Chapter 059
2013 -- S 0709
Enacted 06/03/13
A N A C T
RELATING TO
INSURANCE
Introduced By: Senator Frank Lombardo
Date Introduced: March 13, 2013
It is enacted by the
General Assembly as follows:
SECTION 1. Title 27 of the General Laws entitled
"INSURANCE" is hereby amended
by adding thereto the following chapter:
CHAPTER
77
RISK
MANAGEMENT AND OWN RISK AND SOLVENCY ASSESSMENT ACT
27-77-1.
Purpose and Scope. -- The purpose of this
chapter is to provide the
requirements for maintaining a risk management framework, and
completing an own risk and
solvency assessment (ORSA) and provide guidance and
instructions for filing an ORSA Summary
Report with the insurance
commissioner of this state.
The requirements of
this chapter shall apply to all insurers domiciled in this state
unless exempt pursuant to section 27-77-6.
The general assembly
finds and declares that the ORSA Summary Report will contain
confidential and sensitive information related to an insurer or
insurance group's identification of
risks material and relevant to the insurer or insurance
group filing the report. This information
will include proprietary and trade secret information that
has the potential for harm and
competitive disadvantage to the insurer or insurance group if the
information is made public. It
is the intent of this general assembly that the ORSA
Summary Report shall be a confidential
document filed with the commissioner, that the ORSA Summary
Report will be shared only as
stated herein and to assist the commissioner in the
performance of his or her duties, and that in no
event shall the ORSA Summary Report be subject to public
disclosure.
27-77-2.
Definitions. - (a) "Commissioner" means
the director of the department of
business regulation or his or her designee.
(b) "Insurance
group" For the purpose of conducting an ORSA, the term "insurance
group" means those insurers and affiliates included
within an insurance holding company system
as defined in chapter 27-35.
(c)
"Insurer" The term "insurer" shall not include agencies,
authorities or
instrumentalities of the
Puerto Rico, the District of
Columbia, or a state or political subdivision of a state.
(d) "NAIC"
means the National Association of Insurance Commissioners.
(e) "Own Risk
and Solvency Assessment" or "ORSA" An "Own Risk and
Solvency
Assessment" or "ORSA" means a
confidential internal assessment, appropriate to the nature,
scale and complexity of an insurer or insurance group,
conducted by that insurer or insurance
group of the material and relevant risks associated with
the insurer or insurance group's
current business plan, and the sufficiency of capital
resources to support those risks.
(f) "ORSA
Guidance Manual" means the current version of the "Own Risk and
Solvency Assessment Guidance Manual" developed
and adopted by the NAIC and as amended
from time to time. A change in the ORSA guidance manual
shall be effective on January 1
following the calendar year in which the changes have been
adopted by the NAIC.
(g) "ORSA
Summary Report" means a confidential high-level summary of an insurer or
insurance group's ORSA.
27-77-3.
Risk Management Framework. - An insurer shall
maintain a risk
management framework to assist the insurer with identifying,
assessing, monitoring, managing
and reporting on its material and relevant risks. This
requirement may be satisfied if the
insurance group of which the insurer is a member maintains a
risk management framework
applicable to the operations of the insurer.
27-77-4.
ORSA Requirement. - Subject to section 27-77-6,
an insurer, or the
insurance group of which the insurer is a member, shall
regularly conduct an ORSA
consistent with a process comparable to the ORSA guidance
manual. The ORSA shall be
conducted no less than annually but also at any time when there
are significant changes to the
risk profile of the insurer or the insurance group of
which the insurer is a member.
27-77-5.
ORSA Summary Report. - (a) Upon
the commissioner's request, and no more
than once each year, an insurer shall submit to the
commissioner an ORSA summary report or
any combination of reports that together contain the
information described in the ORSA
guidance manual, applicable to the insurer and/or the
insurance group of which it is a member.
Notwithstanding any request from the commissioner, if
the insurer is a member of an insurance
group, the insurer shall submit the report(s) required by
this subsection if the commissioner is
the lead state commissioner of the insurance group as
determined by the procedures within the
financial analysis handbook adopted by the NAIC.
(b) The report(s)
shall include a signature of the insurer or insurance group's chief risk
officer or other executive having responsibility for the
oversight of the insurer's enterprise risk
management process attesting to the best of his/her belief and
knowledge that the insurer applies
the enterprise risk management process described in the
ORSA summary report and that a copy of
the report has been provided to the insurer's board of
directors or the appropriate committee
thereof.
(c) An insurer may
comply with subsection (a) by providing the most recent and
substantially similar report(s) provided by the insurer or another
member of an insurance group
of which the insurer is a member to the commissioner of
another state or to a supervisor or
regulator of a foreign jurisdiction, if that report provides
information that is comparable to the
information described in the ORSA guidance manual. Any such
report in a language other than
english must be accompanied by a translation of that report
into the english language.
27-77-6.
Exemption. - (a) An
insurer shall be exempt from the requirements of this
chapter, if:
(1) The insurer has
annual direct written and unaffiliated assumed premium, including
international direct and assumed premium but excluding premiums
reinsured with the Federal
Crop Insurance Corporation and Federal Flood Program,
less than five hundred million dollars
($500,000,000); and,
(2) The insurance
group of which the insurer is a member has annual direct written and
unaffiliated assumed premium, including international direct and
assumed premium, but
excluding premiums reinsured with the Federal Crop Insurance
Corporation and Federal Flood
Program, less than one billion dollars
($1,000,000,000).
(b) If an insurer
qualifies for exemption pursuant to subdivision 27-77-6(a)(1),
but
the insurance group of which the insurer is a member does
not qualify for exemption pursuant to
subdivision 27-77-6(a)(2), then the ORSA summary report that may
be required pursuant to
section 27-77-5 shall include every insurer within the
insurance group. This requirement may be
satisfied by the submission of more than one ORSA summary
report for any combination of
insurers provided any combination of reports includes every
insurer within the insurance group.
(c)
If an insurer does not qualify for exemption pursuant to subdivision 27-77-
6(a)(1), but the insurance
group of which it is a member qualifies for exemption pursuant to
subdivision 27-77-6(a)(2), then the only ORSA summary report that
may be required
pursuant to section 27-77-5 shall be the report applicable to
that insurer.
(d) An insurer that
does not qualify for exemption pursuant to subsection (a) may
apply to the commissioner for a waiver from the
requirements of this chapter based upon unique
circumstances. In deciding whether to grant the insurer's
request for waiver, the commissioner
may consider the type and volume of business written,
ownership and organizational structure,
and any other factor the commissioner considers relevant
to the insurer or insurance group of
which the insurer is a member. If the insurer is part of an
insurance group with insurers
domiciled in more than one state, the commissioner shall
coordinate with the lead state
commissioner and with the other domiciliary commissioners in
considering whether to grant the
insurer's request for a waiver.
(e) Notwithstanding
the exemptions stated in this section:
(1) The commissioner
may require that an insurer maintain a risk management
framework, conduct an ORSA and file an ORSA summary report
based on unique circumstances
including, but not limited to, the type and volume of business
written, ownership and
organizational structure, federal agency requests, and international
supervisor requests; and
(2) The commissioner
may require that an insurer maintain a risk management
framework, conduct an ORSA and file an ORSA summary report if
the insurer has risk-based
capital for company action level event as defined and
governed by chapter 27-4.6, meets one or
more of the standards of an insurer deemed to be in
hazardous financial condition as defined in
chapter 27-14.2, or otherwise exhibits qualities of a
troubled insurer as determined by the
commissioner.
(f) If an insurer
that qualifies for an exemption pursuant to subsection (a)
subsequently no longer qualifies for that exemption due to changes
in premium as reflected in
the insurer's most recent annual statement or in the most
recent annual statements of the insurers
within the insurance group of which the insurer is a member,
the insurer shall have one year
following the year the threshold is exceeded to comply with the
requirements of this chapter.
27-77-7.
Contents of ORSA Summary Report. - (a) The ORSA
summary report shall
be prepared consistent with the ORSA guidance manual,
subject to the requirements of
subsection (b) of this section. Documentation and supporting
information shall be maintained
and made available upon examination or upon request of
the commissioner.
(b) The review of the
ORSA summary report, and any additional requests for
information, shall be made using similar procedures currently
used in the analysis and
examination of multi- state or global insurers and insurance
groups.
27-77-8.
Confidentiality. - (a) Documents, materials or
other information, including
the ORSA summary report, in the possession of or control
of the department of business
regulation that are obtained by, created by or disclosed to the
commissioner or any other person
under this chapter, is recognized by this state as being
proprietary and to contain trade secrets.
All such documents, materials or other information
shall be confidential by law and privileged,
shall not be subject to chapter 38-2 (Access to Public
Records), 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 a 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.
(b) Neither the
commissioner nor any person who received documents, materials or other
ORSA-related information, through examination or
otherwise, 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).
(c) In order to
assist in the performance of the commissioner's regulatory duties, the
commissioner:
(1) May, upon
request, share documents, materials or other ORSA-related information,
including the confidential and privileged documents, materials
or information subject to
subsection (a), including proprietary and trade secret documents
and materials with other state,
federal and international financial regulatory agencies,
including members of any supervisory
college as defined in chapter 27-35, with the NAIC and with
any third-party consultants
designated by the commissioner, provided that the recipient
agrees in writing to maintain the
confidentiality and privileged status of the ORSA-related documents,
materials or other
information and has verified in writing the legal authority to
maintain confidentiality; and
(2) May receive
documents, materials or other ORSA-related information, including
otherwise confidential and privileged documents, materials or
information, including proprietary
and trade-secret information or documents, from
regulatory officials of other foreign or
domestic jurisdictions, including members of any supervisory
college as defined in chapter 27-
35, and from the NAIC, and shall maintain as
confidential or privileged any documents,
materials 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.
(3) Shall enter into
a written agreement with the NAIC or a third-party consultant
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 or a third-party consultant
pursuant to this chapter,
including procedures and protocols for sharing by the NAIC with
other state regulators from
states in which the insurance group has domiciled insurers.
The agreement shall provide that the
recipient agrees in writing to maintain the confidentiality and
privileged status of the ORSA-
related documents, materials or other information and has verified
in writing the legal authority
to maintain confidentiality;
(ii) Specify that
ownership of information shared with the NAIC or a third-party
consultant pursuant to this chapter remains with the
commissioner and the NAIC's or a third-
party consultant's use of the information is subject to the
direction of the commissioner;
(iii) Prohibit the
NAIC or third-party consultant from storing the information shared
pursuant to this chapter in a permanent database after the
underlying analysis is completed;
(iv)
Require prompt notice to be given to an insurer whose
confidential information in
the possession of the NAIC or a third-party consultant
pursuant to this chapter is subject to a
request or subpoena to the NAIC or a third-party consultant
for disclosure or production;
(v) Require the NAIC
or a third-party consultant to consent to intervention by an insurer
in any judicial or administrative action in which the
NAIC or a third-party consultant may be
required to disclose confidential information about the
insurer shared with the NAIC or a third-
party consultant pursuant to this chapter; and
(vi)
In the case of an agreement involving a third-party consultant,
provide for the
insurer's written consent.
(d) The sharing of
information and documents 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.
(e) No waiver of any
applicable privilege or claim of confidentiality in the documents,
proprietary and trade-secret materials or other ORSA-related
information shall occur as a result
of disclosure of such ORSA-related information or
documents to the commissioner under this
section or as a result of sharing as authorized in this
chapter.
(f) Documents,
materials or other information in the possession or control of the
NAIC or third-party consultants pursuant to this
chapter shall be confidential by law and
privileged, shall not be subject to chapter 38-2, shall not be
subject to subpoena, and shall not be
subject to discovery or admissible in evidence in any private
civil action.
27-77-9.
Sanctions. - Any insurer failing, without just
cause, to timely file the ORSA
summary report as required in this chapter shall be required,
after notice and hearing, to pay a
penalty of one thousand dollars ($1,000) for each day's
delay, to be recovered by the
commissioner and the penalty so recovered shall be paid into the
general fund. The maximum
penalty under this section is three hundred sixty-five
thousand dollars ($365,000). 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.
27-77-10.
Severability Clause. - If any provision of this
chapter, or the application
thereof to any person or circumstance, is held invalid, such
determination shall not affect the
provisions or applications of this chapter which can be given
effect without the invalid
provision or application, and to that end the provisions of
this chapter are severable.
SECTION 2. This act shall take effect on January 1, 2015.
=======
LC01405
=======