law21231

Chapter 231

2021 -- H 5780 SUBSTITUTE A AS AMENDED
Enacted 07/08/2021

A N A C T

RELATING TO INSURANCE -- FINANCIAL SERVICES

Introduced By: Representatives Solomon, Kennedy, and Casey

Date Introduced: February 24, 2021

It is enacted by the General Assembly as follows:

SECTION 1. Sections 27-1.1-1 and 27-1.1-4 of the General Laws in Chapter 27-1.1 entitled

"Credit for Reinsurance Act" are hereby amended to read as follows:

27-1.1-1. Credit allowed a domestic ceding insurer.

(a) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a

reduction from liability on account of reinsurance ceded only when the reinsurer meets the

requirements of subsections (b), (c), (d), (e), (f), or (g), or (h) of this section; provided, further, that

the commissioner may adopt by regulation pursuant to § 27-1.1-4 specific additional requirements

relating to or setting forth:

(1) The valuation of assets or reserve credits;

(2) The amount and forms of security supporting reinsurance arrangements described in §

27-1.1-4; and

(3) The circumstances pursuant to which credit will be reduced or eliminated.

Credit shall be allowed under subsections (b), (c), or (d) of this section only as respects

cessions of those kinds or classes of business which the assuming insurer is licensed or otherwise

permitted to write or assume in its state of domicile or, in the case of a U.S. United States branch

of an alien assuming insurer, in the state through which it is entered and licensed to transact

insurance or reinsurance. Credit shall be allowed under subsections (d) or (e) of this section only if

the applicable requirements of subsection (h)(i) of this section have been satisfied.

(b) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is

licensed to transact insurance or reinsurance in this state.

accredited by the commissioner as a reinsurer in this state. In order to be eligible for an accreditation

a reinsurer must:

(1) File with the commissioner evidence of its submission to this state's jurisdiction;

(2) Submit to this state's authority to examine its books and records;

(3) Be licensed to transact insurance or reinsurance in at least one state, or in the case of a

United States branch of an alien assuming insurer, be entered through and licensed to transact

insurance or reinsurance in at least one state;

(4) Annually file with the commissioner a copy of its annual statement filed with the

insurance department of its state of domicile and a copy of its most recent audited financial

statement; and

(5) Demonstrate to the satisfaction of the commissioner that it has adequate financial

capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from

domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its

application if it maintains a surplus as regards policyholders in an amount not less than twenty

million dollars ($20,000,000) and its accreditation has not been denied by the commissioner within

ninety (90) days after submission of its application.

(d)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is

domiciled in, or in the case of a United States branch of an alien assuming insurer is entered

through, a state that employs standards regarding credit for reinsurance substantially similar to

those applicable under this statute and the assuming insurer or U.S. United States branch of an

alien assuming insurer:

(i) Maintains a surplus regarding policyholders in an amount not less than twenty million

dollars ($20,000,000); and

(ii) Submits to the authority of this state to examine its books and records.

(2) Provided, that the requirement of subsection (d)(1)(i) of this section does not apply to

reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same

holding company system.

(e)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that

maintains a trust fund in a qualified United States financial institution, as defined in § 27-1.1-3(b),

for the payment of the valid claims of its United States ceding insurers, their assigns, and successors

in interest. To enable the commissioner to determine the sufficiency of the trust fund, the assuming

insurer shall report annually to the commissioner information substantially the same as that required

to be reported on the National Association of Insurance Commissioners (NAIC) annual statement

form by licensed insurers. The assuming insurer shall submit to examination of its books and

records by the commissioner and bear the expense of examination.

(2)(i) Credit for reinsurance shall not be granted under this subsection unless the form of

the trust and any amendments to the trust have been approved by:

(A) The commissioner of the state where the trust is domiciled; or

(B) The commissioner of another state who, pursuant to the terms of the trust instrument,

has accepted principal regulatory oversight of the trust.

(ii) The form of the trust and any trust amendments shall also be filed with the

commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled.

The trust instrument shall provide that contested claims shall be valid and enforceable upon the

final order of any court of competent jurisdiction in the United States. The trust shall vest legal title

to its assets in its trustees for the benefit of the assuming insurer's U.S. United States ceding

insurers, their assigns, and successors in interest. The trust and the assuming insurer shall be subject

to examination as determined by the commissioner.

(iii) The trust shall remain in effect for as long as the assuming insurer has outstanding

obligations due under the reinsurance agreements subject to the trust. No later than February 28 of

each year the trustee of the trust shall report to the commissioner in writing the balance of the trust

and listing the trust's investments at the preceding year end and shall certify the date of termination

of the trust, if so planned, or certify that the trust will not expire prior to the following December

31.

(3) The following requirements apply to the following categories of assuming insurer:

(i) The trust fund for a single assuming insurer shall consist of funds in trust in an amount

not less than the assuming insurer's liabilities attributable to reinsurance ceded by U.S. United

States ceding insurers, and, in addition, the assuming insurer shall maintain a trusteed surplus of

not less than twenty million dollars ($20,000,000), except as provided in subsection (e)(3)(ii);

(ii) At any time after the assuming insurer has permanently discontinued underwriting new

business secured by the trust for at least three (3) full years, the commissioner with principal

regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only

after a finding, based on an assessment of the risk, that the new required surplus level is adequate

for the protection of U.S. United States ceding insurers, policyholders, and claimants in light of

reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial

review, including an independent analysis of reserves and cash flows, and shall consider all material

risk factors, including, when applicable, the lines of business involved; the stability of the incurred

loss estimates; and the effect of the surplus requirements on the assuming insurer's liquidity or

solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty

percent (30%) of the assuming insurer's liabilities attributable to reinsurance ceded by U.S. United

States ceding insurers covered by the trust;

(iii)(A) In the case of a group including incorporated and individual unincorporated

underwriters:

(B)(I) For reinsurance ceded under reinsurance agreements with an inception, amendment

or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an amount

not less than the respective underwriters' several liabilities attributable to business ceded by U.S.

United States domiciled ceding insurers to any underwriter of the group;

(C)(II) For reinsurance ceded under reinsurance agreements with an inception date on or

before December 31, 1992, and not amended or renewed after that date, notwithstanding the other

provisions of this chapter, the trust shall consist of a trusteed account in an amount not less than

the respective underwriters' several insurance and reinsurance liabilities attributable to business

written in the United States;

(D)(III) In addition to these trusts, the group shall maintain in trust a trusteed surplus of

which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of the U.S.

United States domiciled ceding insurers of any member of the group for all years of account;

(E)(B) The incorporated members of the group shall not be engaged in any business other

than underwriting as a member of the group and shall be subject to the same level of regulation and

solvency control by the group's domiciliary regulator as are the unincorporated members;

(F)(C) Within ninety (90) days after its financial statements are due to be filed with the

group's domiciliary regulator, the group shall provide to the commissioner an annual certification

by the group's domiciliary regulator of the solvency of each underwriter member; or if a

certification is unavailable, financial statements, prepared by independent public accountants, of

each underwriter member of the group; and

(iv) In the case of a group of incorporated underwriters under common administration the

group shall:

(A) Have continuously transacted an insurance business outside the United States for at

least three (3) years immediately prior to making application for accreditation;

(B) Maintain an aggregate policyholders surplus of ten billion dollars ($10,000,000,000);

attributable to business ceded by United States domiciled ceding insurers to any member of the

group pursuant to reinsurance contracts issued in the name of the group;

(D) In addition, maintain a joint trusted trusteed surplus of which one hundred million

dollars ($100,000,000) shall be held jointly for the benefit of U.S. United States domiciled ceding

insurers of any member of the group as additional security for these liabilities; and

(E) Within ninety (90) days after its financial statements are due to be filed with the group's

domiciliary regulator, make available to the commissioner an annual certification of each

underwriter member's solvency by the member's domiciliary regulator and financial statements of

each underwriter member of the group prepared by its independent public accountant.

(f) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has

been certified by the commissioner as a reinsurer in this state and secures its obligations in

accordance with the requirements of this subsection.

(1) In order to be eligible for certification, the assuming insurer shall meet the following

requirements:

(i) The assuming insurer must be domiciled and licensed to transact insurance or

reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to paragraph

(f)(iii)(3) of this subsection;

(ii) The assuming insurer must maintain minimum capital and surplus, or its equivalent, in

an amount to be determined by the commissioner pursuant to regulation;

(iii) The assuming insurer must maintain financial strength ratings from two or more rating

agencies deemed acceptable by the commissioner pursuant to regulation;

(iv) The assuming insurer must agree to submit to the jurisdiction of this state, appoint the

commissioner as its agent for service of process in this state, and agree to provide security for one

hundred percent (100%) of the assuming insurer's liabilities attributable to reinsurance ceded by

U.S. United States ceding insurers if it resists enforcement of a final U.S. United States judgment;

(v) The assuming insurer must agree to meet applicable information filing requirements as

determined by the commissioner, both with respect to an initial application for certification and on

an ongoing basis; and

(vi) The assuming insurer must satisfy any other requirements for certification deemed

relevant by the commissioner.

(2) An association including incorporated and individual unincorporated underwriters may

be a certified reinsurer. In order to be eligible for certification, in addition to satisfying requirements

of subsection (f)(1)(i) above:

(i) The association shall satisfy its minimum capital and surplus requirements through the

capital and surplus equivalents (net of liabilities) of the association and its members, which shall

include a joint central fund that may be applied to any unsatisfied obligation of the association or

any of its members, in an amount determined by the commissioner to provide adequate protection;

(ii) The incorporated members of the association shall not be engaged in any business other

than underwriting as a member of the association and shall be subject to the same level of regulation

and solvency control by the association's domiciliary regulator as are the unincorporated members;

and

(iii) Within ninety (90) days after its financial statements are due to be filed with the

association's domiciliary regulator, the association shall provide to the commissioner an annual

certification by the association's domiciliary regulator of the solvency of each underwriter member;

or if a certification is unavailable, financial statements, prepared by independent public

accountants, of each underwriter member of the association.

(3) The commissioner shall create and publish a list of qualified jurisdictions, under which

an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for

certification by the commissioner as a certified reinsurer.

(i) In order to determine whether the domiciliary jurisdiction of a non-U.S. United States

assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall

evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the

jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits, and the extent

of reciprocal recognition afforded by the non-U.S. United States jurisdiction to reinsurers licensed

and domiciled in the U.S. United States. A qualified jurisdiction must agree to share information

and cooperate with the commissioner with respect to all certified reinsurers domiciled within that

jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the commissioner

has determined that the jurisdiction does not adequately and promptly enforce final U.S. United

States judgments and arbitration awards. Additional factors may be considered in the discretion of

the commissioner;

(ii) A list of qualified jurisdictions shall be published through the NAIC committee process.

The commissioner shall consider this list in determining qualified jurisdictions. If the commissioner

approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the

commissioner shall provide thoroughly documented justification in accordance with criteria to be

developed under regulations;

(iii) U.S. United States jurisdictions that meet the requirement for accreditation under the

NAIC financial standards and accreditation program shall be recognized as qualified jurisdictions;

and

(iv) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction,

the commissioner has the discretion to suspend the reinsurer's certification indefinitely, in lieu of

revocation.

(4) The commissioner shall assign a rating to each certified reinsurer, giving due

consideration to the financial strength ratings that have been assigned by rating agencies deemed

acceptable to the commissioner pursuant to regulation. The commissioner shall publish a list of all

certified reinsurers and their ratings.

(5) A certified reinsurer shall secure obligations assumed from U.S. United States ceding

insurers under this subsection at a level consistent with its rating, as specified in regulations

promulgated by the commissioner.

(i) In order for a domestic ceding insurer to qualify for full financial statement credit for

reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form

acceptable to the commissioner and consistent with the provisions of section (3), or in a multi-

beneficiary trust in accordance with subsection (e) of this section, except as otherwise provided in

this subsection;

(ii) If a certified reinsurer maintains a trust to fully secure its obligations subject to

subsection (e) of this section, and chooses to secure its obligations incurred as a certified reinsurer

in the form of a multi-beneficiary trust, the certified reinsurer shall maintain separate trust accounts

for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer

with reduced security as permitted by this subsection or comparable laws of other U.S. United

States jurisdictions and for its obligations subject to subsection (e) of this section. It shall be a

condition to the grant of certification under subsection (f) of this section that the certified reinsurer

shall have bound itself, by the language of the trust and agreement with the commissioner with

principal regulatory oversight of each such trust account, to fund, upon termination of any such

trust account, out of the remaining surplus of such trust any deficiency of any other such trust

account;

(iii) The minimum trusteed surplus requirements provided in subsection D (e) are not

applicable with respect to a multi-beneficiary trust maintained by a certified reinsurer for the

purpose of securing obligations incurred under this subsection, except that such trust shall maintain

a minimum trusteed surplus of ten million dollars ($10,000,000);

(iv) With respect to obligations incurred by a certified reinsurer under this subsection, if

the security is insufficient, the commissioner shall reduce the allowable credit by an amount

proportionate to the deficiency, and has the discretion to impose further reductions in allowable

credit upon finding that there is a material risk that the certified reinsurer's obligations will not be

paid in full when due; and

(v) For purposes of this subsection, a certified reinsurer whose certification has been

terminated for any reason shall be treated as a certified reinsurer required to secure one hundred

percent (100%) of its obligations.

(A) As used in this subsection, the term "terminated" refers to revocation, suspension,

voluntary surrender and inactive status; and

(B) If the commissioner continues to assign a higher rating as permitted by other provisions

of this section, this requirement does not apply to a certified reinsurer in inactive status or to a

reinsurer whose certification has been suspended.

(6) If an applicant for certification has been certified as a reinsurer in an NAIC-accredited

jurisdiction, the commissioner has the discretion to defer to that jurisdiction's certification, and has

the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall

be considered to be a certified reinsurer in this state.

(7) A certified reinsurer that ceases to assume new business in this state may request to

maintain its certification in inactive status in order to continue to qualify for a reduction in security

for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable

requirements of this subsection, and the commissioner shall assign a rating that takes into account,

if relevant, the reasons why the reinsurer is not assuming new business.

(g)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer,

meeting each of the conditions set forth below.

(i) The assuming insurer must have its head office or be domiciled in, as applicable, and

be licensed in a reciprocal jurisdiction. A "reciprocal jurisdiction" is a jurisdiction that meets one

of the following:

(A) A non-United States jurisdiction that is subject to an in-force covered agreement with

the United States, each within its legal authority, or, in the case of a covered agreement between

the United States and European Union, is a member state of the European Union. For purposes of

this subsection, a “covered agreement” is an agreement entered into, pursuant to the Dodd-Frank

Wall Street Reform and Consumer Protection Act, 31 U.S.C. §§ 313 and 314, that is currently in

effect or in a period of provisional application and addresses the elimination, under specified

conditions, of collateral requirements, as a condition for entering into any reinsurance agreement

with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit

for reinsurance;

(B) A United States jurisdiction that meets the requirements for accreditation under the

NAIC financial standards and accreditation program; or

(f)(3) of this section, which that is not otherwise described in subsection (g)(1)(i)(A) or (g)(1)(i)(B)

of this section and, which meets certain additional requirements, consistent with the terms and

conditions of in-force covered agreements, as specified by the commissioner in regulation.

(ii) The assuming insurer must have and maintain, on an ongoing basis, minimum capital

and surplus, or its equivalent, calculated according to the methodology of its domiciliary

jurisdiction, in an amount to be set forth in regulation. If the assuming insurer is an association,

including incorporated and individual unincorporated underwriters, it must have and maintain, on

an ongoing basis, minimum capital and surplus equivalents (net of liabilities), calculated according

to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a

balance in amounts to be set forth in regulation.

(iii) The assuming insurer must have and maintain, on an ongoing basis, a minimum

solvency or capital ratio, as applicable, which that will be set forth in regulation. If the assuming

insurer is an association, including incorporated and individual unincorporated underwriters, it

must have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal

jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is

also licensed.

(iv) The assuming insurer must agree and provide adequate assurance to the commissioner,

in a form specified by the commissioner, pursuant to regulation, as follows:

(A) The assuming insurer must provide prompt written notice and explanation to the

commissioner, if it falls below the minimum requirements set forth in subsections (g)(1)(ii) or

(g)(1)(iii) of this section, or if any regulatory action is taken against it, for serious noncompliance

with applicable law;

(B) The assuming insurer must consent in writing to the jurisdiction of the courts of this

state and to the appointment of the commissioner, as agent for service of process. The commissioner

may require that consent for service of process, be provided to the commissioner, and included in

each reinsurance agreement. Nothing in this provision shall limit, or in any way alter, the capacity

of parties to a reinsurance agreement, to agree to alternative dispute resolution mechanisms, except

to the extent such the agreements are unenforceable under applicable insolvency or delinquency

laws;

enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared

enforceable in the jurisdiction where the judgment was obtained;

(D) Each reinsurance agreement must include a provision requiring the assuming insurer

to provide security in an amount equal to one hundred percent (100%) of the assuming insurer’s

liabilities, attributable to reinsurance ceded pursuant to that agreement, if the assuming insurer

resists enforcement of a final judgment that is enforceable under the law of the jurisdiction, in

which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding

insurer or by its legal successor on behalf of its resolution estate; and

(E) The assuming insurer must confirm that it is not presently participating in any solvent

scheme of arrangement, which that involves this state’s ceding insurers, and agree to notify the

ceding insurer and the commissioner and to provide security in an amount equal to one hundred

percent (100%) of the assuming insurer’s liabilities to the ceding insurer, should the assuming

insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent

with the provisions of subsection (g) (f) of this section and § 27-1.1-2 and as specified by the

commissioner in regulation.

(v) The assuming insurer or its legal successor must provide, if requested by the

commissioner, on behalf of itself and any legal predecessors, certain documentation to the

commissioner, as specified by the commissioner in regulation.

(vi) The assuming insurer must maintain a practice of prompt payment of claims under

reinsurance agreements, pursuant to criteria set forth in regulation.

(vii) The assuming insurer’s supervisory authority must confirm to the commissioner on

an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported

to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in

subsections (g)(1)(ii) and (g)(1)(iii) of this section.

(viii) Nothing in this provision precludes an assuming insurer from providing the

commissioner with information on a voluntary basis.

(2) The commissioner shall timely create and publish a list of reciprocal jurisdictions.

(i) A list of reciprocal jurisdictions is published through the NAIC committee process. The

commissioner’s list shall include any reciprocal jurisdiction as defined under subsections

(g)(1)(i)(A) and (g)(1)(i)(B) of this section, and shall consider any other reciprocal jurisdiction

included on the NAIC list. The commissioner may approve a jurisdiction that does not appear on

the NAIC list of reciprocal jurisdictions, in accordance with criteria to be developed under

regulations issued by the commissioner.

(ii) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions,

upon a determination that the jurisdiction no longer meets the requirements of a reciprocal

jurisdiction, in accordance with a process set forth in regulations issued by the commissioner,

except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined

under subsections (g)(1)(i)(A) and (g)(1)(i)(B) of this section. Upon removal of a reciprocal

jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home

office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this

chapter 1.1 of title 27.

(3) The commissioner shall timely create and publish a list of assuming insurers that have

satisfied the conditions, set forth in this subsection and to which cessions shall be granted credit, in

accordance with this subsection. The commissioner may add an assuming insurer to such list, if an

NAIC accredited jurisdiction has added such assuming insurer to a list of such assuming insurers

or if, upon initial eligibility, the assuming insurer submits the information to the commissioner, as

required under subsection (g)(1)(iv) of this section and complies with any additional requirements

that the commissioner may impose by regulation, except to the extent that they conflict with an

applicable covered agreement.

(4) If the commissioner determines that an assuming insurer no longer meets one or more

of the requirements under this subsection, the commissioner may revoke or suspend the eligibility

of the assuming insurer, for recognition under this subsection, in accordance with procedures set

forth in regulation.

(i) While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued,

amended, or renewed after the effective date of the suspension, qualifies for credit except to the

extent that the assuming insurer’s obligations under the contract are secured in accordance with §

27-1.1-2.

(ii) If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted

after the effective date of the revocation, with respect to any reinsurance agreements entered into

by the assuming insurer, including reinsurance agreements entered into prior to the date of

revocation, except to the extent that the assuming insurer’s obligations, under the contract, are

secured in a form acceptable to the commissioner and consistent with the provisions of § 27-1.1-2.

(5) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable,

the ceding insurer, or its representative, may seek and, if determined appropriate by the court in

which the proceedings are pending, may obtain an order requiring that the assuming insurer post

security for all outstanding ceded liabilities.

(6) Nothing in this subsection shall limit or in any way alter the capacity of parties to a

reinsurance agreement to agree on requirements for security or other terms in that reinsurance

agreement, except as expressly prohibited by this chapter 1.1 of title 27 or other applicable law or

regulation.

(7) Credit may be taken under this subsection (g) only for reinsurance agreements entered

into, amended, or renewed on or after the effective date of the statute adding this subsection, and

only with respect to losses incurred and reserves reported on or after the later of:

(i) The date on which the assuming insurer has met all eligibility requirements, pursuant to

subsection (g)(1) of this section; and

(ii) The effective date of the new reinsurance agreement, amendment, or renewal.

(A) This subsection (g)(7) does not alter or impair a ceding insurer’s right to take credit for

reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance

qualifies for credit, under any other applicable provision of this chapter 1.1 of title 27.

(B) Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce

the security provided under any reinsurance agreement, except as permitted by the terms of the

agreement.

reinsurance agreement to renegotiate the agreement.

(g)(h) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not

meeting the requirements of subsections (b), (c), (d), (e), or (f), or (g) of this section, but only as to

the insurance of risks located in jurisdictions where the reinsurance is required by applicable law

or regulation of that jurisdiction.

(h)(i) If the assuming insurer is not licensed, accredited, or certified to transact insurance

or reinsurance in this state, the credit permitted by subsections (d) and (e) of this section shall not

be allowed unless the assuming insurer agrees in the reinsurance agreements:

(1)(i) That in the event of the failure of the assuming insurer to perform its obligations

under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding

insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the

United States, will comply with all requirements necessary to give the court jurisdiction, and will

abide by the final decision of the court or of any appellate court in the event of an appeal; and

(ii) To designate the commissioner or a designated attorney as its true and lawful attorney

upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on

behalf of the ceding insurer.

(2) This subsection is not intended to conflict with or override the obligation of the parties

to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the agreement.

(i)(j) If the assuming insurer does not meet the requirements of subsections (b), (c), or (d),

or (g), the credit permitted by subsection (e) or (f) of this section shall not be allowed unless the

assuming insurer agrees in the trust agreements to the following conditions:

(1) Notwithstanding any other provisions in the trust instrument, if the trust fund is

inadequate because it contains an amount less than the amount required by subsection (e)(iii)(3) of

this section, or if the grantor of the trust has been declared insolvent or placed into receivership,

rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile,

the trustee shall comply with an order of the commissioner with regulatory oversight over the trust

or with an order of a court of competent jurisdiction directing the trustee to transfer to the

commissioner with regulatory oversight all of the assets of the trust fund;

(2) The assets shall be distributed by and claims shall be filed with and valued by the

commissioner with regulatory oversight in accordance with the laws of the state in which the trust

is domiciled that are applicable to the liquidation of domestic insurance companies;

(3) If the commissioner with regulatory oversight determines that the assets of the trust

fund or any part thereof are not necessary to satisfy the claims of the U.S. United States ceding

insurers of the grantor of the trust, the assets or part thereof shall be returned by the commissioner

with regulatory oversight to the trustee for distribution in accordance with the trust agreement; and

(4) The grantor shall waive any right otherwise available to it under U.S. United States

law that is inconsistent with this provision.

(j)(k) If an accredited or certified reinsurer ceases to meet the requirements for

accreditation or certification, the commissioner may suspend or revoke the reinsurer's accreditation

or certification.

(1) The commissioner must give the reinsurer notice and opportunity for hearing. The

suspension or revocation may not take effect until after the commissioner's order on hearing, unless:

(i) The reinsurer waives its right to hearing;

(ii) The commissioner's order is based on regulatory action by the reinsurer's domiciliary

jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact

insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of

the reinsurer under subparagraph (f)(vi)(6) of this section; or

(iii) The commissioner finds that an emergency requires immediate action and a court of

competent jurisdiction has not stayed the commissioner's action.

(A) (2) While a reinsurer's accreditation or certification is suspended, no reinsurance

contract issued or renewed after the effective date of the suspension qualifies for credit except to

the extent that the reinsurer's obligations under the contract are secured in accordance with Section

3 § 27-1.1-2. If a reinsurer's accreditation or certification is revoked, no credit for reinsurance may

be granted after the effective date of the revocation except to the extent that the reinsurer's

obligations under the contract are secured in accordance with subsection (f)(v)(5) or section 3 § 27-

1.1-2.

(k)(l) Concentration Risk.

(1) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate

to its own book of business. A domestic ceding insurer shall notify the commissioner within thirty

(30) days after reinsurance recoverables from any single assuming insurer, or group of affiliated

assuming insurers, exceeds fifty percent (50%) of the domestic ceding insurer's last reported surplus

to policyholders, or after it is determined that reinsurance recoverables from any single assuming

insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall

demonstrate that the exposure is safely managed by the domestic ceding insurer.

(2) A ceding insurer shall take steps to diversify its reinsurance program. A domestic

ceding insurer shall notify the commissioner within thirty (30) days after ceding to any single

assuming insurer, or group of affiliated assuming insurers, more than twenty percent (20%) of the

ceding insurer's gross written premium in the prior calendar year, or after it has determined that the

reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is likely

to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the

domestic ceding insurer.

27-1.1-4. Rules and regulations.

(a) The commissioner may adopt reasonable rules and regulations implementing the

provisions of this law.

(b) The commissioner is further authorized to adopt rules and regulations applicable to

reinsurance arrangements described in subsection (b)(1) of this section.

(1) A regulation adopted pursuant to this section may apply only to reinsurance relating to:

(i) Life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel

benefits;

(ii) Universal life insurance policies with provisions resulting in the ability of a

policyholder to keep a policy in force over a secondary guarantee period;

(iii) Variable annuities with guaranteed death or living benefits;

(iv) Long-term-care insurance policies; or

(v) Other life and health insurance and annuity products as to which the NAIC adopts

model regulatory requirements with respect to credit for reinsurance.

(2) A regulation adopted pursuant to subsection (b)(1)(i) or (b)(1)(ii) of this section may

apply to any treaty containing:

(i) Policies issued on or after January 1, 2015; and

(ii) Policies issued prior to January 1, 2015, if risk pertaining to the pre-2015 policies is

ceded in connection with the treaty, in whole or in part, on or after January 1, 2015.

(3) A regulation adopted pursuant to subsection (b) of this section may require the ceding

insurer, in calculating the amounts or forms of security required to be held under regulations

promulgated under this authority, to use the Valuation Manual adopted by the NAIC under Section

11B(1) of the NAIC Standard Valuation Law, including all amendments adopted by the NAIC and

in effect on the date as of which the calculation is made, to the extent applicable.

(4) A regulation adopted pursuant to subsection (b) of this section shall not apply to

cessions to an assuming insurer that:

(i) Meets the conditions set forth in § 27-1.1-1(g); or

(i)(ii) Is certified in this state; or

(ii)(iii) Maintains at least two hundred fifty million dollars ($250,000,000) in capital and

surplus when determined in accordance with the NAIC Accounting Practices and Procedures

Manual, including all amendments thereto adopted by the NAIC, excluding the impact of any

permitted or prescribed practices; and is:

(A) Licensed in at least twenty-six (26) states; or

(B) Licensed in at least ten (10) states, and licensed or accredited in a total of at least thirty-

five (35) states.

(5) The authority to adopt regulations pursuant to subsection (b) of this section does not

limit the commissioner's general authority to adopt regulations pursuant to subsection (a) of this

section.

SECTION 2. Section 27-4.6-3 of the General Laws in Chapter 27-4.6 entitled "Risk-Based

Capital (RBC) for Insurers Act" is hereby amended to read as follows:

27-4.6-3. Company action level event.

(a) "Company action level event" means any of the following events:

(1) The filing of an RBC report by an insurer that indicates that:

(i) The insurer's total adjusted capital is greater than or equal to its regulatory action level

RBC but less than its company action level RBC;

(ii) If a life and/or health insurer, the insurer has total adjusted capital that is greater than

or equal to its company action level RBC but less than the product of its authorized control level

RBC and 2.5 3.0 and has a negative trend; or

(iii) If a property and casualty insurer, the insurer has total adjusted capital which that is

greater than or equal to its company action level RBC but less than the product of its authorized

control level RBC and 3.0 and triggers the trend test determined in accordance with the trend test

calculation included in the property and casualty RBC instructions.

(2) The notification by the commissioner to the insurer of an adjusted RBC report that

indicates an event in subdivision (a)(1), provided the insurer does not challenge the adjusted RBC

report under § 27-4.6-7; or

(3) If, pursuant to § 27-4.6-7, an insurer challenges an adjusted RBC report that indicates

the event in subdivision (a)(1), the notification by the commissioner to the insurer that the

commissioner has, after a hearing, rejected the insurer's challenge.

(b) In the event of a company action level event, the insurer shall prepare and submit to the

commissioner an RBC plan which that shall:

(1) Identify the conditions that contribute to the company action level event;

(2) Contain proposals of corrective actions that the insurer intends to take and would be

expected to result in the elimination of the company action level event;

(3) Provide projections of the insurer's financial results in the current year and at least the

four (4) succeeding years, both in the absence of proposed corrective actions and giving effect to

the proposed corrective actions, including projections of statutory operating income, net income,

capital, and/or surplus. (The projections for both new and renewal business might include separate

projections for each major line of business and separately identify each significant income, expense,

and benefit component);

(4) Identify the key assumptions impacting the insurer's projections and the sensitivity of

the projections to the assumptions; and

(5) Identify the quality of, and problems associated with, the insurer's business, including,

but not limited to,: its assets,; anticipated business growth and associated surplus strain,;

extraordinary exposure to risk,; mix of business; and use of reinsurance, if any, in each case.

(1) Within forty-five (45) days of the company action level event; or

(2) If the insurer challenges an adjusted RBC report pursuant to § 27-4.6-7, within forty-

five (45) days after notification to the insurer that the commissioner has, after a hearing, rejected

the insurer's challenge.

(d) Within sixty (60) days after the submission by an insurer of an RBC plan to the

commissioner, the commissioner shall notify the insurer whether the RBC plan shall be

implemented or is, in the judgment of the commissioner, unsatisfactory. If the commissioner

determines that the RBC plan is unsatisfactory, the notification to the insurer shall set forth the

reasons for the determination, and may set forth proposed revisions which that will render the RBC

plan satisfactory in the judgment of the commissioner. Upon notification from the commissioner,

the insurer shall prepare a revised RBC plan, which may incorporate by reference any revisions

proposed by the commissioner, and shall submit the revised RBC plan to the commissioner:

(1) Within forty-five (45) days after the notification from the commissioner; or

(2) If the insurer challenges the notification from the commissioner under § 27-4.6-7,

within forty-five (45) days after a notification to the insurer that the commissioner has, after a

hearing, rejected the insurer's challenge.

(e) In the event of a notification by the commissioner to an insurer that the insurer's RBC

plan or revised RBC plan is unsatisfactory, the commissioner may at the commissioner's discretion,

subject to the insurer's right to a hearing under § 27-4.6-7, specify in the notification that the

notification constitutes a regulatory action level event.

(f) Every domestic insurer that files an RBC plan or revised RBC plan with the

commissioner shall file a copy of the RBC plan or revised RBC plan with the insurance

commissioner in any state in which the insurer is authorized to do business if:

(1) That state has an RBC provision substantially similar to § 27-4.6-8(a); and

(2) The insurance commissioner of that state has notified the insurer of its request for the

filing in writing, in which case the insurer shall file a copy of the RBC plan or revised RBC plan

in that state no later than the later of:

(i) Fifteen (15) days after the receipt of notice to file a copy of its RBC plan or revised

RBC plan with the state; or

(ii) The date on which the RBC plan or revised RBC plan is filed under subsections (c) and

(d) of this section.

SECTION 3. Sections 27-35-1, 27-35-3 and 27-35-6 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

who 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 definition prescribed by § 42-14-5 designated

and authorized by him or her while acting under that designation.

"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 § 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) "Group capital calculation instructions" means the group capital calculation

instructions, as adopted by the NAIC and as amended by the NAIC from time to time, in accordance

with the procedures adopted by the NAIC.

(d)(e) "Group-wide supervisor" means the regulatory official authorized to engage in

conducting and coordinating group wide supervision activities who is determined or acknowledged

by the commissioner under § 27-35-5.5(d) to have sufficient significant contacts with the

internationally active insurance group.

(e)(f) "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.

(f)(g) "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 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.

(g)(h) "Internationally active insurance group" means an insurance holding company

system that:

(1) Includes an insurer registered under § 27-35-3; and

(2) Meets the following criteria:

(i) Premiums written in at least three (3) countries;

(ii) The percentage of gross premiums written outside the United States is at least ten

percent (10%) of the insurance holding company system's total gross written premiums; and

(iii) Based on a three-year (3) rolling average, the total assets of the insurance holding

company system are at least fifty billion dollars ($50,000,000,000) or the total gross written

premiums of the insurance holding company system are at least ten billion dollars

($10,000,000,000).

(h)(i) "Enterprise Risk." "Enterprise Risk" 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

insurer's risk-based capital to fall into company action level as set forth in chapters 4.6 and 4.7 of

this title or would cause the insurer to be in a hazardous financial condition as set forth in chapter

14.2 of this title.

(i)(j) "NAIC." means the National Association of Insurance Commissioners.

(k) “NAIC liquidity stress test framework.” The “NAIC liquidity stress test framework” is

a separate NAIC publication, which that includes a history of the NAIC’s development of

regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the

liquidity stress test instructions and reporting templates for a specific data year, such scope criteria,

instructions and reporting template being as adopted by the NAIC and as amended by the NAIC

from time to time, in accordance with the procedures adopted by the NAIC.

(j)(l) "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.

(m) “Scope criteria.” The “scope criteria,” as detailed in the NAIC liquidity stress test

framework, are the designated exposure bases along with minimum magnitudes thereof for the

specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC

liquidity stress test framework for that data year.

(k)(n) "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.

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

person directly, or indirectly, through one or more intermediaries.

(m)(p) "Voting security." The term "voting security" shall include any security convertible

into or evidencing a right to acquire a voting security.

27-35-3. Registration of insurers.

(a) Registration. Every insurer which is authorized to do business in this state and which

that 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 that are substantially similar to those contained

in:

(1) this This section;

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

(3) Either § 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 May 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 that is a member of an insurance holding company

system and which that 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 its 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 that 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 that

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 that 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;

(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;

(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 insurer's board of directors oversees corporate governance and

internal controls and that the insurer's 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.

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 31st day of December next preceding

shall not be deemed material for purposes of this section. The definition of materiality provided in

this subsection, shall not apply for purposes of the group capital calculation or the liquidity stress

test framework.

(e) Reporting of dividends to shareholders. Subject to § 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.

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 filings.

(1) 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 person's

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 Financial Analysis Handbook adopted by the national association of insurance

commissioners National Association of Insurance Commissioners (NAIC).

(2) Group capital calculation. Except as provided below, the ultimate controlling person of

every insurer subject to registration, shall concurrently file with the registration an annual group

capital calculation, as directed by the lead state commissioner. The report shall be completed in

accordance with the NAIC group capital calculation instructions, which may permit the lead state

commissioner to allow a controlling person, that is not the ultimate controlling person, to file the

group capital calculation. The report shall be filed with the lead state commissioner of the insurance

holding company system, as determined by the commissioner, in accordance with the procedures

within the Financial Analysis Handbook adopted by the NAIC. Insurance holding company systems

described below are exempt from filing the group capital calculation:

(i) An insurance holding company system that has only one insurer within its holding

company structure, that only writes business in its domestic state, and assumes no business from

any other insurer;

(ii) An insurance holding company system that is required to perform a group capital

calculation, specified by the United States Federal Reserve Board. The lead state commissioner

shall request the calculation from the Federal Reserve Board, under the terms of information

sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the

lead state commissioner, the insurance holding company system is not exempt from the group

capital calculation filing;

(iii) An insurance holding company system whose non-United States group-wide

supervisor is located within a reciprocal jurisdiction, as described in § 27-1.1-1(g) that recognizes

the United States state regulatory approach to group supervision and group capital;

(iv) An insurance holding company system:

(A) That provides information to the lead state that meets the requirements for accreditation

under the NAIC financial standards and accreditation program, either directly or indirectly through

the group-wide supervisor, who has determined such the information is satisfactory to allow the

lead state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial

Analysis Handbook; and

(B) Whose non-United States group-wide supervisor that is not in a Reciprocal Jurisdiction

reciprocal jurisdiction recognizes and accepts, as specified by the commissioner in regulation, the

group capital calculation as the world-wide group capital assessment for U.S. United States

insurance groups who operate in that jurisdiction;

(v) Notwithstanding the provisions of §§ 27-35- subsections 3(l)(2)(iii) and (iv) of this

section, a lead state commissioner shall require the group capital calculation for United States

operations of any non-United States based insurance holding company system where, after any

necessary consultation with other supervisors or officials, it is deemed appropriate by the lead state

commissioner for prudential oversight and solvency monitoring purposes or for ensuring the

competitiveness of the insurance marketplace.

(vi) Notwithstanding the exemptions from filing the group capital calculation stated in §§

27-35-3(l)(2)(iii) and (iv) subsections (l)(2)(iii) and (iv) of this section, the lead state

commissioner has the discretion to exempt the ultimate controlling person, from filing the annual

group capital calculation or to accept a limited group capital filing or report, in accordance with

criteria as specified by the commissioner in regulation.

(vii) If the lead state commissioner determines that an insurance holding company system

no longer meets one or more of the requirements for an exemption from filing the group capital

calculation under this section, the insurance holding company system shall file the group capital

calculation at the next annual filing date unless given an extension by the lead state commissioner

based on reasonable grounds shown.

(3) Liquidity stress test. The ultimate controlling person of every insurer subject to

registration and also scoped into the NAIC liquidity stress test framework shall file the results of a

specific year’s liquidity stress test. The filing shall be made to the lead state insurance

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:

(i) The NAIC liquidity stress test framework includes scope criteria applicable to a specific

data year. These scope criteria are reviewed at least annually by the financial stability task force or

its successor. Any change to the NAIC liquidity stress test framework or to the data year for which

the scope criteria are to be measured, shall be effective on January 1 of the year following the

calendar year when such changes are adopted. Insurers meeting at least one threshold of the scope

criteria, are considered scoped into the NAIC liquidity stress test framework for the specified data

year, unless the lead state insurance commissioner, in consultation with the NAIC financial stability

task force or its successor, determines the insurer should not be scoped into the framework for that

data year. Similarly, insurers that do not trigger at least one threshold of the scope criteria are

considered scoped out of the NAIC liquidity stress test framework for the specified data year, unless

the lead state insurance commissioner, in consultation with the NAIC financial stability task force

or its successor, determines the insurer should be scoped into the framework for that data year.

(A) Regulators wish to avoid having insurers scoped in and out of the NAIC liquidity stress

test framework on a frequent basis. The lead state insurance commissioner, in consultation with the

financial stability task force or its successor, will assess this concern as part of the determination

for an insurer.

(ii) The performance of, and filing of the results from, a specific year’s liquidity stress test

shall comply with the NAIC liquidity stress test framework’s instructions and reporting templates

for that year and any lead state insurance commissioner determinations, in conjunction with the

financial stability task force or its successor, provided within the framework.

(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.

27-35-6. 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 § 27-35-5, and all

information reported pursuant to §§ 27-35-2(b)(xii)(b)(1)(xii) , 27-35-2(b)(viii)(b)(1)(xiii), 27-35-

3, and 27-35-4, and 27-35-5.5 are recognized by this state as being proprietary and to contain trade

secrets, and 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.

(1) For purposes of the information reported and provided to the department of insurance,

pursuant to § 27-35-3 (l)(2), the commissioner shall maintain the confidentiality of the group capital

calculation and group capital ratio produced within the calculation and any group capital

information received from an insurance holding company supervised by the Federal Reserve Board

or any United States group-wide supervisor.

(2) For purposes of the information reported and provided to the department pursuant to §

27-35-3(l)(3), the commissioner shall maintain the confidentiality of the liquidity stress test results

and supporting disclosures and any liquidity stress test information received from an insurance

holding company supervised by the Federal Reserve Board and non-United States group-wide

supervisors.

(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.

(1) May share documents, materials, or other 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 regulatory agencies,

with the NAIC and its affiliates and subsidiaries, with any third-party consultants designated by the

commissioner, and with state, federal, and international law enforcement authorities, including

members of any supervisory college described in § 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 § 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.

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

privileged documents, materials, or information, including proprietary trade-secret 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.

(4) Shall enter into written agreements with the NAIC and any third-party consultant

designated by the commissioner 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 and any third-party consultant

designated by the commissioner pursuant to this chapter, including procedures and protocols for

sharing by the NAIC with other state, federal, or international regulators. The agreement shall

provide that the recipient agrees in writing to maintain the confidentiality and privileged status of

the documents, materials, or other information and has verified in writing the legal authority to

maintain such confidentiality;

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

subsidiaries or any third-party consultant pursuant to this chapter remains with the commissioner

and the NAIC's or a third-party consultant’s, as designated by the commissioner, use of the

information is subject to the direction of the commissioner;

(iii) Excluding documents, material, or information reported pursuant to § 27-35-3(l)(3),

prohibit the NAIC or third-party consultant designated by the commissioner from storing the

information shared pursuant to this chapter in a permanent database after the underlying analysis

is completed;

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

the possession of the NAIC or a third-party consultant designated by the commissioner pursuant to

this chapter is subject to a request or subpoena to the NAIC or a third-party consultant designated

by the commissioner for disclosure or production; and

(iv)(v) Require the NAIC and its affiliates and subsidiaries or a third-party consultant

designated by the commissioner to consent to intervention by an insurer in any judicial or

administrative action in which the NAIC or a third-party consultant designated by the commissioner

and its affiliates and subsidiaries may be required to disclose confidential information about the

insurer shared with the NAIC and its affiliates and subsidiaries or a third-party consultant

designated by the commissioner pursuant to this chapter; and

(vi) For documents, material, or information reporting pursuant to § 27-35-3(l)(3), in the

case of an agreement involving a third-party consultant, provide for notification of the identity of

the consultant to the applicable insurers.

(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.

(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 or

a third-party consultant pursuant to this chapter shall be confidential by law and privileged, shall

not be subject to § 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.

(g) The group capital calculation and resulting group capital ratio required under § 27-35-

3(l)(3)(2) and the liquidity stress test, along with its results and supporting disclosures required

under § 27-35-3(l)(3), are regulatory tools for assessing group risks and capital adequacy and group

liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding

company systems generally. Therefore, except as otherwise may be required under the provisions

of this chapter, the making, publishing, disseminating, circulating, or placing before the public, or

causing directly or indirectly to be made, published, disseminated, circulated, or placed before the

public in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet,

letter, or poster, or over any radio or television station or any electronic means of communication

available to the public, or in any other way as an advertisement, announcement, or statement

containing a representation or statement with regard to the group capital calculation, group capital

ratio, the liquidity stress test results, or supporting disclosures for the liquidity stress test of any

insurer or any insurer group, or of any component derived in the calculation by any insurer, broker,

or other person engaged in any manner in the insurance business would be misleading and is

therefore prohibited; provided, however, that if any materially false statement with respect to the

group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount

to an insurer’s or insurance group’s group capital calculation or resulting group capital ratio,

liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate

comparison of any amount to an insurer’s or insurance group’s liquidity stress test result or

supporting disclosures is published in any written publication and the insurer is able to demonstrate

to the commissioner, with substantial proof the falsity of such statement or the inappropriateness,

as the case may be, then the insurer may publish announcements in a written publication if the sole

purpose of the announcement is to rebut the materially false statement.

SECTION 4. This act shall take effect upon passage.

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LC002093/SUB A

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