HB 164: "An Act relating to insurance; relating to risk based capital for domestic insurers and fraternal benefit societies, including provisions related to insurers subject to risk based capital and action level event requirements; relating to review by the director of insurance of an insurer's risk based capital plan; relating to confidentiality and sharing of certain information submitted to the director of insurance for evaluating insurance holding companies, risk based capital, risk management, and own risk and solvency assessments; clarifying provisions related to risk based capital plans; relating to exemptions by the director of insurance for certain domestic and casualty insurers from risk based capital requirements; relating to insurance holding companies, including filing requirements, divestiture, content of statements, and hearings; relating to registration requirements; relating to transactions within an insurance holding company system or transactions involving a domestic insurer; relating to management and examination of domestic insurers that are part of an insurance holding company system; adding provisions relating to participation by the director of insurance in a supervisory college; relating to civil and criminal penalties for violations of provisions related to insurance holding companies; relating to provisions for risk management and own risk and solvency assessments; relating to operating requirements for controlling insurance producers; relating to producer-controlled insurers; adding and amending definitions related to insurers; and providing for an effective date."
00 HOUSE BILL NO. 164 01 "An Act relating to insurance; relating to risk based capital for domestic insurers and 02 fraternal benefit societies, including provisions related to insurers subject to risk based 03 capital and action level event requirements; relating to review by the director of 04 insurance of an insurer's risk based capital plan; relating to confidentiality and sharing 05 of certain information submitted to the director of insurance for evaluating insurance 06 holding companies, risk based capital, risk management, and own risk and solvency 07 assessments; clarifying provisions related to risk based capital plans; relating to 08 exemptions by the director of insurance for certain domestic and casualty insurers from 09 risk based capital requirements; relating to insurance holding companies, including 10 filing requirements, divestiture, content of statements, and hearings; relating to 11 registration requirements; relating to transactions within an insurance holding company 12 system or transactions involving a domestic insurer; relating to management and
01 examination of domestic insurers that are part of an insurance holding company system; 02 adding provisions relating to participation by the director of insurance in a supervisory 03 college; relating to civil and criminal penalties for violations of provisions related to 04 insurance holding companies; relating to provisions for risk management and own risk 05 and solvency assessments; relating to operating requirements for controlling insurance 06 producers; relating to producer-controlled insurers; adding and amending definitions 07 related to insurers; and providing for an effective date." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. AS 21.14.010(a) is amended to read: 10 (a) A [LIFE AND HEALTH] domestic insurer [, PROPERTY AND 11 CASUALTY DOMESTIC INSURER, OR OTHER INSURER REQUIRED BY THE 12 DIRECTOR] shall, on or before March 1, submit to the director a report of its risk 13 based capital covering the previous calendar year. The report must be in a form and 14 contain the information required by risk based capital instructions. A domestic insurer 15 required to submit a report under this subsection shall file the report with 16 (1) the National Association of Insurance Commissioners; and 17 (2) the insurance regulatory agency in each state in which the insurer is 18 authorized to transact business if the insurance regulatory agency has requested the 19 report in writing from the insurer; a report requested under this paragraph must 20 [SHALL] be delivered 21 (A) not later than 15 days from the receipt of a request if the 22 report has already been filed with the director; or 23 (B) at the time the report is filed with the director, if the report 24 has not yet been filed with the director. 25 * Sec. 2. AS 21.14.030(b) is repealed and reenacted to read: 26 (b) The director may retain an actuary, investment expert, or other consultant 27 as may be necessary to review the insurer's risk based capital plan or revised risk 28 based capital plan, to examine or analyze the assets, liabilities, and operations of the
01 insurer or to formulate a corrective order with respect to the insurer. The affected 02 insurer or affiliated person shall pay the fees, costs, and expenses of a person retained 03 by the director under this subsection as ordered by the director. 04 * Sec. 3. AS 21.14.040 is amended to read: 05 Sec. 21.14.040. Authorized control level event. If an authorized control level 06 event occurs, the director shall take the action necessary 07 (1) under AS 21.14.030(a) against the insurer; or 08 (2) to place the insurer under regulatory control under AS 21.78 [IF, 09 AFTER A HEARING UNDER AS 21.06.180 - 21.06.240, THE DIRECTOR 10 DETERMINES IT TO BE IN THE BEST INTEREST OF THE POLICYHOLDERS 11 AND CREDITORS OF THE INSURER AND OF THE PUBLIC]. 12 * Sec. 4. AS 21.14.050(a) is amended to read: 13 (a) If a mandatory control level event occurs for a domestic insurer, the 14 director shall take the action necessary to place the insurer under regulatory control 15 under AS 21.78 or, if a fraternal benefit society, under AS 21.84. 16 * Sec. 5. AS 21.14.050 is amended by adding a new subsection to read: 17 (c) The director may allow a property and casualty insurer that is running off 18 its business, by writing no new business and only by renewing ongoing business to the 19 extent required by law or by contract, but continuing to collect premiums and pay 20 claims as they come due on existing business, to continue the runoff under the 21 director's supervision without placing the insurer under regulatory control under 22 AS 21.78. 23 * Sec. 6. AS 21.14.060(a) is amended to read: 24 (a) If a plan is required under this chapter or by order of the director in 25 response to an event described under AS 21.14.020 - 21.14.050, the plan must 26 [SHALL] be a financial plan that includes [MUST INCLUDE] 27 (1) identification of the conditions that contribute to the level event; 28 (2) a proposal for corrective action that the insurer intends to take that 29 would be expected to eliminate the level event; 30 (3) projections of [FOR] the insurer's financial results for [IN] the 31 current year and for at least the next four years or, if a health organization, for at
01 least the next two years [IN THE FOUR SUBSEQUENT YEARS AFTER THE 02 CURRENT YEAR], with and without the proposed corrective action, including 03 projections of statutory operating income, net income, and capital and surplus; the 04 projections for new and renewal business must include separate projections for each 05 major line of business and separately identify each significant income, expense, and 06 benefit component; 07 (4) identification of the key assumptions affecting the insurer's 08 projections and the sensitivity of the projections to the assumptions; 09 (5) identification of the quality of, and problems associated with, the 10 insurer's business, including the insurer's assets, anticipated business growth, 11 associated surplus strain, extraordinary exposure to risk, mix of business, and use of 12 reinsurance in each case; and 13 (6) other information required by the director. 14 * Sec. 7. AS 21.14.060 is amended by adding a new subsection to read: 15 (f) The director may specify in a notification under (c) of this section of an 16 unsatisfactory plan or revised plan that the notification constitutes a regulatory action 17 level event, subject to an insurer's right to challenge the unsatisfactory determination 18 under AS 21.14.080. 19 * Sec 8. AS 21.14.080 is amended by adding a new subsection to read: 20 (b) An insurer shall request a hearing within 15 days after the director's notice 21 of 22 (1) an adjusted risk based capital report under AS 21.14.010; 23 (2) an unsatisfactory risk based capital plan or revised risk based 24 capital plan; 25 (3) a regulatory action level event based on an unsatisfactory risk 26 based capital plan or revised risk based capital plan; 27 (4) the insurer's failure to adhere to its risk based capital plan or 28 revised risk based capital plan and the failure has a substantial adverse effect on the 29 insurer's ability to eliminate the company action level event in accordance with its 30 plan or revised plan; and 31 (5) a corrective order applicable to the insurer.
01 * Sec. 9. AS 21.14.090(a) is amended to read: 02 (a) Except as provided in AS 21.06.060 and this subsection, a report required 03 under AS 21.14.010, a plan required under AS 21.14.060, the results or report of an 04 examination or analysis of an insurer performed under this chapter, and a corrective 05 order issued by the director are confidential and privileged and may not be made 06 public by the director or another person. Information in a risk based capital report 07 that is also set out in a publically available annual statement schedule is not 08 confidential [WITHOUT THE PRIOR WRITTEN CONSENT OF THE INSURER 09 WHO IS THE SUBJECT OF THE REPORT, PLAN, ANALYSIS, OR ORDER. IF 10 THE DIRECTOR, AFTER GIVING THE INSURER AND ITS AFFILIATES WHO 11 WOULD BE AFFECTED BY PUBLICATION OF THE INFORMATION NOTICE 12 AND OPPORTUNITY TO BE HEARD, DETERMINES THAT THE INTERESTS 13 OF POLICYHOLDERS, SHAREHOLDERS, OR THE PUBLIC WILL BE SERVED 14 BY THE PUBLICATION OF THE INFORMATION, THE DIRECTOR MAY 15 PUBLISH ALL OR PART OF THE INFORMATION IN THE MANNER THE 16 DIRECTOR CONSIDERS APPROPRIATE. THIS SUBSECTION DOES NOT 17 PROHIBIT THE DIRECTOR FROM RELEASING A REPORT, PLAN, 18 ANALYSIS, OR ORDER TO AN INSURANCE REGULATORY AGENCY OF 19 ANOTHER STATE]. 20 * Sec. 10. AS 21.14.090 is amended by adding a new subsection to read: 21 (d) In addition to the provisions in AS 21.06.060, information that is 22 confidential and privileged under this section is not subject to discovery and is not 23 admissible as evidence in a private civil action. 24 * Sec 11. AS 21.14.100(b) is amended to read: 25 (b) If a report, plan, or revised plan has not been filed in conformance with the 26 requirements of this chapter, the director may, as provided 27 (1) under AS 21.09.150, AS 21.84.535, AS 21.86.190, or 28 AS 21.87.110 and, as applicable to a particular insurer, suspend the authority of an 29 insurer to enter into new obligations or issue a new or renewal policy of insurance in 30 this state; or 31 (2) under AS 21.34.070, declare a surplus lines insurer ineligible to
01 transact business in this state. 02 * Sec. 12. AS 21.14 is amended by adding new sections to read: 03 Sec. 21.14.110. Exemptions. (a) The director may exempt from the application 04 of this chapter a domestic property and casualty insurer that 05 (1) writes direct business only in this state; 06 (2) writes direct annual premiums of $2,000,000 or less; and 07 (3) assumes no reinsurance in excess of five percent of direct premium 08 written. 09 (b) The director may exempt from the application of this chapter a domestic 10 health organization that 11 (1) writes direct business only in this state; 12 (2) assumes no reinsurance in excess of five percent of direct premium 13 written; and 14 (A) writes direct annual premiums for comprehensive medical 15 care of $2,000,000 or less; or 16 (B) is a limited health service organization that covers less than 17 2,000 lives. 18 Sec. 21.14.120. Notices. All notices by the director to an insurer that may 19 result in regulatory action under this chapter are effective upon mailing if mailed by 20 registered or certified mail, or in the case of any other transmission, upon the director's 21 transmission of the notice. 22 Sec. 21.14.130. Regulations. The director may adopt regulations to implement 23 this chapter. 24 * Sec. 13. AS 21.14.200(4) is amended to read: 25 (4) "company action level event" means a report, an adjusted report 26 that has not been challenged, or an adjusted report for which a challenge has been 27 rejected that is filed under AS 21.14.010 and that indicates that 28 (A) an insurer's total adjusted capital is greater than or equal to 29 its regulatory action level risk based capital but is less than its company action 30 level risk based capital; 31 (B) if a life and health insurer or a fraternal benefit society,
01 the insurer or the fraternal benefit society has total adjusted capital that is 02 greater than or equal to its [THE INSURER'S] company action level risk based 03 capital but is less than the product [250 PERCENT] of the insurer's authorized 04 control level risk based capital and 3.0 and that has a negative trend; or 05 (C) if a property and casualty insurer or health organization, the 06 insurer or organization has total adjusted capital that is greater than or equal to 07 the company action level risk based capital but is less than the product [300 08 PERCENT] of its authorized control level risk based capital and 3.0 and that 09 triggers the trend test calculation in the risk based capital instructions 10 applicable to the insurer or health organization [HAS A NEGATIVE 11 TREND]; 12 * Sec. 14. AS 21.14.200(5) is amended to read: 13 (5) "company action level risk based capital" means the product of 14 2.0 and [200 PERCENT OF] an insurer's authorized control level risk based capital; 15 * Sec. 15. AS 21.14.200(6) is amended to read: 16 (6) "corrective order" means an order issued by the director specifying 17 action that the director has determined is required [BY THE INSURER] under this 18 chapter; 19 * Sec. 16. AS 21.14.200(12) is amended to read: 20 (12) "mandatory control level risk based capital" means the product 21 of 0.70 [70 PERCENT] of an insurer's authorized control level risk based capital; 22 * Sec. 17. AS 21.14.200(13) is amended to read: 23 (13) "negative trend" for a life and health insurer or a fraternal 24 benefit society, [A PROPERTY AND CASUALTY INSURER, AND A HEALTH 25 ORGANIZATION] means a negative trend over a period of time, as determined by 26 the "trend test calculation" in the risk based capital instructions applicable to life and 27 health insurer or fraternal benefit society; 28 * Sec. 18. AS 21.14.200(16) is amended to read: 29 (16) "regulatory action level risk based capital" means the product of 30 1.5 [150 PERCENT] of an insurer's authorized control level risk based capital; 31 * Sec. 19. AS 21.14.200(20) is amended to read:
01 (20) "risk based capital instructions" means risk based capital 02 instructions most recently adopted by the National Association of Insurance 03 Commissioners [FOR A LIFE AND HEALTH INSURER OR FOR A PROPERTY 04 AND CASUALTY INSURER]; 05 * Sec. 20. AS 21.14.200 is amended by adding new paragraphs to read: 06 (22) "fraternal benefit society" has the meaning given in AS 21.84.900; 07 (23) "insurer" means a property and casualty insurer, a life and health 08 insurer, a health organization, and a fraternal benefit society. 09 * Sec. 21. AS 21.22.010(a) is amended to read: 10 (a) Until the provisions of (b) of this section have been fulfilled, a person may 11 not 12 (1) unless the person is an issuer, make a tender or an offer for or a 13 request or an invitation for tenders of, or enter into any agreement to exchange 14 securities for, seek to acquire, or acquire, in the open market or otherwise, any voting 15 security of a domestic insurer if, after the purchase, the person would, directly or 16 indirectly or by conversion or by exercise of any right to acquire, be in control of the 17 insurer; or 18 (2) enter into an agreement to merge with or otherwise to acquire 19 control of a domestic insurer or a person controlling a domestic insurer. 20 * Sec. 22. AS 21.22.010(c) is amended to read: 21 (c) If a proposal described in (a) of this section is to be made by means of a 22 registration statement under 15 U.S.C. 77a - 77aa (Securities Act of 1933) or in 23 circumstances requiring the disclosure of similar information under 15 U.S.C. 78a - 24 78mm (Securities Exchange Act of 1934), or under a state law requiring similar 25 registration or disclosure, the person required to file the statement under (b) of this 26 section may use those documents in furnishing the information called for by that 27 statement. [HOWEVER, THE DIRECTOR MAY REQUIRE THE PERSON 28 MAKING THE PROPOSAL TO PRODUCE OTHER INFORMATION THE 29 DIRECTOR CONSIDERS NECESSARY TO CARRY OUT THE DUTIES OF THE 30 DIRECTOR UNDER THIS CHAPTER.] 31 * Sec. 23. AS 21.22.010(h) is amended to read:
01 (h) In this section, "domestic insurer" includes any person controlling a 02 domestic insurer unless that person is either directly or through its affiliates primarily 03 engaged in business other than the business of insurance; in this subsection, 04 "person" includes a securities broker holding, in the usual and customary 05 broker's function, more than 20 percent of the voting securities of an insurer or 06 of a person controlling an insurer. 07 * Sec. 24. AS 21.22.010 is amended by adding new subsections to read: 08 (i) A controlling person of a domestic insurer seeking to divest its controlling 09 interest in the domestic insurer, in any manner, shall file with the director, with a copy 10 to the insurer, confidential notice of its proposed divestiture at least 30 days before the 11 cessation of control. The director shall determine those instances in which a party 12 seeking to divest or to acquire a controlling interest in an insurer will be required to 13 file for and obtain approval of the transaction. The information is confidential until the 14 conclusion of the transaction unless the director, in the director's discretion, 15 determines that confidential treatment will interfere with enforcement of this section. 16 If a statement referred to in (b) of this section is otherwise filed, this subsection will 17 not apply. 18 (j) For a transaction subject to this section, an acquiring person also shall file a 19 preacquisition notification with the director that contains the information set out in 20 AS 21.22.065(c). A failure to file the notification may be subject to penalties specified 21 in AS 21.22.065(i). 22 * Sec. 25. AS 21.22.020 is amended by adding new subsections to read: 23 (b) In addition to the other requirements in this section, a person required to 24 file a statement under AS 21.22.010 shall provide 25 (1) the annual enterprise risk statement specified in AS 21.22.060(n) 26 for so long as control exists; and 27 (2) an acknowledgment that the person and all subsidiaries within its 28 control in the insurance holding company system will provide information to the 29 director upon request as necessary to evaluate enterprise risk to the insurer. 30 (c) In this section, "consideration" includes a pledge of an insurer's stock or 31 the stock of its subsidiary.
01 * Sec. 26. AS 21.22.030(b) is repealed and reenacted: 02 (b) The public hearing referred to in (a) of this section must be held within 60 03 days after the statement required by AS 21.22.010 is filed and determined to be 04 complete by the director. The director shall give at least 20 days' notice of the hearing 05 to the person filing the statement. The person filing the statement shall give at least 06 seven days' notice of the hearing to the insurer and to other persons as may be 07 designated by the director. The director shall issue a decision within the 60-day period 08 preceding the effective date of the proposed transaction. The procedure in 09 AS 21.06.210 will apply to a public hearing under this section. 10 * Sec. 27. AS 21.22.030(c) is repealed and reenacted to read: 11 (c) In evaluating the effect of a merger or other acquisition under (a)(2) of this 12 section, the 13 (1) information requirements of AS 21.22.065(c)(1) and the standards 14 of AS 21.22.065(d)(1), (2), and (e) will apply; 15 (2) merger or other acquisition may not be disapproved if the director 16 finds that a situation meeting the criteria in AS 21.22.065(g) exists; and 17 (3) director may condition the approval of the merger or other 18 acquisition on the removal of a basis for disapproval within a specified period of time. 19 * Sec. 28. AS 21.22.030 is amended by adding a new subsection to read: 20 (e) If the proposed acquisition of control will require the approval of more 21 than one insurance regulator, the public hearing referred to under (a) and (b) of this 22 section may be held on a consolidated basis upon request of the person filing the 23 statement referred to in AS 21.22.010. That person shall file the statement referred to 24 in AS 21.22.010 with the National Association of Insurance Commissioners within 25 five days after making the request for a public hearing. The director may opt out of a 26 consolidated hearing and shall provide notice to the applicant of the opt-out within 10 27 days after receipt of the statement referred to in AS 21.22.010. A hearing conducted 28 on a consolidated basis must be public and must be held within the United States 29 before the insurance regulators of the states in which the insurers are domiciled. The 30 director may attend the hearing in person or by telecommunication. 31 * Sec. 29. AS 21.22.060(a) is amended to read:
01 (a) Except as provided in (c) of this section, an [EVERY] insurer that is 02 authorized to do business in this state and that is a member of an insurance holding 03 company system shall register with the director. An insurer that is subject to 04 registration under this section shall register not later than [WITHIN 60 DAYS 05 AFTER JANUARY 1, 1977 OR] 15 days after it becomes subject to registration [, 06 WHICHEVER IS LATER], unless the director for good cause shown extends the time 07 for registration; if the time is extended, the insurer shall register within the extended 08 time. 09 * Sec. 30. AS 21.22.060(b) is amended to read: 10 (b) An [EVERY] insurer subject to registration shall file a registration 11 statement, on a form provided by the director, that must contain current information 12 about 13 (1) the capital structure, general financial condition, ownership, and 14 management of the insurer and any person controlling the insurer; 15 (2) the identity and relationship of every member of the insurance 16 holding company system; 17 (3) the following agreements in force [, RELATIONSHIPS 18 SUBSISTING,] and transactions currently outstanding or that have occurred in the 19 last calendar year between the insurer and its affiliates: 20 (A) loans, other investments, or purchases, sales, or exchanges 21 of securities of the affiliates by the insurer or of the insurer by its affiliates; 22 (B) purchases, sales, or exchanges of assets; 23 (C) transactions not in the ordinary course of business; 24 (D) guarantees or undertakings for the benefit of an affiliate 25 that result in an actual contingent exposure of the insurer's assets to liability, 26 other than insurance contracts entered into in the ordinary course of the 27 insurer's business; 28 (E) all management and service contracts and all cost-sharing 29 arrangements; [AND] 30 (F) reinsurance agreements; 31 (G) dividends and other distributions to shareholders; and
01 (H) consolidated tax allocation agreements; and 02 (4) other matters concerning transactions between registered insurers 03 and any affiliates that may be included from time to time in a registration form 04 adopted or approved by the director; 05 (5) a pledge of the insurer's stock, including stock of a subsidiary 06 or controlling affiliate, for a loan made to a member of the insurance holding 07 company system; 08 (6) if requested by the director, the financial statements of or 09 within an insurance holding company system, including all affiliates or the most 10 recently filed parent corporation financial statements that have been filed with 11 the United States Securities and Exchange Commission; financial statements may 12 include annual audited financial statements filed with the United States Securities 13 and Exchange Commission under the Securities Act of 1933, as amended, or the 14 Securities Exchange Act of 1934, as amended; 15 (7) statements that the insurer's board of directors is responsible 16 for and oversees corporate governance and internal controls and that the 17 insurer's officers or senior management have approved, implemented, and 18 continue to maintain and monitor corporate governance and internal control 19 procedures; and 20 (8) other information required by the director by rule or 21 regulation. 22 * Sec. 31. AS 21.22.060(c) is amended to read: 23 (c) An [THE DIRECTOR MAY PERMIT AN] authorized insurer is not 24 required to register under (a) of this section if the insurer [THAT] is a member of 25 a holding company system subject to registration requirements and standards under 26 the laws or regulations of its state of domicile that are [IN THE OPINION OF THE 27 DIRECTOR] substantially similar to those contained in this chapter, except that the 28 director may require the insurer to file a copy of the registration statement, the 29 summary statement as described in (l) of this section, or other information filed 30 in its state of [TO SATISFY THE REQUIREMENTS OF (a) OF THIS SECTION 31 BY FILING A STATEMENT IN ACCORDANCE WITH THE LAWS OF THE
01 STATE OF ITS] domicile. 02 * Sec. 32. AS 21.22.060(e) is amended to read: 03 (e) Each registered insurer shall keep current the information required to be 04 disclosed in its registration statement by reporting all material changes or additions on 05 amendment forms provided by the director within 30 days after the end of the month 06 in which it learns of each change or addition; however, subject to AS 21.22.100, each 07 registered insurer shall report all dividends and other distributions to shareholders 08 within 15 [TWO] business days following their declaration. 09 * Sec. 33. AS 21.22.060(j) is amended to read: 10 (j) A person may file with the director a disclaimer of affiliation with an 11 authorized insurer or the disclaimer may be filed by the insurer or a member of an 12 insurance holding company system. The disclaimer must fully disclose all material 13 relationships and bases for affiliation between that person and that insurer as well as 14 the basis for disclaiming the affiliation. A disclaimer of affiliation will be considered 15 granted unless the director, within 30 days following receipt of a complete 16 disclaimer, notifies the disclaiming party that the disclaimer is disallowed. If 17 disallowed, the disclaiming party may request a hearing under AS 21.06.180 18 [AFTER A DISCLAIMER HAS BEEN FILED, THE INSURER IS RELIEVED OF 19 ANY DUTY TO REGISTER OR REPORT UNDER THIS SECTION THAT MAY 20 ARISE OUT OF THE INSURER'S RELATIONSHIP WITH THE PERSON UNTIL 21 THE DIRECTOR DISALOWS THE DISCLAIMER. THE DIRECTOR SHALL 22 DISALLOW A DISCLAIMER ONLY AFTER FURNISHING ALL PARTIES IN 23 INTEREST WITH NOTICE AND AN OPPORTUNITY TO BE HEARD AND 24 AFTER MAKING SPECIFIC FINDINGS OF FACT TO SUPPORT THE 25 DISALLOWANCE]. 26 * Sec. 34. AS 21.22.060 is amended by adding new subsections to read: 27 (m) A person within an insurance holding company system subject to 28 registration shall provide complete and accurate information to an insurer, where the 29 information is reasonably necessary to enable the insurer to comply with the 30 provisions of this chapter. 31 (n) The ultimate controlling person of an insurer subject registration shall file
01 an annual enterprise risk report. The report must, to the best of ultimate controlling 02 person's knowledge and belief, identify the material risks within the insurance holding 03 company system that may pose enterprise risk to the insurer. The report shall be filed 04 with the lead state insurance regulator of the insurance holding company system as 05 determined by the procedures in the Financial Analysis Handbook adopted by the 06 National Association of Insurance Commissioners. 07 * Sec. 35. AS 21.22.065(d) is repealed and reenacted to read: 08 (d) The director may enter an order under (b) of this section regarding an 09 acquisition if the insurer fails to file adequate information in compliance with (c) of 10 this section or if there is substantial evidence that the acquisition may substantially 11 lessen competition, create a monopoly in a line of insurance in this state, or 12 significantly increase an insurer's market concentration. In determining whether an 13 acquisition violates the competitive standards in this subsection, the director shall 14 consider the following: 15 (1) an acquisition covered under (a) of this section involving two or 16 more insurers competing in the same market is prima facie evidence of a violation of 17 the competitive standard if 18 (A) the market is highly concentrated and the involved insurers 19 possess the following shares of the market: 20 Insurer A Insurer B 21 4 percent 4 percent or more 22 10 percent 2 percent or more 23 15 percent 1 percent or more; 24 (B) the market is not highly concentrated and the involved 25 insurers possess the following shares of the market: 26 Insurer A Insurer B 27 5 percent 5 percent or more 28 10 percent 4 percent or more 29 15 percent 3 percent or more 30 19 percent 1 percent or more. 31 (2) an acquisition covered under (a) of this section involving two or
01 more insurers competing in the same market is prima facie evidence of violation of the 02 competitive standard if 03 (A) there is a significant trend toward increased concentration 04 in the market, which occurs when the aggregate market share of any grouping 05 of the largest insurers in the market, from the two largest to the eighth largest, 06 has increased by seven percent or more of the market over a period of time 07 extending from any base year five to 10 years before the acquisition up to the 08 date of the acquisition; 09 (B) one of the insurers involved is an insurer in a grouping of 10 large insurers showing the requisite increase in market share; and 11 (C) another involved insurer's market share is two percent or 12 more. 13 * Sec. 36. AS 21.22.080 is amended to read: 14 Sec. 21.22.080. Transactions with affiliates. Material transactions by 15 registered insurers with their affiliates are subject to the following standards: 16 (1) the terms shall be fair and reasonable; 17 (2) charges or fees for services performed shall be reasonable; 18 (3) expenses incurred and payment received shall be allocated to the 19 insurer in conformity with customary insurance accounting practices consistently 20 applied; 21 (4) the books, accounts, and records of each party to the transactions 22 shall be maintained so as to disclose clearly and accurately the [PRECISE] nature and 23 details of the transactions including accounting information that is necessary to 24 support the reasonableness of the charges or fees to the respective parties;[AND] 25 (5) the insurer's surplus as regards policyholders following any 26 dividends or distributions to shareholder affiliates or performance under a material 27 transaction with an affiliate shall be reasonable in relation to the insurer's outstanding 28 liabilities and adequate to its financial needs; and 29 (6) agreements for cost sharing services and management must 30 include the provisions as are required by regulation adopted by the director. 31 * Sec. 37. AS 21.22.085(a) is amended to read:
01 (a) Transactions [THE FOLLOWING TRANSACTIONS] involving a 02 domestic insurer and a person in its insurance holding company system, including 03 amendments or modifications of affiliate agreements previously filed under 04 AS 21.22.080, which are subject to a materiality standard in (1) - (7) of this 05 subsection, may not be entered into unless the insurer has notified the director in 06 writing of the insurer's intention to enter into the transaction at least 30 days before the 07 transaction, or a shorter period if allowed by the director, and the director has not 08 disapproved the transaction within the required notice period. The notice of 09 amendments or modifications must include the reasons for the change and the 10 financial impact on the domestic insurer. A domestic insurer shall provide to the 11 director informal notice, within 30 days after a termination of a previously filed 12 agreement, for determination of the type of filing required, if any. The 13 requirements in this section apply to the following transactions: 14 (1) a sale, purchase, exchange, loan or extension of credit, 15 [GUARANTEE,] or investment, provided the transaction is equal to or exceeds 16 (A) with respect to insurers other than life insurers, the lesser of 17 three percent of the insurer's admitted assets or 25 percent of surplus that 18 pertains to policyholder surplus, as of the 31st day of December of the 19 calendar year in which the transaction took place [EACH CALCULATED 20 UNDER AS 21.21.020(d)]; or 21 (B) with respect to life insurers, three percent of the insurer's 22 admitted assets as of the 31st day of December of the calendar year in 23 which the transaction took place [CALCULATED UNDER 24 AS 21.21.020(d)]; 25 (2) a loan or extension of credit to a person who is not an affiliate, 26 where the insurer makes loans or extensions of credit with the agreement or 27 understanding that the proceeds of the transaction, in whole or in substantial part, are 28 to be used to make a loan or extension of credit to, purchase an asset of, or make an 29 investment in an affiliate of the insurer making the loan or extension of credit 30 provided the transaction is equal to or exceeds 31 (A) with respect to insurers other than life insurers, the lesser of
01 three percent of the insurer's admitted assets or 25 percent of surplus that 02 pertains to policyholder surplus, as of the 31st day of December of the 03 calendar year in which the transaction took place [EACH CALCULATED 04 UNDER AS 21.21.020(d)]; or 05 (B) with respect to life insurers, three percent of the insurer's 06 admitted assets as of the 31st day of December of the calendar year in which 07 the transaction took place, calculated under AS 21.21.020(d); 08 (3) a reinsurance agreement or modification, including 09 (A) a reinsurance pooling agreement; 10 (B) an agreement in which the reinsurance premium or a 11 change in the insurer's liabilities, or the projected reinsurance premium 12 or a change in the insurer's liabilities in any of the three years after 13 entering into the agreement or modification, equals or exceeds five percent 14 of the insurer's surplus that pertains to policyholders as of the 31st day of 15 December of the calendar year in which the transaction took place, 16 including those agreements that may require as consideration a transfer of 17 assets from an insurer to a nonaffiliate, if an agreement or understanding 18 exists between the insurer and nonaffiliate that a portion of the assets will 19 be transferred to one or more affiliates of the insurer [IN WHICH THE 20 REINSURANCE PREMIUM OR CHANGE IN THE INSURER'S 21 LIABILITIES EQUALS OR EXCEEDS FIVE PERCENT OF THE 22 INSURER'S SURPLUS THAT PERTAINS TO POLICYHOLDER 23 SURPLUS, CALCULATED UNDER AS 21.21.020(D), INCLUDING AN 24 AGREEMENT THAT MAY REQUIRE AS CONSIDERATION THE 25 TRANSFER OF ASSETS FROM AN INSURER TO A NONAFFILIATE IF 26 AN AGREEMENT OR UNDERSTANDING EXISTS BETWEEN THE 27 INSURER AND NONAFFILIATE THAT A PORTION OF THE ASSETS 28 WILL BE TRANSFERRED TO AN AFFILIATE OF THE INSURER]; 29 (4) a management agreement, service contract, tax allocation 30 agreement, guarantee, or cost-sharing arrangement; [AND] 31 (5) a material transaction specified by regulation that the director
01 determines may adversely affect the interests of the insurer's policyholders; 02 (6) a guarantee if made by a domestic insurer; provided, however, 03 that a guarantee that is quantifiable as to amount is not subject to the notice 04 requirements of this subsection unless it exceeds the lesser of one-half of one 05 percent of the insurer's admitted assets or 10 percent of surplus that pertains to 06 policyholders as of the 31st day of December of the calendar year in which the 07 transaction took place; a guarantee that is not quantifiable as to amount is 08 subject to the notice requirements of this subsection; and 09 (7) a direct or an indirect acquisition or investment in a person 10 that controls an insurer or in an affiliate of the insurer in an amount that, 11 together with the person's present holdings in such investment, exceeds two and 12 one-half percent of the insurer's surplus to policyholders; direct or indirect 13 acquisitions or investments in subsidiaries authorized under this title or 14 regulations adopted by the director or in nonsubsidiary insurance affiliates that 15 are subject to the provisions of this chapter are exempt from this requirement. 16 * Sec. 38. AS 21.22.105 is amended by adding new subsections to read: 17 (c) Not less than one-third of the directors of a domestic insurer and not less 18 than one-third of the members of each committee of the board of directors of any 19 domestic insurer may be persons who are not officers or employees of the insurer or of 20 any entity controlling, controlled by, or under common control with the insurer and 21 who are not beneficial owners of a controlling interest in the voting stock of the 22 insurer or entity. At least one person must be included in a quorum for the transaction 23 of business at any meeting of the board of directors or a committee thereof. 24 (d) The board of directors of a domestic insurer shall establish one or more 25 committees comprised solely of directors who are not officers or employees of the 26 insurer or of any entity controlling, controlled by, or under common control with the 27 insurer and who are not beneficial owners of a controlling interest in the voting stock 28 of the insurer or the entity. The committee or committees shall have responsibility for 29 nominating candidates to be a director for election by shareholders or policyholders, 30 evaluating the performance of officers deemed to be principal officers of the insurer, 31 and recommending to the board of directors the selection and compensation of the
01 principal officers. 02 (e) The provisions of (c) and (d) of this section do not apply to a domestic 03 insurer if a person controlling the insurer has a board of directors and committees 04 thereof that meet the requirements of (c) and (d) of this section with respect to a 05 controlling person. In this section, "person" may include an insurer, a mutual 06 insurance holding company, or a publicly held corporation. 07 (f) An insurer may make application to the director for a waiver from the 08 requirements of this section, if the insurer's annual direct written and assumed 09 premium, excluding premiums reinsured with the Federal Crop Insurance Corporation 10 and the National Flood Insurance Program, is less than $300,000,000. An insurer may 11 make application to the director for a waiver from the requirements of this section 12 based on an insurer's unique circumstances. The director may consider various factors, 13 including the type of business entity, volume of business written, availability of 14 qualified board members, or the ownership or organizational structure of the entity. 15 * Sec. 39. AS 21.22.110(a) is repealed and reenacted to read: 16 (a) In addition to the director's authority to examine insurers under 17 AS 21.06.120 - 21.06.170, the director may examine an insurer registered under 18 AS 21.22.060 and its affiliates to ascertain the financial condition of the insurer, 19 including the enterprise risk to the insurer by the ultimate controlling party, by any 20 entity or combination of entities within the insurance holding company system, or by 21 the insurance holding company system on a consolidated basis. 22 * Sec. 40. AS 21.22.110(b) is repealed and reenacted to read: 23 (b) The director may 24 (1) order an insurer registered under AS 21.22.060 to produce the 25 records, books, or other information papers in the possession of the insurer or its 26 affiliates as are reasonably necessary to determine compliance with this chapter; 27 (2) order an insurer registered under AS 21.22.060 to produce 28 information not in the possession of the insurer if the insurer can obtain access to the 29 information under contractual relationships, statutory obligations, or other method; in 30 the event the insurer cannot obtain the information requested by the director, the 31 insurer shall provide the director a detailed explanation of the reason that the insurer
01 cannot obtain the information and the identity of the holder of information; if it 02 appears to the director that the detailed explanation is without merit, the director may 03 require, after notice and hearing, the insurer to pay a penalty of $250 for each day's 04 delay in providing the requested information, or may suspend or revoke the insurer's 05 license; 06 (3) in the event the insurer fails to comply with an order under this 07 subsection, examine or issue subpoenas to the insurer's affiliates to obtain the 08 information. 09 * Sec. 41. AS 21.22 is amended by adding a new section to read: 10 Sec. AS 21.22.115. Supervisory colleges. (a) With respect to an insurer 11 registered under AS 21.22.060, and in accordance with (c) of this section, the director 12 may participate in a supervisory college for a domestic insurer that is part of an 13 insurance holding company system with international operations to determine the 14 insurer's compliance with this chapter. The director may 15 (1) initiate the establishment of a supervisory college; 16 (2) clarify the membership and participation of other supervisors in the 17 supervisory college; 18 (3) clarify the functions of the supervisory college and the role of other 19 regulators, including the establishment of a group-wide supervisor; 20 (4) coordinate the ongoing activities of the supervisory college, 21 including planning meetings, supervisory activities, and processes for information 22 sharing; and 23 (5) establish a crisis management plan. 24 (b) Each registered insurer subject to this section shall be liable for and shall 25 pay the reasonable expenses of the director's participation in a supervisory college in 26 accordance with (c) of this section, including reasonable travel expenses. Under this 27 section, a supervisory college may be convened as either a temporary or permanent 28 forum for communication and cooperation between the regulators charged with the 29 supervision of the insurer or its affiliates, and the director may establish a regular 30 assessment to the insurer for the payment of these expenses. 31 (c) To assess the business strategy, financial position, legal and regulatory
01 position, risk exposure, risk management, and governance processes, and as part of the 02 examination of individual insurers in accordance with AS 21.22.110, the director may 03 participate in a supervisory college with other regulators charged with supervision of 04 the insurer or its affiliates, including other state, federal, and international regulatory 05 agencies. The director may enter into agreements in accordance under AS 21.06.060 06 and AS 21.22.120 to share confidential information between the director and 07 regulatory agencies or other members of the supervisory college. Nothing in this 08 section delegates to the supervisory college the director's authority to regulate or 09 supervise an insurer or its affiliates under this title. 10 * Sec. 42. AS 21.22.120 is amended to read: 11 Sec. 21.22.120. Confidentiality. All information, documents, holding 12 company analyses, insurer profile summaries, and copies of the information and 13 documents obtained by or disclosed to the director or any other person in the course of 14 an examination or investigation under AS 21.22.110 and all information reported 15 under AS 21.22.020(b), 21.22.060, and 21.22.085 - 21.22.105, [AS 21.22.060] and all 16 preacquisition notification information received under AS 21.22.065 shall be given 17 confidential and privileged treatment under AS 21.06.060 and is not subject to 18 discovery or admissible in evidence in a private civil action [AND MAY NOT BE 19 MADE PUBLIC BY THE DIRECTOR OR ANY OTHER PERSON, EXCEPT TO 20 INSURANCE AGENCIES OF OTHER STATES WITHOUT THE PRIOR 21 WRITTEN CONSENT OF THE INSURER TO WHICH IT PERTAINS]. However, if 22 the director, after giving the insurer and its affiliates who would be affected by 23 publication of the information notice and opportunity to be heard, determines that the 24 interests of policyholders, shareholders, or the public will be served by the publication 25 of the information, the director may publish all or part of the information in the 26 manner the director considers appropriate. 27 * Sec. 43. AS 21.22.120 is amended by adding a new subsection to read: 28 (b) The director may 29 (1) share documents, materials, or other information, including the 30 confidential and privileged information under (a) of this section, with state, federal, 31 and international regulatory agencies, with the National Association of Insurance
01 Commissioners and its affiliates and subsidiaries, and with state, federal, and 02 international law enforcement authorities, including members of a supervisory college 03 described in AS 21.22.115, provided that the recipient agrees in writing to maintain 04 the confidentiality of the document, material, or other information and has verified in 05 writing the legal authority to maintain confidentiality; 06 (2) not share confidential and privileged documents, material, or 07 information reported under AS 21.22.060(n) with the insurance regulator of another 08 state, unless the statutes or regulations of the other state are substantially similar to this 09 section and the other state has agreed in writing not to disclose the information; 10 (3) enter into a written agreement with the National Association of 11 Insurance Commissioners governing sharing and use of information obtained under 12 this chapter that must 13 (A) specify procedures and protocols regarding the 14 confidentiality and security of information shared with the National 15 Association of Insurance Commissioners and its affiliates and subsidiaries 16 under this chapter, including procedures and protocols for sharing by the 17 National Association of Insurance Commissioners with state, federal, or 18 international regulators; 19 (B) specify that ownership of information shared with the 20 National Association of Insurance Commissioners and its affiliates and 21 subsidiaries under this chapter remains with the director and National 22 Association of Insurance Commissioners' use of the information is subject to 23 the direction of the director; 24 (C) require prompt notice to be given to an insurer whose 25 confidential information in possession of the National Association of Insurance 26 Commissioners under this chapter is subject to a request or subpoena to the 27 National Association of Insurance Commissioners for disclosure or production; 28 and 29 (D) require the National Association of Insurance 30 Commissioners and its affiliates and subsidiaries to consent to intervention by 31 an insurer in a judicial or administrative action in which the National
01 Association of Insurance Commissioners and affiliates and subsidiaries may be 02 required to disclose confidential information about the insurer shared with the 03 National Association of Insurance Commissioners and its affiliates and 04 subsidiaries under this chapter. 05 * Sec. 44. AS 21.22.170 is repealed and reenacted to read: 06 Sec. 21.22.170. Civil penalties for violations. (a) An insurer failing, without 07 just cause, to file a registration statement required under this chapter shall be required, 08 after notice and hearing under AS 21.06.170 - 21.06.240, to pay a $200 fine for each 09 day the insurer fails to file the registration. The maximum penalty under this section is 10 $50,000. The director may reduce the penalty if the insurer demonstrates to the 11 director that the imposition of the penalty would be a financial hardship to the insurer. 12 (b) A director or officer of an insurance holding company system who 13 knowingly violates, participates in, or assents to, or who knowingly permits an officer 14 or agent of an insurer to engage in transactions or make investments that have not been 15 properly reported or submitted under AS 21.22.060, 21.22.085, or 21.22.100, or that 16 violate this chapter, shall pay, in the director's or officer's individual capacity, a fine of 17 not more than $50,000 for each violation, after notice and hearing under AS 21.06.170 18 - 21.06.240. In determining the amount of the fine, the director shall take into account 19 the appropriateness of the fine with respect to the gravity of the violation, the history 20 of previous violations, and other matters as justice may require. 21 (c) If the director has a reason to believe that an insurer subject to this chapter, 22 or a director, officer, employee, or agent of the insurer, has engaged in a transaction or 23 entered into a contract that is subject to AS 21.22.080 - 21.22.105, and that would not 24 have been approved had the approval been requested, the director may order the 25 insurer to cease and desist immediately any further activity under that transaction or 26 contract. After notice and hearing under AS 21.06.170 - 21.06.240, the director may 27 also order the insurer to void any contracts and restore the status quo if the action is in 28 the best interest of the policyholders, creditors, or the public. 29 (d) If the director has reason to believe that a person has committed a violation 30 of AS 21.22.010 or 21.22.020 that prevents the full understanding of the enterprise 31 risk to an insurer by its affiliates or by the insurance holding company system, the
01 violation may serve as an independent basis for disapproving dividends or 02 distributions and for placing the insurer under an order of rehabilitation in accordance 03 with AS 21.78.090. 04 * Sec. 45. AS 21.22 is amended by adding a new section to read: 05 Sec. 21.22.175. Criminal penalties. (a) An insurer or a director, officer, 06 employee, or agent of an insurer who commits a wilful violation of this chapter is 07 guilty of a class C felony. 08 (b) An officer, director, or employee of an insurance holding company system 09 who knowingly subscribes to or makes or causes to be made a false statement or false 10 report or false filing with the intent to deceive the director under this chapter is guilty 11 of a class C felony. 12 (c) An insurer may not pay a fine imposed by a court on a director, officer, 13 employee, or agent that is sentenced under (a) or (b) of this section. The fine must be 14 paid by the officer, director, employee, or agent in the officer's, director's, or 15 employee's individual capacity. 16 * Sec. 46. AS 21.22.200(10) is amended to read: 17 (10) "person" means an individual, a corporation, a limited liability 18 company, a partnership, an association, a joint stock company, a trust, an 19 unincorporated organization, any similar entity or any combination of these entities 20 acting in concert, but does not include a joint venture partnership exclusively 21 engaged in owning, managing, leasing, or developing real or tangible personal 22 property, or a securities broker performing not [NO] more than the usual and 23 customary broker's function; 24 * Sec. 47. AS 21.22.200 is amended by adding new paragraphs to read: 25 (15) "enterprise risk" means an activity, circumstance, event, or series 26 of events involving one or more affiliates of an insurer that, if not remedied promptly, 27 is likely to have a material adverse effect on the financial condition or liquidity of the 28 insurer or its insurance holding company system as a whole including anything that 29 would cause the insurer's risk based capital to fall into company action level as set out 30 in AS 21.14.020 or would cause the insurer to be impaired or in imminent danger of 31 becoming impaired as defined under AS 21.97.900 and regulations adopted by the
01 director; 02 (16) "supervisory college" means a forum for cooperation and 03 communication among the involved state, federal, and international regulators 04 established for the fundamental purpose of facilitating the effectiveness of supervision 05 of entities that belong to an insurance holding company system. 06 * Sec 48. AS 21 is amended by adding a new chapter to read: 07 Chapter 23. Risk Management; Own Risk and Solvency Assessment. 08 Sec. 21.23.010. Risk management framework. An insurer shall maintain a 09 risk management framework to assist the insurer with identifying, assessing, 10 monitoring, managing, and reporting on its material and relevant risks. This 11 requirement may be satisfied if the insurance group of which the insurer is a member 12 maintains a risk management framework applicable to the operations of the insurer. 13 Sec. 21.23.020. Own risk and solvency assessment requirement. Unless 14 exempted under AS 21.23.040, an insurer or the insurance group of which the insurer 15 is a member shall regularly conduct an own risk and solvency assessment consistent 16 with the own risk and solvency assessment guidance manual. The assessment shall be 17 conducted annually, but also at any time when there are significant changes to the risk 18 profile of the insurer or the insurance group of which the insurer is a member. 19 Sec. 21.23.030. Own risk and solvency assessment summary report. (a) If 20 requested by the director, an insurer shall submit an own risk and solvency assessment 21 summary report or any combination of reports that together contain the information 22 described in the own risk and solvency assessment guidance manual that is applicable 23 to the insurer or the insurance group of which it is a member. The director's request for 24 a report from an insurer is limited to one request a year. The report must be submitted 25 to the director within 30 days of the request, unless the insurer requests an extension 26 of time in writing and the director grants the request. If an insurer is a member of an 27 insurance group, the insurer shall submit the report required by this subsection more 28 than annually if the director is the lead state regulator of the insurance group as 29 determined by the procedures in the Financial Analysis Handbook adopted by the 30 National Association of Insurance Commissioners. 31 (b) For a report submitted under this section, an insurer or insurance group's
01 chief risk officer or other executive having responsibility for the oversight of the 02 insurer's enterprise risk management process shall sign the report and attest to the best 03 of the officer's or executive's belief and knowledge that the insurer applies the 04 enterprise risk management process described in the report and that a copy of the 05 report has been provided to the insurer's board of directors or the appropriate 06 committee of the board. 07 (c) An insurer may comply with (a) of this section by providing the most 08 recent and substantially similar report or reports provided by the insurer or another 09 member of the insurance group of which the insurer is a member to the insurance 10 regulator of another state or a foreign jurisdiction, if that report provides information 11 that is comparable to the information described in the own risk and solvency 12 assessment guidance manual. A report in a language other than English must be 13 accompanied by a translation of that report into the English language. 14 Sec 21.23.040. Exemption. (a) An insurer is exempt from the requirements of 15 this chapter, if 16 (1) the insurer has annual direct written and unaffiliated assumed 17 premium, including international direct and assumed premium but excluding 18 premiums reinsured with the Federal Crop Insurance Corporation and the National 19 Flood Insurance Program, less than $500,000,000; and 20 (2) the insurance group of which the insurer is a member has annual 21 direct written and unaffiliated assumed premium, including international direct and 22 assumed premium, but excluding premiums reinsured with the Federal Crop Insurance 23 Corporation and the National Flood Insurance Program, less than $1,000,000,000. 24 (b) If an insurer qualifies for exemption under (a)(1) of this section, but the 25 insurance group of which the insurer is a member does not qualify for exemption 26 under (a)(2) of this section, then the own risk and solvency assessment summary 27 report required under AS 21.23.030 must include every insurer within the insurance 28 group. This requirement may be satisfied by the submission of more than one own risk 29 and solvency assessment summary report for a combination of insurers provided the 30 combination of reports includes every insurer within the insurance group. 31 (c) If an insurer does not qualify for exemption under to (a)(1) of this section,
01 but the insurance group of which it is a member qualifies for exemption under (a)(2) 02 of this section, then the only own risk and solvency assessment summary report that 03 may be required under AS 21.23.030 is the report applicable to that insurer. 04 (d) An insurer that does not qualify for exemption under (a) of this section 05 may apply to the director for a waiver from the requirements of this chapter based on 06 unique circumstances. In deciding whether to grant the insurer's request for a waiver, 07 the director may consider the type and volume of business written, ownership and 08 organizational structure, and any other factor that the director considers relevant to the 09 insurer or insurance group of which the insurer is a member. If the insurer is part of an 10 insurance group with insurers domiciled in more than one state, the director shall 11 coordinate with the lead state regulator and with the other domiciliary regulators in 12 considering whether to grant the insurer's request for a waiver. 13 (e) Notwithstanding the exemptions stated in this section, the director may 14 require that an insurer maintain a risk management framework, conduct an own risk 15 and solvency assessment, and file an own risk and solvency assessment summary 16 report 17 (1) based on unique circumstances, including the type and volume of 18 business written, ownership and organizational structure, federal agency requests, and 19 international supervisor requests; 20 (2) if the insurer has risk based capital for company action level event 21 as set out in AS 21.14, meets one or more of the standards of an insurer deemed to be 22 impaired or in imminent danger of becoming impaired as defined in AS 21.97.900 and 23 in regulations adopted by the director, or otherwise exhibits qualities of a troubled 24 insurer as determined by the director. 25 (f) If an insurer that qualified for exemption under (a) of this section no longer 26 qualifies for that exemption due to changes in premium as reflected in the insurer's 27 most recent annual statement or in the most recent annual statements of the insurers 28 within the insurance group of which the insurer is a member, the insurer shall have 29 one year following the year the threshold in (a) of this section is exceeded to comply 30 with the requirements of this chapter. 31 Sec 21.23.050. Contents of own risk and solvency assessment summary
01 report. (a) The own risk and solvency assessment summary report under 02 AS 21.22.030 must be prepared in compliance with the own risk and solvency 03 assessment guidance manual, subject to the requirements of (b) of this section. The 04 insurer shall maintain documentation and supporting information relating to the 05 assessment and make them available on examination or on request of the director. 06 (b) The director's review of the report and additional requests for information 07 shall be made using procedures currently used in the analysis and examination of 08 multistate or global insurers and insurance groups. 09 Sec 21.23.060. Confidentiality. Documents, materials, or other information, 10 including the own risk and solvency assessment summary report, that are obtained by, 11 created by, or disclosed to the director or another person under this chapter are 12 confidential and privileged and are considered trade secrets and proprietary business 13 information subject to AS 21.06.060 and AS 21.22.120. A third-party consultant is 14 subject to the information sharing requirements of AS 21.22.120(b). 15 Sec 21.23.070. Penalties. An insurer shall pay to the director $1,000 for each 16 day the insurer fails to file the report within the time required in AS 21.23.030(a), not 17 to exceed $365,000. The director may reduce the penalty if the insurer demonstrates to 18 the director that the imposition of the penalty is a financial hardship to the insurer. 19 Sec. 21.23.080. Regulations. The director may adopt regulations to 20 implement, define, and enforce the provisions of this chapter. 21 Sec 21.23.090. Definitions. In this chapter, 22 (1) "insurance group" means those insurers and affiliates included 23 within an insurance holding company system as defined in AS 21.22.200; 24 (2) "insurer" has the meaning given in AS 21.97.900, except that it 25 shall not include agencies, authorities, or instrumentalities of the United States, its 26 possessions and territories, the Commonwealth of Puerto Rico, the District of 27 Columbia, or a state or political subdivision of a state; 28 (3) "own risk and solvency assessment" means a confidential internal 29 assessment, appropriate to the nature, scale, and complexity of an insurer or insurance 30 group, conducted by that insurer or insurance group of the material and relevant risks 31 associated with the insurer or insurance group's current business plan and the
01 sufficiency of capital resources to support those risks; 02 (4) "own risk and solvency assessment guidance manual" means the 03 Own Risk and Solvency Assessment Guidance Manual developed and adopted by the 04 National Association of Insurance Commissioners; 05 (5) "own risk and solvency assessment summary report" means a 06 confidential high-level summary of an insurer or insurance group's own risk and 07 solvency assessment; 08 (6) "risk management framework" means a set of internal policies or 09 procedures that address an insurer's or insurance group's risk culture and governance, 10 risk identification and prioritization, risk appetite, tolerance and limits, risk 11 management controls, and risk reporting and communication as described in the 12 National Association of Insurance Commissioners Own Risk and Solvency 13 Assessment Guidance Manual. 14 * Sec. 49. AS 21.27.570(a) is amended to read: 15 (a) If the aggregate amount of gross written premium on business placed by a 16 controlling insurance producer exceeds five percent of the admitted assets of the 17 controlled insurer for a calendar year as reported in the insurer's most recent financial 18 statement filed with the director, the controlling insurance producer may not place 19 business with the controlled insurer and the controlled insurer may not accept business 20 from the controlling insurance producer unless a written contract is in effect between 21 the parties that 22 (1) establishes the responsibilities of each party, indicates each party's 23 share of responsibility for each particular function, and specifies the division of 24 responsibilities; 25 (2) has been approved by the board of directors of the controlled 26 insurer; 27 (3) contains the following minimum provisions: 28 (A) the controlled insurer may terminate the contract for cause 29 upon written notice sent [BY CERTIFIED MAIL] to the controlling producer 30 and shall suspend the authority of the controlling insurance producer to write 31 business during a dispute regarding the cause for termination;
01 (B) the controlling insurance producer shall render accounts to 02 the controlled insurer detailing all transactions, including information in the 03 accounts necessary to support compensation, commissions, charges, and other 04 fees received by, or owing to, the controlling producer; 05 (C) the controlling insurance producer shall remit money due 06 under the contract to the controlled insurer at least monthly; 07 (D) premiums or installments collected shall be due not later 08 than 90 days after the effective date of coverage placed with the controlled 09 insurer; 10 (E) money collected for the account of a controlled insurer 11 shall be held by the controlling insurance producer as a fiduciary, except a 12 controlling insurance producer not required to be licensed under this chapter 13 shall act as a fiduciary in compliance with the requirements of its domiciliary 14 jurisdiction; 15 (F) all payments on behalf of the controlled insurer shall be 16 held by the controlling insurance producer as a fiduciary; 17 (G) the controlling insurance producer shall maintain separate 18 records for each controlled insurer in a form usable by the controlled insurer; 19 the controlled insurer or its authorized representative shall have the right to 20 audit and the right to copy all accounts and records related to the controlled 21 insurer's business; the director, in addition to authority granted in this title, 22 shall have access to all books, bank accounts, and records of the controlling 23 insurance producer in a form usable to the director; 24 (H) the contract may not be assigned in whole or in part by the 25 controlling insurance producer; 26 (I) the controlled insurer shall provide, and the controlling 27 producer shall follow, written underwriting standards, rules, procedures, and 28 manuals that must include the conditions for acceptance or rejection of risks, 29 including types of risks that may be written, maximum limits of liability, 30 applicable exclusions, territorial limitations, policy cancellation provisions, the 31 maximum policy term, the rating system, and basis of the rates to be charged;
01 (J) the underwriting standards, rules, procedures, and manuals 02 shall be the same as those applicable to comparable business placed with the 03 controlled insurer by insurance producers [LICENSEES] other than the 04 controlling insurance producer [LICENSEE]; 05 (K) the rates and terms of the controlling insurance producer's 06 compensation including commissions, charges, and other fees may not be 07 greater than those applicable to comparable business placed with the controlled 08 insurer by insurance producers [LICENSEES] other than the controlling 09 insurance producer [LICENSEE]; 10 (L) the controlled insurer shall establish a limit, that may be 11 different for each kind or class of business, on the amount of premium that the 12 controlling insurance producer may place with the controlled insurer in relation 13 to the controlled insurer's surplus and total writings; 14 (M) the controlled insurer shall notify the controlling insurance 15 producer if an applicable limit is approached and the controlling insurance 16 producer may not place and the controlled insurer may not accept business if 17 the limit under (L) of this paragraph has been reached; 18 (N) if the contract provides that the controlling insurance 19 producer, on insurance placed with the controlled insurer, is to be compensated 20 contingent upon the controlling insurer's profits on the placed insurance, the 21 contingent compensation may not be determined or paid until 22 (i) at least five years after the premiums are earned on 23 casualty business and at least one year after the premiums are earned on 24 any other insurance; 25 (ii) a later period established by the director for 26 specified kinds or classes of insurance; and 27 (iii) not until the profits have been verified under (b) of 28 this section; 29 (O) the controlling insurance producer may negotiate but may 30 not bind reinsurance on behalf of the controlled insurer on insurance that the 31 controlling insurance producer places with the controlled insurer, except that
01 the controlling insurance producer may bind facultative reinsurance contracts 02 under obligatory agreements if the contract with the controlled insurer contains 03 reinsurance underwriting guidelines including, for both reinsurance assumed 04 and ceded, a list of reinsurers with which automatic agreements are in effect, 05 the coverage and amounts or percentages that may be reinsured, and 06 commission schedules; and 07 (4) provides that the controlled insurer has an audit committee 08 composed of independent members of the board of directors that meet at least annually 09 with management, the insurer's independent certified public accountants, and an 10 independent actuary specialist acceptable to the director to review the adequacy of the 11 insurer's reserves for losses incurred and outstanding. 12 * Sec. 50. 21.27.570 is amended by adding new subsections to read: 13 (i) Except as provided in this section, AS 21.22 applies to all parties within a 14 holding company system subject to this section. 15 (j) A controlling insurance producer may not be appointed as a broker by a 16 client in this state or relative to a subject resident, located, or to be performed in this 17 state unless, in a form acceptable to the director, the controlling insurance producer 18 has disclosed in writing to the client the relationship between the controlling insurance 19 producer and controlled insurer, each client has acknowledged receipt of the 20 disclosure, and a copy of the acknowledged disclosure is maintained by the controlling 21 insurance producer in its records. The records shall be available for inspection by the 22 director. 23 * Sec. 51. 21.27.900(8) is amended to read: 24 (8) "controlled insurer" means an admitted insurer domiciled in this 25 state or domiciled in a state that is not an accredited state having a law 26 substantially similar to AS 21.27.570 that is controlled, directly or indirectly, by an 27 insurance producer and includes a risk retention group as defined in 15 U.S.C. 28 3901, but not a captive insurer; 29 * Sec. 51. 21.27.900 is amended by adding new paragraphs to read: 30 (32) "accredited state" means a state in which the insurance department 31 or regulatory agency has qualified as meeting the minimum financial regulatory
01 standards adopted and established by the National Association of Insurance 02 Commissioners; 03 (33) "captive insurer" means an insurer owned by another organization 04 whose exclusive purpose is to insure risks of the parent organization and affiliated 05 companies or, in the case of groups and associations, an insurance organization owned 06 by the insureds whose exclusive purpose is to insure risks of member organizations 07 and group members and their affiliates. 08 * Sec. 52. AS 21.14.010(d), 21.14.010(e); AS 21.27.560(f), 21.27.570(h)(5); and 09 AS 21.36.360(h) are repealed. 10 * Sec. 53. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 REVISOR'S INSTRUCTIONS. The revisor of statues is requested to change the catch 13 line of AS 21.22.080 from "Transactions with affiliates" to "Transactions within an insurance 14 holding company system." 15 * Sec. 54. This Act takes effect on July 1, 2015.