Chapter 026

2011 -- S 0508 SUBSTITUTE A

Enacted 05/27/11

 

A N A C T

RELATING TO INSURANCE -- INSURANCE HOLDING COMPANY SYSTEMS

 

     Introduced By: Senators Bates, and Miller

     Date Introduced: March 10, 2011

 

It is enacted by the General Assembly as follows:

 

     SECTION 1. Chapter 27-35 of the General Laws entitled "Insurance Holding Company

Systems" is hereby amended by adding thereto the following section:

 

     27-35-5.5. Supervisory colleges. Ė (a) Power of the Commissioner. With respect to any

insurer registered under section 27-35-3, and in accordance with subsection (c) below, the

commissioner shall also have the power to participate in a supervisory college for any domestic

insurer that is part of an insurance holding company system with international operations in order

to determine compliance by the insurer with this chapter. The powers of the commissioner with

respect to supervisory colleges include, but are not limited to, the following:

     (1) Initiating the establishment of a supervisory college;

     (2) Clarifying the membership and participation of other supervisors in the supervisory

college;

     (3) Clarifying the functions of the supervisory college and the role of other regulators,

including the establishment of a group-wide supervisor;

     (4) Coordinating the ongoing activities of the supervisory college, including planning

meetings, supervisory activities, and processes for information sharing; and

     (5) Establishing a crisis management plan.

     (b) Expenses. Each registered insurer subject to this section shall be liable for and shall

pay the reasonable expenses of the commissionerís participation in a supervisory college in

accordance with subsection (c) below, including reasonable travel expenses. For purposes of this

section, a supervisory college may be convened as either a temporary or permanent forum for

communication and cooperation between the regulators charged with the supervision of the

insurer or its affiliates, and the commissioner may establish a regular assessment to the insurer for

the payment of these expenses.

     (c) Supervisory College. In order to assess the business strategy, financial position, legal

and regulatory position, risk exposure, risk management and governance processes, and as part of

the examination of individual insurers in accordance with section 27-35-5, the commissioner may

participate in a supervisory college with other regulators charged with supervision of the insurer

or its affiliates, including other state, federal and international regulatory agencies. The

commissioner may enter into agreements in accordance with subsection 27-35-6(c) providing the

basis for cooperation between the commissioner and the other regulatory agencies, and the

activities of the supervisory college. Nothing in this section shall delegate to the supervisory

college the authority of the commissioner to regulate or supervise the insurer or its affiliates

within its jurisdiction.

 

     SECTION 2. Sections 27-35-1, 27-35-2, 27-35-2.5, 27-35-3, 27-35-4, 27-35-5, 27-35-6,

27-35-9 and 27-35-10 of the General Laws in Chapter 27-35 entitled "Insurance Holding

Company Systems" are hereby amended to read as follows:

 

     27-35-1. Definitions. -- (a) "Affiliate." An "affiliate" of, or person "affiliated" with, a

specific person, is a person that directly, or indirectly through one or more intermediaries

controls, or is controlled by, or is under common control with, the person specified. An "affiliate"

does not include a protected cell of a protected cell company organized under the Protected Cell

Companies Act, chapter 64 of this title.

      (b) "Commissioner." The term "commissioner" means the director of the department of

business regulation and any assistant to the director designated and authorized by him or her

while acting under that designation.

      (c) "Control." The term "control" (including the terms "controlling," "controlled by" and

"under common control with"), means the possession, direct or indirect, of the power to direct or

cause the direction of the management and policies of a person, whether through the ownership of

voting securities, by contract other than a commercial contract for goods or management services,

or otherwise, unless the power is the result of an official position with or corporate office held by

the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls,

holds with the power to vote, or holds proxies representing, ten percent (10%) or more of the

voting securities of any other person. This presumption may be rebutted by a showing made in

the manner provided by section 27-35-3(i) 27-35-3(k) that control does not exist in fact. The

commissioner may determine, after furnishing all persons in interest notice and opportunity to be

heard and making specific findings of fact to support the determination, that control exists in fact,

notwithstanding the absence of a presumption to that effect.

      (d) "Insurance holding company system." An "insurance holding company system"

consists of two (2) or more affiliated persons, one or more of which is an insurer.

      (e) "Insurer." The term "insurer" means any person or persons or corporation, partnership

or company authorized by the laws of this state to transact the business of insurance in this state,

including entities organized or authorized to transact business in this state pursuant to chapters

19, 20, 20.1, 20.2, 20.3, and 41 of this title, except that it shall not include: (1) agencies,

authorities, or instrumentalities of the United States, its possessions and territories, the

Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a

state. ; or

      (2) Fraternal benefit societies.

      (f) "NAIC" means the National Association of Insurance Commissioners. ďEnterprise

Risk.Ē ďEnterprise RiskĒ means any activity, circumstance, event or series of events involving

one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material

adverse effect upon the financial condition or liquidity of the insurer or its insurance holding

company system as a whole, including, but not limited to, anything that would cause the insurerís

risk-based capital to fall into company action level as set forth in chapters 27-4.6 and 27-4.7 or

would cause the insurer to be in a hazardous financial condition as set forth in chapter 27-14.2

     (g) ďNAICĒ means the national association of insurance commissioners.

      (g)(h) "Person." A "person" is an individual, a corporation, a limited liability company, a

partnership, an association, a joint stock company, a trust, an unincorporated organization, or any

similar entity or any combination of the foregoing acting in concert, but shall not include any

joint venture partnership exclusively engaged in owning, managing, leasing or developing real or

tangible personal property.

      (h)(i) "Securityholder." A "securityholder" of a specified person is one who owns any

security of such person, including common stock, preferred stock, debt obligations, and any other

security convertible into or evidencing the right to acquire any of the foregoing.

     (i)(j) "Subsidiary." A "subsidiary" of a specified person is an affiliate controlled by such

person directly, or indirectly through one or more intermediaries.

      (j)(k) "Voting security." The term "voting security" shall include any security convertible

into or evidencing a right to acquire a voting security.

 

     27-35-2. Acquisition of control of or merger with domestic insurer. -- (a) Filing

Requirements. - (1) No person other than the issuer shall make a tender offer for or a request or

invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire,

or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the

consummation thereof, such person would, directly or indirectly (or by conversion or by exercise

of any right to acquire) be in control of the insurer, and no person shall enter into an agreement to

merge with or otherwise to acquire control of a domestic insurer or any person controlling a

domestic insurer unless, at the time the offer, request or invitation is made or the agreement is

entered into, or prior to the acquisition of the securities if no offer or agreement is involved, such

person has filed with the commissioner and has sent to the insurer, a statement containing the

information required by this section and the offer, request, invitation, agreement or acquisition

has been approved by the commissioner in the manner prescribed in this chapter;

     (2) For purposes of this section, any controlling person of a domestic insurer seeking to

divest its controlling interest in the domestic insurer, in any manner, shall file with the

commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least

thirty (30) days prior to the cessation of control. The commissioner shall determine those

instances in which the party(ies) seeking to divest or to acquire a controlling interest in an insurer

will be required to file for and obtain approval of the transaction. The information shall remain

confidential until the conclusion of the transaction unless the commissioner, in his or her

discretion, determines that confidential treatment will interfere with enforcement of this section.

If the statement referred to in subdivision (a)(1) of this section is otherwise filed, this paragraph

shall not apply.

     (3) With respect to a transaction subject to this section, the acquiring person must also

file a pre-acquisition notification with the commissioner, which shall contain the information set

forth in subdivision 27-35-2.5(c)(1). A failure to file the notification may be subject to penalties

specified in subdivision 27-35-2.5(e)(3).

      (2)(4) For the purposes of this section, a domestic insurer shall include any person

controlling a domestic insurer unless the person, as determined by the commissioner, is either

directly or through its affiliates primarily engaged in business other than the business of

insurance. However, the person shall file a pre-acquisition notification with the commissioner

containing the information set forth in subdivision 27-35-2.5(c)(1) sixty (60) days prior to the

proposed effective date of the acquisition. Failure to file is subject to subdivision 27-35-2.5(e)(3).

For the purposes of this section, "person" shall not include any securities broker holding, in the

usual and customary broker's function, less than twenty percent (20%) of the voting securities of

an insurance company or of any person which controls an insurance company.

      (b) Content of Statement. - (1) The statement to be filed with the commissioner under

this section shall be made under oath or affirmation and shall contain the following information:

      (i) The name and address of each person by whom or on whose behalf the merger or

other acquisition of control referred to in subsection (a) of this section is to be effected,

(hereinafter called the "acquiring party"), and:

      (A) If the person is an individual, his or her principal occupation and all offices and

positions held during the past five (5) years, and any conviction for crimes other than minor

traffic violations during the past ten (10) years;

      (B) If the person is not an individual, a report of the nature of its business operations

during the past five (5) years or for the lesser period as the person and any predecessors shall

have been in existence; an informative description of the business intended to be done by the

person and the person's subsidiaries, and a list of all individuals who are or who have been

selected to become directors or executive officers of the person, or who perform or will perform

functions appropriate to such positions. The list shall include for each individual the information

required by subparagraph (A) of this subdivision;

      (ii) The source, nature and amount of the consideration used or to be used in effecting

the merger or other acquisition of control, a description of any transaction where funds were or

are to be obtained for any such purpose, (including any pledge of the insurer's stock, or stock of

any of its subsidiaries or controlling affiliates), and the identity of persons furnishing the

consideration; provided, however, that where a source of the consideration is a loan made in the

lender's ordinary course of business, the identity of the lender shall remain confidential, if the

person filing the statement so requests;

      (iii) Fully audited financial information as to the earnings and financial condition of each

acquiring party for the preceding five (5) fiscal years of each acquiring party (or for such lesser

period as the acquiring party and any predecessors shall have been in existence) and similar

unaudited information as of a date not earlier than ninety (90) days prior to the filing of the

statement;

      (iv) Any plans or proposals which each acquiring party may have to liquidate the insurer,

to sell its assets or merge or consolidate it with any person, or to make any other material change

in its business or corporate structure or management;

      (v) The number of shares of any security referred to in subsection (a) of this section

which each acquiring party proposes to acquire, and the terms of the offer, request, invitation,

agreement, or acquisition referred to in subsection (a) of this section, and a statement as to the

method by which the fairness of the proposal was arrived at;

      (vi) The amount of each class of any security referred to in subsection (a) of this section

which is beneficially owned or concerning which there is a right to acquire beneficial ownership

by each acquiring party;

      (vii) A full description of any contracts, arrangements, or understanding with respect to

any security referred to in subsection (a) of this section in which any acquiring party is involved,

including, but not limited to transfer of any of the securities, joint ventures, loan or option

arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits,

division of losses or profits, or the giving or withholding of proxies. The description shall identify

the persons with whom the contracts, arrangements, or understandings have been entered into;

      (viii) A description of the purchase of any security referred to in subsection (a) of this

section during the twelve (12) calendar months preceding the filing of the statement by any

acquiring party, including the dates of purchase, names of the purchasers, and consideration paid

or agreed to be paid;

      (ix) A description of any recommendations to purchase any security referred to in

subsection (a) of this section made during the twelve (12) calendar months preceding the filing of

the statement by any acquiring party, or by anyone based upon interviews or at the suggestion of

the acquiring party;

      (x) Copies of all tender offers for, requests or invitations for tenders of, exchange offers

for, and agreements to acquire or exchange any securities referred to in subsection (a) of this

section, and (if distributed) of additional soliciting material relating to them;

      (xi) The terms of any agreement, contract, or understanding made with or proposed to be

made with any broker-dealer as to solicitation of securities referred to in subsection (a) of this

section for tender, and the amount of any fees, commissions, or other compensation to be paid to

broker-dealers with regard thereto; and

     (xii) An agreement by the person required to file the statement referred to in subsection

(a) of this section that it will provide the annual report, specified in subsection 27-35-3(l), for so

long as control exists;

     (xiii) An acknowledgement by the person required to file the statement referred to in

subsection (a) of this section that the person and all subsidiaries within its control in the insurance

holding company system will provide information to the commissioner upon request as necessary

to evaluate enterprise risk to the insurer; and

     (xii)(xiv) Such additional information that the commissioner may by rule or regulation

prescribe as necessary or appropriate for the protection of policyholders and securityholders of

the insurer or in the public interest;

      (2) If the person required to file the statement referred to in subsection (a) of this section

is a partnership, limited partnership, syndicate, or other group, the commissioner may require that

the information called for by paragraphs (1)(i) -- (1)(xii) (1)(xiv) of this subsection shall be given

with respect to each partner of the partnership or limited partnership, each member of the

syndicate or group, and each person who controls the partner or member. If any partner, member,

or person is a corporation, or the person required to file the statement referred to in subsection (a)

of this section is a corporation, the commissioner may require that the information called for by

paragraphs (1)(i) -- (1)(xii) (1)(xiv) of this subsection shall be given with respect to the

corporation, each officer and director of the corporation, and each person who is directly or

indirectly the beneficial owner of more than ten percent (10%) of the outstanding voting

securities of the corporation;

      (3) If any material change occurs in the facts set forth in the statement filed with the

commissioner and sent to the insurer pursuant to this section, an amendment setting forth the

change, together with copies of all documents and other material relevant to the change, shall be

filed with the commissioner and sent to the insurer within two (2) business days after the person

learns of the change.

      (c) Alternative filing materials. - If any offer, request, invitation, agreement or

acquisition referred to in subsection (a) of this section is proposed to be made by means of a

registration statement under the Securities Act of 1933 or in circumstances requiring the

disclosure of similar information under the Securities Exchange Act of 1934 or under a state law

requiring similar registration or disclosure, the person required to file the statement referred to in

subsection (a) of this section may utilize the documents in furnishing the information called for

by that statement.

      (d) Approval by commissioner: Hearings. - (1) The commissioner shall approve any

merger or other acquisition of control referred to in subsection (a) of this section unless, after a

public hearing held on the merger or acquisition, at the discretion of the commissioner or upon

the request of the acquiring party, the insurer or any other interested party, he or she finds that

any of the following conditions exist:

      (i) After the change of control the domestic insurer referred to in subsection (a) of this

section would not be able to satisfy the requirements for the issuance of a license to write the line

or lines of insurance for which it is presently licensed;

      (ii) The effect of the merger or other acquisition of control would be substantially to

lessen competition in insurance in this state or tend to create a monopoly. In applying the

competitive standard in this subparagraph:

      (A) The informational requirements of subdivision 27-35-2.5(c)(1) and the standards of

subdivision 27-35-2.5(d)(2) shall apply;

      (B) The merger or other acquisition shall not be disapproved if the commissioner finds

that any of the situations meeting the criteria provided by subdivision 27-35-2.5(d)(3) exist; and

      (C) The commissioner may condition the approval of the merger or other acquisition on

the removal of the basis of disapproval within a specified period of time;

      (iii) The financial condition of any acquiring party is such as might jeopardize the

financial stability of the insurer, or prejudice the interest of its policyholders;

      (iv) The plans or proposals which the acquiring party has to liquidate the insurer, sell its

assets or consolidate or merge it with any person, or to make any other material change in its

business or corporate structure or management, are unfair and unreasonable to policyholders of

the insurer and not in the public interest;

      (v) The competence, experience, and integrity of those persons who would control the

operation of the insurer are such that it would not be in the interest of policyholders of the insurer

and of the public to permit the merger or other acquisition of control; or

      (vi) The acquisition is likely to be hazardous or prejudicial to the insurance-buying

public.

      (2) The public hearing referred to in subdivision (1) of this subsection, if required, shall

be held within thirty (30) days after the statement required by subsection (a) of this section is

filed, and at least twenty (20) days notice of the public hearing shall be given by the

commissioner to the person filing the statement. Not less than seven (7) days notice of the public

hearing shall be given by the person filing the statement to the insurer and to such other persons

as may be designated by the commissioner. The commissioner shall make a determination within

a the sixty (60) day period preceding the effective date of the proposed transaction. At the

hearing, the person filing the statement, the insurer, any person to whom notice of hearing was

sent, and any other person whose interest may be affected shall have the right to present evidence,

examine and cross examine witnesses, and offer oral and written arguments and in connection

therewith shall be entitled to conduct discovery proceedings in the same manner as is presently

allowed in the superior court of this state. All discovery proceedings shall be concluded not later

than three (3) days prior to the commencement of the public hearing. ;

     (3) If the proposed acquisition of control will require the approval of more than one

commissioner, the public hearing referred to in subdivision (2) of this subsection may be held on

a consolidated basis upon request of the person filing the statement referred to in subsection (a) of

this section. Such person shall file the statement referred to in subsection (a) of this section with

the national association of insurance commissioners (NAIC) within five (5) days of making the

request for a public hearing. A commissioner may opt out of a consolidated hearing, and shall

provide notice to the applicant of the opt-out within ten (10) days of the receipt of the statement

referred to in subsection (a) of this section. A hearing conducted on a consolidated basis shall be

public and shall be held within the United States before the commissioners of the states in which

the insurers are domiciled. Such commissioners shall hear and receive evidence. A commissioner

may attend such hearing, in person or by telecommunication.

      (3)(4) In connection with a change of control of a domestic insurer, any determination by

the commissioner that the person acquiring control of the insurer shall be required to maintain or

restore the capital of the insurer to the level required by the laws and regulations of this state shall

be made not later than sixty (60) days after the date of notification of the change in control

submitted pursuant to section 27-35-2(a).

      (4)(5) The commissioner may retain at the acquiring person's expense any attorneys,

actuaries, accountants and other experts not otherwise a part of the commissioner's staff as may

be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of

control.

      (e) Exemptions. - The provisions of this section shall not apply to any offer, request,

invitation, agreement or acquisition which the commissioner by order shall exempt from this

section as not having been made or entered into for the purpose and not having the effect of

changing or influencing the control of a domestic insurer, or as otherwise not comprehended

within the purposes of this section.

      (f) Violations. - The following shall be violations of this section:

      (1) The failure to file any statement, amendment, or other material required to be filed

pursuant to subsection (a) or (b) of this section; or

      (2) The effectuation or any attempt to effectuate an acquisition of control of, divestiture

of, or merger with, a domestic insurer unless the commissioner has given his or her approval.

      (g) Jurisdiction; consent to service of process. - The courts of this state are hereby vested

with jurisdiction over every person not resident, domiciled, or authorized to do business in this

state who files a statement with the commissioner under this section, and over all actions

involving such person arising out of violations of this section, and each such person shall be

deemed to have performed acts equivalent to and constituting an appointment by the person of the

commissioner to be his true and lawful attorney upon whom may be served all lawful process in

any action, suit, or proceeding arising out of violations of this section. Copies of all lawful

process shall be served on the commissioner and transmitted by registered or certified mail by the

commissioner to the person at his or her last known address.

 

     27-35-2.5. Acquisitions involving insurers not otherwise covered. -- (a) Definitions. -

The following definitions shall apply for the purposes of this section only:

      (1) "Acquisition" means any agreement, arrangement or activity the consummation of

which results in a person acquiring directly or indirectly the control of another person, and

includes but is not limited to, the acquisition of voting securities, the acquisition of assets, bulk

reinsurance and mergers.

      (2) An "involved insurer" includes an insurer which either acquires or is acquired, is

affiliated with an acquirer or acquired, or is the result of a merger.

      (b) Scope. - (1) Except as exempted in paragraph (2) of this subsection, this section

applies to any acquisition in which there is a change in control of an insurer authorized to do

business in this state.

      (2) This section shall not apply to the following:

      (a) An acquisition subject to approval or disapproval by the commissioner pursuant to

section 27-35-2;

      (b)(a) A purchase of securities solely for investment purposes so long as the securities

are not used by voting or otherwise to cause or attempt to cause the substantial lessening of

competition in any insurance market in this state. If a purchase of securities results in a

presumption of control under subsection 27-35-1(c), it is not solely for investment purposes

unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or

affirmatively finds that control does not exist and the disclaimer action or affirmative finding is

communicated by the domiciliary commissioner to the commissioner of this state;

      (c)(b) The acquisition of a person by another person when both persons are neither

directly nor through affiliates primarily engaged in the business of insurance, if pre-acquisition

notification is filed with the commissioner in accordance with subsection 27-35-2.5(c)

subdivision 27-35-2.5(c)(1) thirty (30) days prior to the proposed effective date of the acquisition.

However, such pre-acquisition notification is not required for exclusion from this section if the

acquisition would otherwise be excluded from this section by any other subparagraph of

subdivision 27-35-2.5(b)(2);

      (d)(c) The acquisition of already affiliated persons;

      (e)(d) An acquisition if, as an immediate result of the acquisition,

      (i) In no market would the combined market share of the involved insurers exceed five

percent (5%) of the total market,

      (ii) There would be no increase in any market share, or

      (iii) In no market would

      (I) The combined market share of the involved insurers exceed twelve percent (12%) of

the total market, and

      (II) The market share increase by more than two percent (2%) of the total market.

      For the purpose of section (2)(e) (d), a market means direct written insurance premium in

this state for a line of business as contained in the annual statement required to be filed by

insurers licensed to do business in this state;

      (f)(e) An acquisition for which a pre-acquisition notification would be required pursuant

to this section due solely to the resulting effect on the ocean marine insurance line of business;

      (g)(f) An acquisition of an insurer whose domiciliary commissioner affirmatively finds

that the insurer is in failing condition; there is a lack of feasible alternative to improving such

condition; the public benefits of improving the insurer's condition through the acquisition exceed

the public benefits that would arise from not lessening competition; and the findings are

communicated by the domiciliary commissioner to the commissioner of this state.

      (c) Pre-acquisition Notification; Waiting Period. - An acquisition covered by subsection

27-35-2.5(b) may be subject to an order pursuant to subsection 27-35-2.5(e) unless the acquiring

person files a pre-acquisition notification and the waiting period has expired. The acquired person

may file a pre-acquisition notification. The commissioner shall give confidential treatment to

information submitted under this subsection in the same manner as provided in section 27-35-6.

      (1) The pre-acquisition notification shall be in such form and contain such information as

prescribed by the NAIC relating to those markets which, under subdivision 27-35-2.5(b)(2)(e) 27-

35-2.5(b)(2)(d), cause the acquisition not to be exempted from the provisions of this section. The

commissioner may require such additional material and information as deemed necessary to

determine whether the proposed acquisition, if consummated, would violate the competitive

standard of subsection 27-35-2.5(d). The required information may include an opinion of an

economist as to the competitive impact of the acquisition in this state accompanied by a summary

of the education and experience of such person indicating his or her ability to render an informed

opinion.

      (2) The waiting period required shall begin on the date of receipt of the commissioner of

a pre-acquisition notification and shall end on the earlier of the thirtieth day after the date of

receipt, or termination of the waiting period by the commissioner. Prior to the end of the waiting

period, the commissioner on a one-time basis may require the submission of additional needed

information relevant to the proposed acquisition, in which event the waiting period shall end on

the earlier of the thirtieth day after receipt of the additional information by the commissioner or

termination of the waiting period by the commissioner.

      (d) Competitive Standard.

      (1) The commissioner may enter an order under subdivision 27-35-2.5(e)(1) with respect

to an acquisition if there is substantial evidence that the effect of the acquisition may be

substantially to lessen competition in any line of insurance in this state or tend to create a

monopoly or if the insurer fails to file adequate information in compliance with subsection 27-35-

2.5(c).

      (2) In determining whether a proposed acquisition would violate the competitive

standard of paragraph (1) of this subsection, the commissioner shall consider the following:

      (a) Any acquisition covered under subsection 27-35-2.5(b) involving two (2) or more

insurers competing in the same market is prima facie evidence of violation of the competitive

standards.

      (i) If the market is highly concentrated and the involved insurers possess the following

shares of the market:

     Insurer A ††† Insurer B

     4% †††††††††††† 4% or more

     10% †††††††††† 2% or more

     15% †††††††††† 1% or more

      (ii) Or, if the market is not highly concentrated and the involved insurers possess the

following shares of the market:

     Insurer A ††† Insurer B

     5% †††††††††††† 5% or more

     10% †††††††††† 4% or more

     15% †††††††††† 3% or more

     19% †††††††††† 1% or more

      A highly concentrated market is one in which the share of the four (4) largest insurers is

seventy-five percent (75%) or more of the market. Percentages not shown in the tables are

interpolated proportionately to the percentages that are shown. If more than two (2) insurers are

involved, exceeding the total of the two columns in the table is prima facie evidence of violation

of the competitive standard in paragraph (1) of this subsection. For the purpose of this item, the

insurer with the largest share of the market shall be deemed to be Insurer A.

      (b) There is a significant trend toward increased concentration when the aggregate

market share of any grouping of the largest insurers in the market, from the two (2) largest to the

eight (8) largest, has increased by seven percent (7%) or more of the market over a period of time

extending from any base year five (5) to ten (10) years prior to the acquisition up to the time of

the acquisition. Any acquisition or merger covered under subsection 27-35-2.5(b) involving two

(2) or more insurers competing in the same market is prima facie evidence of violation of the

competitive standard in paragraph (1) of this subsection if:

      (i) There is a significant trend toward increased concentration in the market;

      (ii) One of the insurers involved is one of the insurers in a grouping of large insurers

showing the requisite increase in the market share; and

      (iii) Another involved insurer's market is two percent (2%) or more.

      (c) For the purposes of subdivision 27-35-2.5(d)(2):

      (i) The term "insurer" includes any company or group of companies under common

management, ownership or control;

      (ii) The term "market" means the relevant product and geographical markets. In

determining the relevant product and geographical markets, the commissioner shall give due

consideration to, among other things, the definitions or guidelines, if any, promulgated by the

NAIC and to information, if any, submitted by parties to the acquisition. In the absence of

sufficient information to the contrary, the relevant product market is assumed to be the direct

written insurance premium for a line of business, such line being that used in the annual statement

required to be filed by insurers doing business in this state, and the relevant geographical market

is assumed to be this state;

      (iii) The burden of showing prima facie evidence of violation of the competitive standard

rests upon the commissioner.

      (d) Even though an acquisition is not prima facie violative of the competitive standard

under paragraphs (2)(a) and (2)(b) of this subsection, the commissioner may establish the

requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition

is prima facie violative of the competitive standard under sections (2)(a) and (2)(b) of this

subsection, a party may establish the absence of the requisite anticompetitive effect based upon

other substantial evidence. Relevant factors in making a determination under this subparagraph

include, but are not limited to, the following: market shares, volatility of ranking of market

leaders, number of competitors, concentration, trend of concentration in the industry, and ease of

entry and exit into the market.

      (3) An order may not be entered under subdivision 27-35-2.5(e)(1) if:

      (a) The acquisition will yield substantial economies of scale or economies in resource

utilization that cannot be feasibly achieved in any other way, and the public benefits which would

arise from such economies exceed the public benefits which would arise from not lessening

competition; or

      (b) The acquisition will substantially increase the availability of insurance, and the

public benefits of the increase exceed the public benefits which would arise from not lessening

competition.

      (e) Orders and Penalties.

      (1) (a) If an acquisition violates the standards of this section, the commissioner may

enter an order:

      (i) Requiring an involved insurer to cease and desist from doing business in this state

with respect to the line or lines of insurance involved in the violation; or

      (ii) Denying the application of an acquired or acquiring insurer for a license to do

business in this state.

      (b) Such an order shall not be entered unless:

      (i) There is a hearing;

      (ii) Notice of the hearing is issued prior to the end of the waiting period and not less than

fifteen (15) days prior to the hearing; and

      (iii) The hearing is concluded and the order is issued no later than sixty (60) days after

the date of the filing of the pre-acquisition notification with the commissioner.

      Every order shall be accompanied by a written decision of the commissioner setting forth

findings of fact and conclusions of law.

      (c) An order pursuant to this paragraph shall not apply if the acquisition is not

consummated.

      (2) Any person who violates a cease and desist order of the commissioner under

paragraph (1) and while the order is in effect may, after notice and hearing and upon order of the

commissioner, be subject to one or more of the penalties set forth in section 42-14-16:

     (3) Any insurer or other person who fails to make any filing required by this section, and

who also fails to demonstrate a good faith effort to comply with any filing requirement, shall be

subject to one or more penalties set forth in section 42-14-16.

      (f) Inapplicable Provisions. - Subsections 27-35-8(b), 27-35-8(c), and 27-35-10 do not

apply to acquisitions covered under subsection 27-35-2.5(b).

 

     27-35-3. Registration of insurers. -- (a) Registration. - Every insurer which is

authorized to do business in this state and which is a member of an insurance holding company

system shall register with the commissioner, except a foreign insurer subject to registration

requirements and standards adopted by statute or regulation in the jurisdiction of its domicile

which are substantially similar to those contained in:

      (1) this section;

      (2) section 27-35-4(a)(1), (b) and (d) and

      (3) Either subdivision 27-35-4(a)(2) or a provision such as the following: Each registered

insurer shall keep current the information required to be disclosed in its registration statement by

reporting all material changes or additions within fifteen (15) days after the end of the month in

which it learns of each change or addition.

      Any insurer which is subject to registration under this section shall register fifteen (15)

days after it becomes subject to registration, and annually thereafter by March 1 of each year for

the previous calendar year, unless the commissioner for good cause shown extends the time for

registration, and then within the extended time. The commissioner may require any insurer

authorized to do business in the state which is a member of a an insurance holding company

system and which is not subject to registration under this section to furnish a copy of the

registration statement, the summary specified in subsection (c) of this section or other information

filed by the insurance company with the insurance regulatory authority of domiciliary

jurisdiction.

      (b) Information and form required. - Every insurer subject to registration shall file a

registration statement with the commissioner on a form and in a format prescribed by the NAIC,

which shall contain the following current information:

      (1) The capital structure, general financial condition, ownership, and management of the

insurer and any person controlling the insurer;

      (2) The identity and relationship of every member of the insurance holding company

system;

      (3) The following agreements in force and transactions currently outstanding or which

have occurred during the last calendar year between the insurer and its affiliates:

      (i) Loans, other investments or purchases, 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 service contracts, service contracts and all cost sharing

arrangements;

      (vi) Reinsurance agreements;

      (vii) Dividends and other distributions to shareholders; and

      (viii) Consolidated tax allocation agreements;

      (4) Any pledge of the insurer's stock, including stock of any subsidiary or controlling

affiliate, for a loan made to any member of the insurance holding company system; and

     (5) If requested by the commissioner, the insurer shall include financial statements of or

within an insurance holding company system, including all affiliates. Financial statements may

include, but are not limited to, annual audited financial statements filed with the U.S. Securities

and Exchange Commission (SEC) pursuant to the Securities Act of 1933, as amended, or the

Securities Exchange Act of 1934, as amended. An insurer required to file financial statements

pursuant to this paragraph may satisfy the request by providing the commissioner with the most

recently filed parent corporation financial statements that have been filed with the SEC;

      (5)(6) 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. ;

     (7) Statements that the insurerís board of directors oversees corporate governance and

internal controls and that the insurerís officers or senior management have approved,

implemented, and continue to maintain and monitor corporate governance and internal control

procedures; and

     (8) Any other information required by the commissioner by rule or regulation.

      (c) Summary of Changes to Registration Statement. - All registration statements shall

contain a summary outlining all items in the current registration statement representing changes

from the prior registration statement.

      (d) Materiality. - No information need be disclosed on the registration statement filed

pursuant to subsection (b) of this section 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, investments or guarantees involving one-half

of one percent (.5%) or less of an insurer's admitted assets as of the thirty-first 31st day of

December next preceding shall not be deemed material for purposes of this section.

      (e) Reporting of Dividends to Shareholders. - Subject to subsection 27-35-4(b), each

registered insurer shall report to the commissioner all dividends and other distributions to

shareholders within fifteen (15) business days following the declaration thereof.

      (f) Information of Insurers. - 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 act.

      (g) Termination of registration. - The commissioner shall terminate the registration of

any insurer that demonstrates that it no longer is a member of an insurance holding company

system.

      (h) Consolidated filing. - The commissioner may require or allow two (2) or more

affiliated insurers subject to registration to file a consolidated registration statement.

      (i) Alternative registration. - The commissioner may allow an insurer that 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.

      (j) Exemptions. - 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 from the provisions of this section.

      (k) Disclaimer. - Any person may file with commissioner a disclaimer of affiliation with

any authorized insurer or a 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

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 a

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.

     A disclaimer of affiliation shall be deemed to have been granted unless the commissioner,

within thirty (30) days following receipt of a complete disclaimer, notifies the filing party that the

disclaimer is disallowed. In the event of disallowance, the disclaiming party may request an

administrative hearing, which shall be granted. The disclaiming party shall be relieved of its duty

to register under this section if approval of the disclaimer has been granted by the commissioner,

or if the disclaimer is deemed to have been approved.

     (l) Enterprise Risk Filing. The ultimate controlling person of every insurer subject to

registration shall also file an annual enterprise risk report. The report shall, to the best of the

ultimate controlling personís knowledge and belief, identify the material risks within the

insurance holding company system that could pose enterprise risk to the insurer. The report shall

be filed with the lead state commissioner of the insurance holding company system as determined

by the procedures within the financial analysis handbook adopted by the national association of

insurance commissioners.

      (l)(m) Violations. - The failure to file a registration statement or any summary of the

registration statement or enterprise risk filing required by this section within the time specified for

the filing shall be a violation of this section.

 

     27-35-4. Standards and management of an insurer within a holding company

system. -- (a) Transactions within a an Insurance Holding Company System. - (1) Transactions

within a an insurance holding company system to which an insurer subject to registration is a

party shall be subject to the following standards:

      (i) The terms shall be fair and reasonable;

     (ii) Agreements for cost sharing and management services shall include such provisions

as required by rule and regulation issued by the commissioner;

      (ii)(iii) Charges or fees for services performed shall be reasonable;

      (iii)(iv) Expenses incurred and payment received shall be allocated to the insurer in

conformity with customary insurance accounting practices consistently applied;

      (iv)(v) The books, accounts, and records of each party to all such transactions shall be so

maintained as to clearly and accurately disclose the nature and details of the transactions

including such accounting information as is necessary to support the reasonableness of the

charges or fees to the respective parties; and

      (v)(vi) The insurer's surplus as regards policyholders following any dividends or

distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding

liabilities and adequate to its financial needs;

      (vi)(vii) The charges or fees for services performed shall be reasonable; and

      (2) The following transactions involving a domestic insurer and any person in its

insurance holding company system, including amendments or modifications of affiliate

agreements previously filed pursuant to this section, which are subject to any materiality

standards contained in subparagraphs (A) through (G) of this subsection, may not be entered into

unless the insurer has notified the commissioner in writing of its intention to enter into the

transaction at least thirty (30) days prior, or such shorter period as the commissioner may permit,

and the commissioner has not disapproved it within that period. The notice for amendments or

modifications shall include the reasons for the change and the financial impact on the domestic

insurer. Informal notice shall be reported, within thirty (30) days after a termination of a

previously filed agreement, to the commissioner for determination of the type of filing required, if

any.

      (A) Sales, purchases, exchanges, loans, extensions of credit, or investments, provided the

transactions are equal to or exceed:

      (i) With respect to nonlife insurers, the lesser of three percent (3%) of the insurer's

admitted assets or twenty-five percent (25%) of surplus as regards policyholders as of the 31st

day of December next preceding; or

      (ii) With respect to life insurers, three percent (3%) of the insurer's admitted assets; as of

the 31st day of December next preceding;

      (B) Loans or extensions of credit to any person who is not an affiliate, where the insurer

makes the loans or extensions of credit with the agreement or understanding that the proceeds of

the transactions, in whole or in substantial part, are to be used to make loans or extensions of

credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the

loans of extensions of credit, provided the transactions are equal to or exceed:

      (i) With respect to nonlife insurers, the lesser of three percent (3%) of the insurer's

admitted assets or twenty-five percent (25%) of surplus as regards policyholders as of the 31st

day of December next preceding;

      (ii) With respect to life insurers, three percent (3%) of the insurer's admitted assets; as of

the 31st day of December next preceding;

      (C) Reinsurance agreements or modifications thereto, including:

     (I) All reinsurance pooling agreements;

     (II) Agreements in which the reinsurance premium or a change in the insurer's liabilities,

or the projected reinsurance premiums or a change in the insurerís liabilities in any of the next

three (3) years, equals or exceeds five percent (5%) of the insurer's surplus as regards

policyholders as of the 31st day of December next preceding, including those agreements which

may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an

agreement or understanding exists between the insurer and nonaffiliate that any portion of those

assets will be transferred to one or more affiliates of the insurer;

      (D) All management agreements, service contracts, tax allocation agreements,

guarantees and all cost sharing arrangements;

     (E) Guarantees when made by a domestic insurer; provided, however, that a guarantee

which is quantifiable as to amount is not subject to the notice requirements of this subsection

unless it exceeds the lesser of one-half of one percent (.5%) of the insurerís admitted assets or ten

percent (10%) of surplus as regards policyholders as of the 31st day of December next preceding.

Further, all guarantees which are not quantifiable as to amount are subject to the notice

requirements of this subsection;     

     (E)(F) Direct or indirect acquisitions or investments in a person that controls the insurer

or in an affiliate of the insurer in an amount which, together with its present holdings in such

investments, exceeds two and one-half percent (2.5%) of the insurer's surplus to policyholders.

Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to section 2

section 27-35-1.5 of this act chapter (or authorized under any other section of this chapter), or in

non-subsidiary insurance affiliates that are subject to the provisions of this act, are exempt from

this requirements; and

      (G) Any material transactions, specified by regulation, which the commissioner

determines may adversely affect the interests of the insurer's policyholders;

      Nothing contained in this paragraph shall be deemed to authorize or permit any

transactions which, in the case of an insurer not a member of the same insurance holding

company system, would be otherwise contrary to law.

      (3) A domestic insurer may not enter into transactions which are part of a plan or series

of like transactions with persons within the insurance holding company system if the purpose of

those separate transactions is to avoid the statutory threshold amount and thus avoid the review

that would occur otherwise. If the commissioner determines that the separate transactions were

entered into over any twelve (12) month period for that purpose, he or she may exercise his or her

authority under section 27-35-9.

      (4) The commissioner, in reviewing transactions pursuant to subsection (b) subdivision

(a)(2) of this section shall consider whether the transactions comply with the standards set forth in

subsection (a) subdivision (a)(1) of this section and whether they may adversely affect the

interests of policyholders.

      (5) The commissioner shall be notified within thirty (30) days of any investment of the

domestic insurer in any one corporation if the total investment in the corporation by the insurance

holding company system exceeds ten percent (10%) of the corporation's voting securities.

      (b) Adequacy of surplus. - For the purposes of this chapter, in determining whether an

insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding

liabilities and adequate to its financial needs, the following factors, among others, shall be

considered:

      (1) The size of the insurer as measured by its assets, capital and surplus, reserves,

premium writings, insurance in force, and other appropriate criteria;

      (2) The extent to which the insurer's business is diversified among the several lines of

insurance;

      (3) The number and size of risks insured in each line of business;

      (4) The extent of the geographical dispersion of the insurer's insured risks;

      (5) The nature and extent of the insurer's reinsurance program;

      (6) The quality, diversification, and liquidity of the insurer's investment portfolio;

      (7) The recent past and projected future trend in the size of the insurer's investment

portfolio;

      (8) The surplus as regards policyholders maintained by other comparable insurers;

      (9) The adequacy of the insurer's reserves; and

      (10) The quality and liquidity of investment in affiliates. The commissioner may treat

this investment as a disallowed asset for the purposes of determining the adequacy of surplus as

regards policyholders whenever in his or her judgment the investment warrants.

      (c) Dividends and other distributions. - (1) No domestic insurer shall pay any

extraordinary dividend or make any other extraordinary distribution to its shareholders until thirty

(30) days after the commissioner has received notice of the declaration thereof and has not within

that period disapproved the payment, or until the commissioner has approved the payment within

the thirty (30) day period;

      (2) For purposes of this section, an "extraordinary dividend or distribution" includes any

dividend or distribution of cash or other property, whose fair market value together with that of

other dividends or distributions made within the preceding twelve (12) months exceeds the lesser

of:

      (i) ten percent (10%) of the insurer's surplus as regards policyholders as of the thirty-first

31st day of December next preceding, ; or

      (ii) the net gain from operations of the insurer, if the insurer is a life insurer, or the net

income, if the insurer is not a life insurer, not including realized capital gains, for the twelve (12)

month period ending the 31st day of December next preceding, but shall not include pro rata

distributions of any class of the insurer's own securities.

      In determining whether a dividend or distribution is extraordinary, an insurer other than

a life insurer may carry forward net income from the previous two (2) calendar years that has not

already been paid out as dividends. This carry forward shall be computed by taking the net

income from the second and third preceding calendar years, not including realized capital gains,

less dividends paid in the second and immediate preceding calendar years;

      (3) Notwithstanding any other provision of law, an insurer may declare an extraordinary

dividend or distribution which is conditional upon the commissioner's approval, and the

declaration shall confer no rights upon shareholders until: (i) the commissioner has approved the

payment of the dividend or distribution or (ii) the commissioner has not disapproved the payment

within the thirty (30) day period referred to in subdivision (1) of this subsection.

      (d) Management of Domestic Insurers Subject to Registration. - All domestic insurers

shall become in compliance and maintain compliance with the provisions of this title addressing

good corporate governance standards section 27-1-2.1, unless otherwise exempted in section 27-

1-2.1.

 

     27-35-5. Examination. -- (a) Power of commissioner. - Subject to the limitation

contained in this section and in addition to the powers which the commissioner has under other

sections of this title relating to the examination of insurers, the commissioner shall also have the

power to examine order any insurer registered under  27-35-3  to produce such records, books, or

other information papers in the possession of the insurer or its affiliates as are  reasonably

necessary to ascertain the financial condition of the insurer or to determine compliance with this

chapter. In the event the insurer fails to comply with the order, the commissioner shall have the

power to examine the affiliates to obtain the information. and its affiliates to ascertain the

financial condition of the insurer, including the enterprise risk to the insurer by the ultimate

controlling party, or by any entity or combination of entities within the insurance holding

company system, or by the insurance holding company system on a consolidated basis.

     (b) Access to books and records.

     (1) The commissioner may order any insurer registered under section 27-35-3 to produce

such records, books, or other information papers in the possession of the insurer or its affiliates as

are reasonably necessary to determine compliance with this chapter.

     (2) To determine compliance with this chapter, the commissioner may order any insurer

registered under section 27-35-3 to produce information not in the possession of the insurer if the

insurer can obtain access to such information pursuant to contractual relationships, statutory

obligations, or other method. In the event the insurer cannot obtain the information requested by

the commissioner, the insurer shall provide the commissioner a detailed explanation of the reason

that the insurer cannot obtain the information and the identity of the holder of information.

Whenever it appears to the commissioner that the detailed explanation is without merit, the

commissioner may require, after notice and hearing, the insurer to pay a penalty for each dayís

delay, or may suspend or revoke the insurerís license.

      (b)(c) Use of consultants. - The commissioner may retain at the registered insurer's

expense such attorneys, actuaries, accountants, and other experts not otherwise a part of the

commissioner's staff as shall be reasonably necessary to assist in the conduct of the examination

under subsection (a) of this section. Any persons so retained shall be under the direction and

control of the commissioner and shall act in a purely advisory capacity.

      (c)(d) Expenses. - Each registered insurer producing for examination records, books and

papers pursuant to subsection (a) of this section shall be liable for and shall pay the expense of the

examination in accordance with applicable laws of this state.

     (e) Compelling Production. In the event the insurer fails to comply with an order, the

commissioner shall have the power to examine the affiliates to obtain the information. The

commissioner shall also have the power to issue subpoenas, to administer oaths, and to examine

under oath any person for purposes of determining compliance with this section. Upon the failure

or refusal of any person to obey a subpoena, the commissioner 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. Every person shall be obliged to attend as a witness at the place

specified in the subpoena, when subpoenaed, anywhere within the state. He or she shall be

entitled to the same fees and mileage, if claimed, as a witness in superior court of this state, which

fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of

witnesses, and their testimony, shall be itemized and charged against, and be paid by, the

company being examined.

 

     27-35-6. Confidential treatment. -- (a) Documents, materials or other information in the

possession or control of the department of business regulation that are obtained by or disclosed to

the commissioner or any other person in the course of an examination or investigation made

pursuant to section 27-35-5, and all information reported pursuant to sections 27-35-2(b)(xii), 27-

35-2(b)(viii), 27-35-3, and 27-35-5 27-35-4, shall be confidential by law and privileged, shall not

be subject to the access of public records act, shall not be subject to subpoena and shall not be

subject to discovery or admissible in evidence in any private civil action. However, the

commissioner is authorized to use the documents, materials or other information in the

furtherance of any regulatory or legal action brought as part of the commissioner's official duties.

The commissioner shall not otherwise make the documents, materials or other information public,

without the prior written consent of the insurer to which it pertains unless the commissioner, after

giving the insurer and its affiliates who would be affected thereby notice and opportunity to be

heard, determines that the interests of policyholders, shareholders, or the public will be served by

the publication thereof, in which event the commissioner may publish all or any part of it in a

manner that he or she may deem appropriate.

      (b) Neither the commissioner nor any person who received documents, materials or other

information while acting under the authority of the commissioner or with whom such documents,

materials, or other information are shared pursuant to this chapter shall be permitted or required

to testify in any private civil action concerning any confidential documents, materials, or

information subject to subsection (a) of this section.

      (c) In order to assist in the performance of the commissioner's duties, the commissioner:

      (1) May share documents, materials or other information, including the confidential and

privileged documents, materials or information subject to subsection (a), with other state, federal

and international regulatory agencies, with the NAIC and its affiliates and subsidiaries, and with

state, federal, and international law enforcement authorities, including members of any

supervisory college described in section 27-35-5.5, provided that the recipient agrees in writing to

maintain the confidentiality and privileged status of the document, material or other information;

and has verified in writing the legal authority to maintain confidentiality.

     (2) Notwithstanding subparagraph (c)(1) above, the commissioner may only share

confidential and privileged documents, material, or information reported pursuant to subsection

27-35-3(l) with commissioners of states having statutes or regulations substantially similar to

subsection (a) of this section and who have agreed in writing not to disclose such information.

      (2)(3) May receive documents, materials or information, including otherwise

confidential and privileged documents, materials or information from the NAIC and its affiliates

and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic

jurisdictions, and shall maintain as confidential or privileged any document, material or

information received with notice or the understanding that it is confidential or privileged under

the laws of the jurisdiction that is the source of the document, material or information. ; and

     (3)(4) May Shall enter into written agreements with the NAIC governing sharing and use

of information provided pursuant to this chapter consistent with this subsection.  that shall:

     (i) Specify procedures and protocols regarding the confidentiality and security of

information shared with the NAIC and its affiliates and subsidiaries pursuant to this chapter,

including procedures and protocols for sharing by the NAIC with other state, federal or

international regulators;

     (ii) Specify that ownership of information shared with the NAIC and its affiliates and

subsidiaries pursuant to this chapter remains with the commissioner and the NAICís use of the

information is subject to the direction of the commissioner;

     (iii) Require prompt notice to be given to an insurer whose confidential information in the

possession of the NAIC pursuant to this chapter is subject to a request or subpoena to the NAIC

for disclosure or production; and

     (iv) Require the NAIC and its affiliates and subsidiaries to consent to intervention by an

insurer in any judicial or administrative action in which the NAIC and its affiliates and

subsidiaries may be required to disclose confidential information about the insurer shared with

the NAIC and its affiliates and subsidiaries pursuant to this chapter.

     (d) The sharing of information by the commissioner pursuant to this chapter shall not

constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely

responsible for the administration, execution and enforcement of the provisions of this chapter.

     (d)(e)  No waiver of any applicable privilege or claim of confidentiality in the documents,

materials or information shall occur as a result of disclosure to the commissioner under this

section or as a result of sharing as authorized in subsection (c).  

     (f) Documents, materials or other information in the possession or control of the NAIC

pursuant to this chapter shall be confidential by law and privileged, shall not be subject to section

38-2-3, shall not be subject to subpoena, and shall not be subject to discovery or admissible in

evidence in any private civil action.

 

     27-35-9. Sanctions. -- (a) Any insurer failing, without just cause, to file any registration

statement as required in this chapter shall be required, after notice and hearing, to pay a penalty of

five hundred dollars ($500) for each day's delay, to be recovered by the commissioner, and the

penalty so recovered shall be paid into the general revenue fund of this state. The maximum

penalty under this section is that determined pursuant to section 42-14-16. The commissioner may

reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the

penalty would constitute a financial hardship to the insurer; .

      (b) Every director or officer of an insurance holding company system who knowingly

violates, participates in, or assents to, or who knowingly shall permit any of the officers or agents

of the insurer to engage in transactions or make investments which have not been properly

reported or submitted as required by this chapter or which violate this chapter shall pay, in their

individual capacity, a civil forfeiture determined pursuant to section 42-14-16, of not more than

one thousand dollars ($1,000) per violation, after notice and hearing. In determining the amount

of the civil forfeiture, the commissioner shall take into account the appropriateness of the

forfeiture with respect to the gravity of the violation, the history of previous violations, and such

other matters as justice may require; .

      (c) Whenever it appears to the commissioner that any insurer subject to this act or any

director, officer, employee, or agent of the insurer has engaged in any transaction or entered into

a contract which is subject to section 27-35-4 of this chapter and which would not have been

approved had approval been requested, the commissioner may order the insurer to immediately

cease and desist any further activity under the transaction or contract. After notice and hearing the

commissioner may also order the insurer to void any contracts and restore the status quo if that

action is in the best interest of the policyholders, creditors, or the public.

      (d) Whenever it appears to the commissioner that any insurer or any director, officer,

employee or agent thereof has committed a willful violation of this chapter, that any insurer or

any director, officer, employee or agent thereof shall be in violation of chapter 54 of title 27.

     (e) Whenever it appears to the commissioner that any person has committed a violation of

section 27-35-2 of this chapter and which prevents the full understanding of the enterprise risk to

the insurer by affiliates or by the insurance holding company system, the violation may serve as

an independent basis for disapproving dividends or distributions and for placing the insurer under

an order of supervision in accordance with section 27-14.1.

 

     27-35-10. Receivership. -- Whenever it appears to the commissioner that any person has

committed a violation of this chapter which impairs the financial condition of a domestic insurer

as to threaten insolvency or make the further transaction of business by it hazardous to its

policyholders, creditors, shareholders, or the public, then the commissioner may proceed as

provided in chapter 14.3 of this title to take possession of the property of the domestic insurer and

to conduct the its business of the insurer.

 

     SECTION 3. This act shall take effect upon passage, except for the requirement to file an

Enterprise Risk Report included in subdivision 27-35-3(1) which shall take effect upon July 1,

2013.

     

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LC01326/SUB A

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