state regarding deceptive, false, or fraudulent acts or practices;

(6) Examination regarding financial condition. Any risk retention group must submit to an examination by the commissioner to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered and licensed has not initiated an examination or does not initiate an examination within sixty days after a request by the commissioner of this state. Any examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the NAIC's examiner handbook. {ADD The total cost of such examination shall be paid for in the same manner as set forth in section 27-13-1. ADD}

(7) Notice of purchasers. Every application form for insurance from a risk retention group, and every policy on its front and declaration pages issued by a risk retention group, shall contain in ten (10) point type the following notice:

THIS POLICY IS ISSUED BY YOUR RISK RETENTION GROUP. YOUR RISK RETENTION GROUP MAY NOT BE SUBJECT TO ALL OF THE INSURANCE LAWS AND REGULATIONS OF YOUR STATE. STATE INSURANCE INSOLVENCY GUARANTY FUNDS ARE NOT AVAILABLE FOR YOUR RISK RETENTION GROUP.

(8) Prohibited acts regarding solicitation or sale. The following acts by a risk retention group are hereby prohibited:

(i) The solicitation or sale of insurance by a risk retention group to any person who is not eligible for membership in the group; and

(ii) The solicitation or sale of insurance, by, or operation of, a risk retention group that is in hazardous financial condition or financially impaired;

(9) Prohibition on ownership by an insurance company. No risk retention group shall be allowed to do business in this state if an insurance company is directly or indirectly a member or owner of the risk retention group, other than in the case of a risk retention group all of whose members are insurance companies;

(10) Prohibited coverage. The terms of any insurance policy issued by any risk retention group shall not provide, or be construed to provide, coverage prohibited generally by statute of this state or declared unlawful by the highest court of this state whose law applied to the policy.

(11) Delinquency proceedings. A risk retention group not chartered in this state and doing business in this state shall comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency or liquidation proceeding commenced by a state insurance commissioner if there has been a finding of financial impairment after an examination under subsection (6);

(12) Penalties. A risk retention group that violates any provision of this chapter will be subject to fines and penalties including revocation if {ADD of ADD} its right to do business in this state, applicable to licensed insurers generally; and

(13) Operation prior to enactment of this chapter. In addition to complying with the requirements of this section, any risk retention group operating in this state prior to enactment of this chapter shall, within thirty (30) days after June 18, 1991,comply with the provision of subsection (1)(i).

SECTION 18. The title of Chapter 51 of the General Laws entitled "The Rhode Island Insurance Accreditation Act" is hereby amended to read as follows:

SECTION 19. Sections 27-51-1 and 27-51-7 of the General Laws in Chapter 51 entitled "The Rhode Island Insurance Accreditation Act" are hereby amended to read as follows:

27-51-1. Short title. -- As used in this chapter, this act may be known as the "Rhode Island Insurance Accreditation Act" {ADD "Managing General Agents Act" ADD} .

27-51-7. Penalties and liabilities. -- (a) If the commissioner finds after a hearing conducted in accordance with the Administrative Procedures Act, chapter 35 of title 42, that any person has violated any provision(s) of this act, the commissioner may order:

(1) For each separate violation, a penalty in an amount not exceeding $1,000.00;

(2) Revocation or suspension of the producer's license ; and/or

(3) The MGA to reimburse the insurer, the rehabilitator, or liquidator of the insurer for any losses incurred by the insurer caused by a violation of this chapter committed by the MGA. {ADD . If it was found that because of such material noncompliance the insurer has suffered any loss or damage, the commissioner may maintain a civil action brought by or on behalf of the insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the insurer and its policyholders and creditors or other appropriate relief. ADD}

(b) The decision, determination, or order of the commissioner pursuant to subsection (a) of this section shall be subject to judicial review pursuant to the Administrative Procedures Act. {ADD If an order of rehabilitation or liquidation of the insurer has been entered pursuant to applicable Rhode Island law and the receiver appointed under that order determines that the MGA or any other person has not materially complied with this act, or any regulation or order promulgated thereunder, and the insurer suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer. ADD}

(c) Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided for in the insurance law.

(d) Nothing contained in this chapter is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, and auditors.

SECTION 20. Chapter 27-53 of the General Laws entitled "Assumption Reinsurance" is hereby repealed in its entirety:

27-53-1. Scope. -- (a) This chapter applies to any insurer licensed in this state which transfers the insurance liabilities of existing or in force contracts of insurance to another insurer pursuant to an assumption reinsurance agreement.

(2) The substitution of one insurer for another upon the expiration of insurance coverage pursuant to statutory or contractual requirements and the issuance of a new contract of insurance by another insurer;

27-53-2. Definitions. -- } (a) "Assuming insurer" means the insurer which acquires an insurance liability from the transferring insurer pursuant to an assumption reinsurance agreement.

(g) "Transferring insurer" means the insurer which transfers an insurance liability to an assuming insurer pursuant to an assumption reinsurance agreement.

27-53-3. Approval. -- (a) No domestic or foreign insurer licensed to do business in this state shall enter into any assumption reinsurance agreement which purport to transfer any Rhode Island risks to any insurer not licensed in this state without first obtaining (i) the approval of the commissioner; and (ii) approval of the policyholders, after notice is given pursuant to section 27-53-4.

(d) An appeal from the order of the commissioner may be taken in accordance with the administrative procedures act, chapter 42-35.

27-53-4. Notice requirements. -- (a) Notice to policyholders.

At the time it first issues a notice of transfer to any policyholder pursuant to section 27-53-4(a), the transferring insurer shall provide the notice to its domiciliary regulator, the domiciliary regulator of the assuming insurer, and the insurance regulator in every state into which a notice of transfer is sent. The commissioner of insurance for the state of Rhode Island shall review the assumption reinsurance agreement, if necessary, and shall issue an order pursuant to the provisions of section 27-53-3. The review may occur at the same time that policyholders have the right to review their options under section 27-53-5.

27-53-5. Policyholder rights. -- (a) Every policyholder shall have the right to consent to or to reject the transfer and novation of its contract of insurance. Policyholders electing to reject the assumption transaction must provide the transferring insurer with the preaddressed, postage paid rejection card or other written notice that the assumption is rejected, collectively referred to as the "rejection notice" no later than forty (40) days after the date on which the transferring insurer mails the notice required under section 27-53-4(a).

(2) To terminate the policyholder's contract with the transferring insurer in accordance with its terms, in which case the transferring insurer shall not impose any cost or fee not otherwise specified in the contract of insurance.

27-53-6. Effect of consent and approval. -- After obtaining commissioner approval, if necessary, and if a policyholder consents to the transfer pursuant to section 27-53-5, there shall be a novation of the contract of insurance subject to the assumption reinsurance agreement with the result that the transferring insurer shall thereby be relieved of all insurance liabilities transferred under the assumption reinsurance agreement and the assuming insurer shall become directly and solely liable to the policyholder for those insurance liabilities.

27-53-7. Notice of transfer. --

After this transfer, you should make all premium payments, (new) claims submissions and direct all questions to ABC Insurance Company.

SECTION 21. Title 27 of the General Laws entitled "Insurance" is hereby amended by adding thereto the following chapter:

{ADD 27-53.1-1. Purpose. -- ADD} {ADD This chapter provides for the regulation of the transfer and novation of contracts of insurance by way of assumption reinsurance. It defines assumption reinsurance and establishes notice and disclosure requirements which protect and define the rights and obligations of policyholders, regulators and the parties to assumption reinsurance agreements. ADD}

{ADD 27-53.1-2. Scope. -- ADD} {ADD (A) This chapter applies to any insurer authorized in this state which either assumes or transfers the obligations and/or risks on contracts of insurance pursuant to an assumption reinsurance agreement.

(B) This chapter does not apply to:

(1) Any reinsurance agreement or transaction in which the ceding insurer continues to remain directly liable for its insurance obligations and/or risks under the contracts of insurance subject to the reinsurance agreement;

(2) The substitution of one insurer for another upon the expiration of insurance coverage pursuant to statutory or contractual requirements and the issuance of a new contract of insurance by another insurer;

(3) The transfer of contracts of insurance pursuant to mergers or consolidations of two (2) or more insurers to the extent that those transactions are regulated by statute;

(4) Any insurer subject to a judicial order of liquidation or rehabilitation;

(5) Any reinsurance agreement or transaction to which a state insurance guaranty association is a party, provided that policyholders do not lose any rights or claims afforded under their original policies pursuant to chapters 34, 34.1 and 34.3 of title 27; or

(6) The transfer of liabilities from one insurer to another under a single group policy upon the request of the group policyholder. ADD}

{ADD 27-53.1-3. Definitions. -- ADD} {ADD (A) "Assuming insurer" means the insurer which acquires an insurance obligation and/or risk from the transferring insurer pursuant to an assumption reinsurance agreement.

(B) "Assumption reinsurance agreement" means any contract which both:

(1) Transfers insurance obligations and/or risks of existing or in-force contracts of insurance from a transferring insurer to an assuming insurer; and

(2) Is intended to effect a novation of the transferred contract of insurance with the result that the assuming insurer becomes directly liable to the policyholders of the transferring insurer and the transferring insurer's insurance obligations and/or risks under the contracts are extinguished.

(C) "Contract of insurance" means any written agreement between an insurer and policyholder pursuant to which the insurer, in exchange for premium or other consideration, agrees to assume an obligation and/or risk of the policyholder or to make payments on behalf of, or to, the policyholder or its beneficiaries; it shall include all property, casualty, life, health, accident, surety, title insurance transacted by insurers not domiciled in Rhode Island and annuity business authorized to be written pursuant to the insurance laws of this state.

(D) "Home service business" means insurance business on which premiums are collected on a weekly or monthly basis by an agent of the insurer.

(E) "Notice of transfer" means the written notice to policyholders required by subsection 27-53.1-4(A).

(F) "Policyholder" means any individual or entity which has the right to terminate or otherwise alter the terms of a contract of insurance. It includes any certificate holder whose certificate is in force on the proposed effective date on the assumption, if the certificate holder has the right to keep the certificate in force without change in benefit following termination of the group policy. The right to keep the certificate in force referred to in this section shall not include the right to elect individual coverage under the Consolidated Omnibus Budget Reconciliation Act, ("COBRA") Section 601, et seq., of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. 1161 et seq.

(G) "Transferring insurer" means the insurer which transfers an insurance obligation and/or risk to an assuming insurer pursuant to an assumption reinsurance agreement. ADD}

{ADD 27-53.1-4. Notice requirements. -- ADD} {ADD (A) Notice to policyholders, agents and brokers

(1) The transferring insurer shall provide or cause to be provided to each policyholder a notice of transfer by first-class mail, addressed to the policyholder's last known address or to the address to which premium notices or other policy documents are sent or, with respect to home service business, by personal delivery with acknowledged receipt. A notice of transfer shall also be sent to the transferring insurer's agents or brokers of record on the affected policies.

(2) The notice of transfer shall state or provide:

(a) The date the transfer and novation of the policyholder's contract of insurance is proposed to take place;

(b) The name, address and telephone number of the assuming and transferring insurer;

(c) That the policyholder has the right to either consent to or reject the transfer and novation;

(d) The procedures and time limit for consenting to or rejecting the transfer and renovations;

(e) A summary of any effect that consenting to or rejecting the transfer and novation will have on the policyholder's rights;

(f) A statement that the assuming insurer is licensed to write the type of business being assumed in the state where the policyholder resides, or is otherwise authorized, as provided herein, to assume such business;

(g) The name and address of the person at the transferring insurer to whom the policyholder should send its written statement of acceptance or rejection of the transfer and novation; and

(h) The address and phone number of the insurance department where the policyholder resides so that the policyholder may write or call the insurance department for further information regarding the financial condition of the assuming insurer;

(i) The following financial date for both companies:

(i) Ratings for the last five (5) years if available or for such lesser period as is available from two (2) nationally recognized insurance rating services acceptable to the commissioner including the rating service's explanation of the meaning of the ratings. If ratings are unavailable for any year of the five (5) year period, this shall also be disclosed;

(ii) A balance sheet as of December 31 for the previous three (3) years if available or for such lesser period as is available and as of the date of the most recent quarterly statement;

(iii) A copy of the Management's Discussion and Analysis that was filed as a supplement to the previous year's annual statement; and

(iv) An explanation of the reason for the transfer.

(3) Notice in a form identical or substantially similar to section 27-53.1-9 shall be deemed to comply with the requirements of subsection 27-53-4A(2).

(4) The notice of transfer shall include a pre-addressed, postage-paid response card which a policyholder may return as its written statement of acceptance or rejection of the transfer and novation.

(5) The notice of transfer shall be filed as part of the prior approval requirement set forth in subsection 27-53.1-4B(1).

(B) Notification and prior approval requirements.

(1) Prior approval by the commissioner is required for any transaction where an insurer domiciled in this state assumes or transfers obligations and/or risks on contracts of insurance under an assumption reinsurance agreement. No insurer licensed in this state shall transfer obligations and/or risks on contracts of insurance issued to or owned by residents of this state to any insurer that is not licensed in this state. An insurer domiciled in this state shall not assume obligations and/or risks on contracts of insurance issued to or owned by policyholders residing in any other state unless it is licensed in the other state, or the insurance regulatory official of that state has approved the assumption.

(2) Any licensed foreign insurer that enters into an assumption reinsurance agreement which transfers the obligations and/or risks on contracts of insurance issued to or owned by residents of this state, shall file or cause to be filed with the commissioner of insurance of this state the assumption certificate, a copy of the notice of transfer and an affidavit that the transaction is subject to substantially similar requirements in the state of domicile of both the transferring and assuming insurer. If no such requirements exist in the domicile of either the transferring or assuming insurers, then the requirements of subsection 27-53.1-4B(3) shall apply.

(3) Any licensed foreign insurer that enters into an assumption reinsurance agreement which transfers the obligations and/or risks on contracts of insurance issued to or owned by residents of this state, shall obtain prior approval of the commissioner of insurance of this state and be subject to all other requirements of this chapter with respect to residents of this state, unless the transferring and assuming insurers are subject to assumption reinsurance requirements adopted by statute or regulation in the jurisdiction of their domicile which are substantially similar to those contained herein.

(4) The following factors, along with such other factors as the commissioner deems appropriate under the circumstances, shall be considered by the commissioner in reviewing a request for approval:

(a) The financial condition of the transferring and assuming insurers and the effect the transaction will have on the financial condition of each company;

(b) The competence, experience and integrity of those persons who control the operation of the assuming insurer;

(c) The plans or proposals the assuming party has with respect to the administration of the policies subject to the proposed transfer;

(d) Whether the transfer is fair and reasonable to the policyholders of both companies; and

(e) Whether the notice of transfer to be provided by the insurer is fair, adequate and not misleading. ADD}

{ADD 27-53.1-5. Policyholder rights. -- ADD} {ADD (A) Policyholders shall have the right to reject the transfer and novation of their contracts of insurance. Policyholders electing to reject the assumption transaction shall return to the transferring insurer the pre-addressed, postage-paid response card or other written notice and indicate thereon that the assumption is rejected (collectively referred to as the "Response Card").

(B) Payment of any premium to the assuming company during the twenty-four (24) month period after notice is received shall be deemed to indicate the policyholder's acceptance of the transfer to the assuming insurer and a novation shall be deemed to have been effected, provided that the premium notice clearly states that payment of the premium to the assuming insurer shall constitute acceptance of the transfer. However, the premium notice shall also provide a method for the policyholder to pay the premium while reserving the right to reject the transfer. With respect to any home service business or any other business not using premium notices, the disclosures and procedural requirements of this subsection are to be set forth in the notice of transfer required by section 27-53.1-4 and in the assumption certificate.

(C) After no fewer than twenty-four (24) months from the mailing of the initial notice of transfer required under subsection 27-53.1-4A, if positive consent to, or rejection of, the transfer and assumption has not been received or consent has not been deemed to have occurred under subsection 27-53.1-5B of this section, the transferring company shall send to the policyholder a second and final notice of transfer as specified in subsection 27-53.1-4A. If the policyholder does not accept or reject the transfer during the one (1) month period immediately following the date on which the transferring insurer mails the second and final notice of transfer, the policyholder's consent will be deemed to have occurred and novation of the contract will be effected. With respect to the home service business, or any other business not using premium notices, the twenty-four (24) and one (1) month periods shall be measured from the date of delivery of the notice of transfer pursuant to subsection 27-53.1-4A(1).

(D) The transferring insurer will be deemed to have received the response card on the date it is postmarked. A policyholder may also send its response card by facsimile or other electronic transmission or by registered mail, express delivery or courier service, in which case the response card shall be deemed to have been received by the assuming insurer on the date of actual receipt by the transferring insurer. ADD}

{ADD 27-53.1-6. Effect of consent. -- ADD} {ADD If a policyholder consents to the transfer pursuant to section 27-53.1-5 or if the transfer is effected under section 27-53.1-7, there shall be a novation of the contract of insurance subject to the assumption reinsurance agreement with the result that the transferring insurer shall thereby be relieved of all insurance obligations and/or risks transferred under the assumption reinsurance agreement and the assuming insurer shall become directly and solely liable to the policyholder for those insurance obligations and/or risks. ADD}

{ADD 27-53.1-7. Commissioner's discretion. -- ADD} {ADD If an insurer domiciled in this state or in a jurisdiction having a substantially similar law is deemed by the domiciliary commissioner to be in hazardous financial condition or an administrative proceeding has been instituted against it for the purpose of reorganizing or conserving the insurer, and the transfer of the obligations and/or risks on contracts of insurance issued to or owned by residents of this state is in their best interest as determined by the Rhode Island commissioner, a transfer and novation may be effected notwithstanding the provisions of this act. This may include a form of implied consent and adequate notification to the policyholder of the circumstances requiring the transfer as approved by the commissioner. ADD}

{ADD 27-53.1-8. Notice of transfer. -- ADD}

{ADD IMPORTANT: THIS NOTICE AFFECTS YOUR CONTRACT RIGHTS. PLEASE READ IT CAREFULLY. ADD}

{ADD Transfer of Policy ADD}

{ADD The (ABC Insurance Company) has agreed to replace us as your insurer under (insert policy/certificate name and number) effective (insert date). The (ABC Insurance Company's) principal place of business is (insert address) and certain financial information concerning both companies is attached, including (1) ratings for the last five years, if available, or for such lesser period as is available from two nationally recognized insurance rating services; (2) balance sheets for the previous three (3) years, if available, or for such lesser period as is available and as of the date of the most recent quarterly statement; (3) a copy of the Management's Discussion and Analysis that was filed as a supplement to the previous year's annual statement; and (4) an explanation of the reason for the transfer. You may obtain additional information concerning (ABC Insurance Company) from reference materials in your local library or by contacting your insurance Commissioner at (insert address and phone number).

The (ABC Insurance company) is licensed to write this coverage in your state. The Commissioner of Insurance in your state has reviewed the potential effect of the proposed transaction, and has approved the transaction. ADD}

{ADD Your Rights ADD}

{ADD You may choose to consent to or reject the transfer of your policy to (ABC Insurance Company). If you want your policy transferred, you may notify us in writing by signing and returning the enclosed pre-addressed, postage-paid card or by writing to us at: ADD}

{ADD (Insert name, address and facsimile number of contact person.) ADD}

{ADD Payment of your premium to the assuming company will also constitute acceptance of the transaction. However, a method will be provided to allow you to pay the premium while reserving the right to reject the transfer.

If you reject the transfer, you may keep your policy with us or exercise any option under your policy. If we do not receive a written rejection you will, as a matter of law, have consented to the transfer. However, before this consent is final you will be provided a second notice of the transfer twenty-four (24) months from now. After the second notice is provided, you will have one (1) month to reply. If you have paid your premium to the (ABC Insurance Company), without reserving your right to reject the transfer, you will not receive a second notice. ADD}

{ADD Effect of Transfer ADD}

{ADD If you accept this transfer, (ABC Insurance Company) will be your insurer. It will have direct responsibility to you for the payment of all claims, benefits and for all other policy obligations. We will no longer have any obligations to you. ADD}

{ADD If you accept this transfer, you should make all premium payments and claims submissions to (ABC Insurance Company) and direct all questions to (ABC Insurance Company). ADD}

{ADD If you have any further questions about this agreement, you may contact (XYZ Insurance) or (ABC Insurance). ADD}

{ADD For your convenience, we have enclosed a pre-addressed postage-paid response card. Please take time now to read the enclosed notice and complete and return the response card to us. ADD}

{ADD (Notice Date) ADD}

Name:_______________________________________________________________

Street Address:_____________________________________________________

City, State, Zip:___________________________________________________

SECTION 22. Section 9-17-5.1 of the General Laws in Chapter 9-17 entitled "Witnesses" is hereby amended to read as follows:

9-17-5.1. Subpoena for production of documentary evidence. -- (A) When a subpoena for the production of books, papers, documents, or tangible things is served on a federal or state agency, public utility, national bank, {ADD insurance company, ADD} or financial institution or a public or private institution of higher education organized under state or federal laws, it shall be deemed a sufficient response to such subpoena if the employee of said entity charged with the responsibility of being custodian of the original records promptly provides the attorney for the party causing service of the subpoena, copies of all documents requested by the subpoena. All responses to said subpoena shall contain a certificate which shall be signed before a notary public by the employee of said entity charged with the responsibility of being custodian of the records and shall include a legend substantially to the following effect: "The copies of records for which this certification is made are true and complete reproductions of the original or microfilmed records which are in the possession of (name of entity). The original records were made in the regular course of business, and it was the regular course of (name of entity) to make such records at or near the time of the matter recorded. This certification is given pursuant to Rhode Island general laws section 9-17-5.1 by the custodian of the records in lieu of his or her personal appearance."

(B) Use of photostatic copies -- Originals held available. Documents or records of any federal or state agency, public utility, national bank, or financial institution organized under state or federal laws, or a public or private institution of higher education or of a hospital that are susceptible to photostatic reproduction may be proved as to foundation, identity and authenticity without any preliminary testimony, by use of legible and durable copies, certified in the manner provided in subsection (A) above by the employee of the said entity charged with the responsibility of being custodian of the originals thereof. Said copies may be used in any trial, hearing, deposition or any other judicial or administrative action or proceeding, whether civil or criminal, in lieu of the original documents or records which, however, said entity shall hold available for inspection and comparison by the court, tribunal or hearing officer and by the parties and their attorneys of record.

(C) Inability to Comply with Subpoena -- In the event any of said entities are unable to provide the documents requested in the subpoena due to the timeliness of the service of the subpoena or for other legal reasons, then the employee charged with the responsibility of being custodian of the records for said entity shall set forth in the certificate required hereunder the specific reasons for the noncompliance, the time of service of the subpoena, and if appropriate the time anticipated in complying with the subpoena.

SECTION 23. Section 27-8-16 of the General Laws entitled "Casualty Insurance Generally" is hereby repealed in its entirety.

27-8-16. Standards and guidelines. -- Every insurer writing automobile insurance in this state shall file with the department of business regulation its underwriting standards and guidelines consistent with regulations to be developed by the director of business regulations. Once filed, companies shall file any changes in such standards or guidelines within thirty (30) days after a revision.

SECTION 24. This act shall take effect upon passage.