HB 78: "An Act relating to insurance; relating to an insurer's corporate annual disclosure; relating to insurance company holding systems; and providing for an effective date."
00 HOUSE BILL NO. 78 01 "An Act relating to insurance; relating to an insurer's corporate annual disclosure; 02 relating to insurance company holding systems; and providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 21.09 is amended by adding new sections to read: 05 Sec. 21.09.330. Corporate governance annual disclosure scope. (a) 06 AS 21.09.330 - 21.09.342 do not prescribe or impose a corporate governance standard 07 or internal procedure beyond which is required under AS 10. Nothing in AS 21.09.330 08 - 21.09.342 limits the director's authority or the rights or obligations of a third party. 09 (b) AS 21.09.330 - 21.09.342 apply to an insurer domiciled in this state. 10 Sec. 21.09.332. Disclosure requirement. (a) An insurer, or an insurance group 11 of which the insurer is a member, shall submit to the director not later than June 1 of 12 each calendar year a corporate governance annual disclosure that contains the 13 information described in AS 21.09.336(b). In the event the director makes a request 14 under (c) of this section, and if the insurer is a member of an insurance group, the
01 insurer shall submit the report required by this section to the lead state insurance 02 regulator of the insurance group, under the laws of the lead state, in accordance with 03 the procedures set out in the most recent Financial Analysis Handbook adopted by the 04 National Association of Insurance Commissioners. 05 (b) The corporate governance annual disclosure must include a signature of 06 the insurer or insurance group's chief executive officer or corporate secretary attesting 07 to the best of that individual's belief and knowledge that 08 (1) the insurer has implemented the corporate governance practices 09 required under AS 21.09.330 - 21.09.342; and 10 (2) a copy of the corporate governance annual disclosure has been 11 provided to the insurer's board of directors or the appropriate committee of the board. 12 (c) An insurer not required to submit a corporate governance annual disclosure 13 under (a) of this section shall submit a disclosure upon request by the director. 14 (d) For purposes of completing a corporate governance annual disclosure, the 15 insurer or insurance group, depending on how the insurer or insurance group has 16 structured its system of corporate governance, may provide information regarding 17 corporate governance at one or all of the following: 18 (1) the ultimate controlling parent level; 19 (2) an intermediate holding company level; or 20 (3) the individual legal entity level. 21 (e) The insurer or insurance group 22 (1) is encouraged to make the corporate governance annual disclosure 23 at the level at which 24 (A) the insurer's or insurance group's risk appetite is 25 determined; 26 (B) the earnings, capital, liquidity, operations, and reputation of 27 the insurer are overseen collectively and at which the supervision of those 28 factors are coordinated and exercised; or 29 (C) legal liability for failure of general corporate governance 30 duties would be placed; 31 (2) if determining the level of reporting based on the criteria under this
01 section, shall 02 (A) indicate which of the three criteria under (1) of this 03 subsection was used to determine the level of reporting; and 04 (B) explain any subsequent change in the level of reporting. 05 (f) A review of the corporate governance annual disclosure and any additional 06 requests for information shall be made through the lead state in accordance with the 07 procedures set out in the most recent Financial Analysis Handbook adopted by the 08 National Association of Insurance Commissioners. 09 (g) An insurer providing information substantially similar to the information 10 required under AS 21.09.330 - 21.09.342 in other documents provided to the director, 11 including proxy statements filed in conjunction with Form B requirements under 12 regulations of the division, or other state or federal filings provided to the division, is 13 not required to duplicate that information in the corporate governance annual 14 disclosure; however, the insurer or insurance group shall include in the disclosure a 15 cross reference of the document in which the information is included. 16 Sec. 21.09.334. Regulations and orders. The director may, to carry out the 17 provisions of AS 21.09.330 - 21.09.349, 18 (1) adopt regulations, including regulations substantially similar to the 19 National Association of Insurance Commissioner's Corporate Governance Annual 20 Disclosure Model Regulation; and 21 (2) issue orders. 22 Sec. 21.09.336. Contents of corporate governance annual disclosure. (a) An 23 insurer or insurance group may have discretion in responding to a corporate 24 governance annual disclosure inquiry if the insurer's or insurance group's disclosure 25 contains the material necessary for the director to gain an understanding of the 26 insurer's or insurance group's corporate governance structure, policies, and practices. 27 The director may request additional information the director determines necessary for 28 the director to have a clear understanding of the insurer's or insurance group's 29 corporate governance policies, reporting or information system, or controls 30 implementing those policies. 31 (b) The insurer or insurance group shall prepare the corporate governance
01 annual disclosure consistent with regulations adopted by the director under 02 AS 21.09.334. An insurer or insurance group shall maintain documents and supporting 03 information used in preparing the insurer's or insurance group's disclosure and shall 04 make the documents and supporting information available upon examination or 05 request by the director. 06 Sec. 21.09.338. Confidentiality. Documents, materials, or other information, 07 including a corporate governance annual disclosure, in the possession or control of the 08 division that are obtained by, created by, or disclosed to the director or any person 09 under AS 21.09.330 - 21.09.349 are confidential and subject to the provisions of 10 AS 21.06.060. 11 Sec. 21.09.340. National Association of Insurance Commissioners and 12 third-party consultants. (a) The director may retain, at the insurer's or insurance 13 group's expense, third-party consultants, including attorneys, actuaries, accountants, 14 and other experts not otherwise a part of the director's staff as may be reasonably 15 necessary to assist the director in reviewing the insurer's or insurance group's 16 corporate governance annual disclosure and related information or the insurer's or 17 insurance group's compliance with AS 21.09.330 - 21.09.349. 18 (b) A person retained under (a) of this section shall be under the direction and 19 control of the director and shall act in a purely advisory capacity. 20 (c) The National Association of Insurance Commissioners and third-party 21 consultants shall be subject to the same confidentiality standards and requirements as 22 the director. 23 (d) As part of the retention process, a third-party consultant shall verify to the 24 director in writing, with notice to the insurer or insurance group, that it is free of a 25 conflict of interest, that it has internal procedures in place to monitor compliance with 26 a conflict, and that it shall comply with the confidentiality standards and requirements 27 under AS 21.09.330 - 21.09.342. 28 (e) A written agreement with the National Association of Insurance 29 Commissioners, a third-party consultant, or both, governing sharing and use of 30 information provided under AS 21.09.330 - 21.09.342 must contain all of the 31 following provisions and expressly require the written consent of the insurer or
01 insurance group before making public information under AS 21.09.330 - 21.09.342: 02 (1) specific procedures and protocols for maintaining the 03 confidentiality and security of corporate governance annual disclosure-related 04 information shared with the National Association of Insurance Commissioners or a 05 third-party consultant under AS 21.09.330 - 21.09.342; 06 (2) procedures and protocols for sharing by the National Association of 07 Insurance Commissioners only with other state regulators from states in which the 08 insurer or insurance group has domiciled insurers; the agreement must provide that the 09 recipient agrees in writing to maintain the confidentiality of the corporate governance 10 annual disclosure-related documents, materials, or other information and has verified 11 in writing the legal authority to maintain confidentiality; 12 (3) a provision specifying that ownership of the corporate governance 13 annual disclosure-related information shared with the National Association of 14 Insurance Commissioners or a third-party consultant remains with the division, and 15 the National Association of Insurance Commissioner's or third-party consultant's use 16 of the information is subject to the direction of the director; 17 (4) a provision that prohibits the National Association of Insurance 18 Commissioners or a third-party consultant from storing the information shared under 19 AS 21.09.330 - 21.09.342 in a permanent database after the underlying analysis is 20 completed; 21 (5) a provision requiring the National Association of Insurance 22 Commissioners or a third-party consultant to provide prompt notice to the director and 23 to the insurer or insurance group regarding any subpoena, request for disclosure, or 24 request for production of the insurer's or insurance group's corporate governance 25 annual disclosure-related information; 26 (6) a requirement that the National Association of Insurance 27 Commissioners or a third-party consultant consent to intervention by an insurer or 28 insurance group in any judicial or administrative action in which the National 29 Association of Insurance Commissioners or a third-party consultant may be required 30 to disclose confidential information about the insurer or insurance group shared with 31 the National Association of Insurance Commissioners or a third-party consultant under
01 AS 21.09.330 – 21.09.342. 02 Sec. 21.09.342. Penalties. An insurer or insurance group shall pay $1,000 for 03 each day the insurer or insurance group fails, without just cause, to file the corporate 04 governance annual disclosure within the time required under AS 21.09.332(a), not to 05 exceed $365,000. The director may reduce the penalty under this section if the insurer 06 or insurance group demonstrates to the director that the imposition of the penalty is a 07 financial hardship to the insurer or insurance group. 08 * Sec. 2. AS 21.22.085(a) is amended to read: 09 (a) Transactions involving a domestic insurer and a person in its insurance 10 holding company system, including amendments or modifications of affiliate 11 agreements previously filed under AS 21.22.080 that are subject to a materiality 12 standard in (1) - (7) of this subsection, may not be entered into unless the insurer has 13 notified the director in writing of the insurer's intention to enter into the transaction at 14 least 30 days before the transaction, or a shorter period if allowed by the director, and 15 the director has not disapproved the transaction within the required notice period. The 16 notice of amendments or modifications must include the reasons for the change and 17 the financial effect on the domestic insurer. A domestic insurer shall provide to the 18 director notice, within 30 days after a termination of a previously filed agreement, for 19 determination of the type of filing required, if any. The requirements in this section 20 apply to the following transactions: 21 (1) a sale, purchase, exchange, loan or extension of credit, or 22 investment, provided the transaction is equal to or exceeds 23 (A) with respect to insurers other than life insurers, the lesser of 24 three percent of the insurer's admitted assets or 25 percent of surplus that 25 pertains to policyholders, as of December 31 of the previous calendar year [IN 26 WHICH THE TRANSACTION TOOK PLACE]; or 27 (B) with respect to life insurers, three percent of the insurer's 28 admitted assets as of December 31 of the previous calendar year [IN WHICH 29 THE TRANSACTION TOOK PLACE]; 30 (2) a loan or extension of credit to a person who is not an affiliate, 31 where the insurer makes loans or extensions of credit with the agreement or
01 understanding that the proceeds of the transaction, in whole or in substantial part, are 02 to be used to make a loan or extension of credit to, purchase an asset of, or make an 03 investment in an affiliate of the insurer making the loan or extension of credit, 04 provided the transaction is equal to or exceeds 05 (A) with respect to insurers other than life insurers, the lesser of 06 three percent of the insurer's admitted assets or 25 percent of surplus that 07 pertains to policyholder surplus, as of December 31 of the previous calendar 08 year [IN WHICH THE TRANSACTION TOOK PLACE]; or 09 (B) with respect to life insurers, three percent of the insurer's 10 admitted assets as of December 31 of the previous calendar year [IN WHICH 11 THE TRANSACTION TOOK PLACE]; 12 (3) a reinsurance agreement or modification, including 13 (A) a reinsurance pooling agreement; 14 (B) an agreement in which the reinsurance premium or change 15 in the insurer's liabilities, or the projected reinsurance premium or a change in 16 the insurer's liabilities in any of the three years after entering into the 17 agreement or modification, equals or exceeds five percent of surplus that 18 pertains to policyholders as of December 31 of the previous calendar year [IN 19 WHICH THE TRANSACTION TOOK PLACE], including an agreement that 20 may require as consideration the transfer of assets from an insurer to a 21 nonaffiliate if an agreement or understanding exists between the insurer and 22 nonaffiliate that a portion of the assets will be transferred to one or more 23 affiliates of the insurer; 24 (4) a management agreement, service contract, tax allocation 25 agreement, guarantee, or cost-sharing arrangement; 26 (5) a material transaction specified by regulation that the director 27 determines may adversely affect the interests of the insurer's policyholders; 28 (6) a guarantee if made by a domestic insurer, except that a guarantee 29 that is quantifiable as to amount is not subject to the notice requirements of this 30 subsection unless it exceeds the lesser of one-half of one percent of the insurer's 31 admitted assets or 10 percent of surplus that pertains to policyholders as of
01 December 31 of the previous calendar year [IN WHICH THE TRANSACTION 02 TOOK PLACE]; a guarantee that is not quantifiable as to amount is subject to the 03 notice requirements of this subsection; and 04 (7) a direct or an indirect acquisition or investment in a person that 05 controls an insurer or in an affiliate of the insurer in an amount that, together with the 06 person’s present holdings in the investment, exceeds two and one-half percent of 07 surplus that pertains to policyholders; direct or indirect acquisitions or investments in 08 subsidiaries authorized under this title or regulations adopted by the director or in 09 nonsubsidiary insurance affiliates that are subject to the provisions of this chapter are 10 exempt from this requirement. 11 * Sec. 3. AS 21.22.120(a) is amended to read: 12 (a) All information, documents, holding company analyses, insurer profile 13 summaries, and copies of the information and documents obtained by or disclosed to 14 the director or any other person in the course of an examination or investigation made 15 under AS 21.22.110 and all information reported under AS 21.22.020(b), 21.22.060, 16 [AND] 21.22.085 - 21.22.105, and 21.22.177 and all preacquisition notification 17 information received under AS 21.22.065 shall be given confidential treatment under 18 AS 21.06.060. However, if the director, after giving the insurer and its affiliates who 19 would be affected by publication of the information notice and opportunity to be 20 heard, determines that the interests of policyholders, shareholders, or the public will be 21 served by the publication of the information, the director may publish all or part of the 22 information in the manner the director considers appropriate. 23 * Sec. 4. AS 21.22.120 is amended by adding new subsections to read: 24 (c) The director or any person who received documents, materials, or other 25 information while acting under the authority of the director or with whom such 26 documents, materials, or other information are shared under AS 21.22 may not be 27 permitted or required to testify in any private civil action concerning any confidential 28 documents, materials, or information subject to (a) of this section. 29 (d) The sharing of information by the director under AS 21.22 shall not 30 constitute a delegation of regulatory authority or rulemaking. The director is solely 31 responsible for the administration, execution, and enforcement of this chapter.
01 (e) A waiver of any applicable privilege or claim of confidentiality in the 02 documents, materials, or information may not be given as a result of disclosure to the 03 director under this section or as a result of sharing as authorized under (b) of this 04 section. 05 (f) Documents, materials, or other information in the possession or control of 06 the National Association of Insurance Commissioners under AS 21.22 07 (A) shall be confidential by law; 08 (B) are not subject to 09 (i) AS 40.25.110 – 40.25.220; 10 (ii) subpoena; or 11 (iii) discovery or admissible in evidence in any private 12 action. 13 * Sec. 5. AS 21.22 is amended by adding a new section to read: 14 Sec. 21.22.177. Group-wide supervision of internationally active insurance 15 groups. (a) The director may act as the group-wide supervisor for an internationally 16 active insurance group in accordance with this section. However, the director may 17 otherwise acknowledge another regulatory official as the group-wide supervisor where 18 the internationally active insurance group 19 (1) does not have substantial operations in the United States; 20 (2) has substantial insurance operations in the United States but not in 21 this state; or 22 (3) has substantial insurance operations in the United States and this 23 state, but the director has determined under (b) and (f) of this section that the other 24 regulatory official is the appropriate group-wide supervisor; an insurance holding 25 company system that does not otherwise qualify as an internationally active insurance 26 group may request that the director make a determination or acknowledgement as to a 27 group-wide supervisor under this section. 28 (b) In cooperation with other state, federal, and international regulatory 29 agencies, the director shall identify a single group-wide supervisor for an 30 internationally active insurance group. The director may determine that the director is 31 the appropriate group-wide supervisor for an internationally active insurance group
01 that conducts substantial insurance operations concentrated in this state. However, the 02 director may acknowledge that a regulatory official from another jurisdiction is the 03 appropriate group-wide supervisor for the internationally active insurance group. The 04 director shall consider the following factors when making a determination or 05 acknowledgement under this subsection: 06 (1) the place of domicile of the insurers within the internationally 07 active insurance group that hold the largest share of the group's written premiums. 08 assets, or liabilities; 09 (2) the place of domicile or the top-tiered insurer or insurers in the 10 insurance holding company system of the internationally active insurance group; 11 (3) the location of the executive offices or largest operational offices of 12 the internationally active insurance group; 13 (4) whether another regulatory official is acting or is seeking to act as 14 the group-wide supervisor under a regulatory system that the director determines to be 15 (A) substantially similar to the system of regulation provided 16 under the laws of this state; or 17 (B) otherwise sufficient in terms of providing for group-wide 18 supervision, enterprise risk analysis, and cooperation with other regulatory 19 officials; and 20 (5) whether another regulatory official acting or seeking to act as the 21 group-wide supervisor provides the director with reasonably reciprocal recognition 22 and cooperation; however, a regulatory official identified under this section as the 23 group-wide supervisor may determine that it is appropriate to acknowledge another 24 supervisor to serve as the group-wide supervisor; the acknowledgement of the group- 25 wide supervisor shall be made after consideration of the factors listed in this 26 subsection, and shall be made in cooperation with, and subject to, the 27 acknowledgement of other regulatory officials involved with supervision of members 28 of the internationally active insurance group and in consultation with the 29 internationally active insurance group. 30 (c) Notwithstanding any other provision of law, when another regulatory 31 official is acting as the group-wide supervisor of an internationally active insurance
01 group, the director shall acknowledge that regulatory official as the group-wide 02 supervisor. However, the director shall make a determination or acknowledgement as 03 to the appropriate group-wide supervisor for the internationally active insurance group 04 under (b) of this section in the event of a material change in the internationally active 05 insurance group that results in 06 (1) the internationally active insurance group's insurers domiciled in 07 this state holding the largest share of the group's premiums, assets, or liabilities; or 08 (2) this state being the place of domicile of the top-tiered insurer or 09 insurers in the holding company system of the internationally active insurance group. 10 (d) The director, under AS 21.22.110, may collect from an insurer registered 11 under AS 21.22.060 all information necessary to determine whether the director may 12 act as the group-wide supervisor of an internationally active insurance group or if the 13 director may acknowledge another regulatory official to act as the group-wide 14 supervisor. Before issuing a determination that an internationally active insurance 15 group is subject to group-wide supervision, the director shall notify the insurer 16 registered under AS 21.22.060 and the ultimate controlling person within the 17 internationally active insurance group. The internationally-active insurance group shall 18 have not less than 30 days to provide the director with additional information pertinent 19 to the pending determination. The director may publish on the division's Internet 20 website the identity of internationally active insurance groups that the director has 21 determined are subject to group-wide supervision by the director. 22 (e) If the director is the group-wide supervisor for an internationally active 23 insurance group, the director may 24 (1) assess the enterprise risks within the internationally active 25 insurance group to ensure 26 (A) the material financial condition and liquidity risks to 27 members of the internationally active insurance group that are engaged in the 28 business of insurance are identified by management; and 29 (B) reasonable and effective mitigation measures are in place; 30 (2) request from a member of an internationally active insurance group 31 subject to the director's supervision, information necessary and appropriate to assess
01 enterprise risk, including information about the members of the internationally active 02 insurance group regarding 03 (A) governance, risk assessment, and management; 04 (B) capital adequacy; and 05 (C) material intercompany transactions; 06 (3) coordinate and, through the authority of the regulatory officials of 07 the jurisdictions where members of the internationally active insurance group are 08 domiciled, compel development and implementation of reasonable measures designed 09 to ensure that the internationally active insurance group is able to timely recognize and 10 mitigate enterprise risks to members of the internationally active insurance group that 11 are engaged in the business of insurance; 12 (4) communicate with other state, federal, and international regulatory 13 agencies for members within the internationally-active insurance group and share 14 relevant information subject to the confidentiality provisions under AS 21.22.120, 15 through supervisory colleges under AS 21.22.115 or otherwise; 16 (5) enter into agreements with, or obtain documentation from, an 17 insurer registered under AS 21.22.060, a member of the internationally active 18 insurance group, or a state, federal, and international regulatory agency for members 19 of the internationally active insurance group, providing the basis for, or otherwise 20 clarifying, the director's role as group-wide supervisor, including provisions for 21 resolving disputes with other regulatory officials; the agreements or documentation 22 may not serve as evidence in a proceeding against an insurer or person within an 23 insurance holding company system not domiciled or incorporated in this state or doing 24 business in this state or is otherwise subject to jurisdiction in this state; and 25 (6) perform other group-wide supervision activities, consistent with the 26 authorities and purposes set out in this subsection. 27 (f) If the director acknowledges that another regulatory official from a 28 jurisdiction that is not accredited by the National Association of Insurance 29 Commissioners is the group-wide supervisor, the director is authorized to reasonably 30 cooperate, thorough supervisory colleges or otherwise, with group-wide supervision 31 undertaken by the group-wide supervisor, if
01 (1) the director's cooperation is in compliance with the laws of this 02 state; and 03 (2) the regulatory official acknowledged as the group-wide supervisor 04 also recognizes and cooperates with the director's activities as a group-wide supervisor 05 for other internationally active insurance groups where applicable; where such 06 recognition and cooperation is not reasonably reciprocal, the director may refuse 07 recognition and cooperation. 08 (g) The director may enter into agreements with, or obtain documentation 09 from, an insurer registered under AS 21.22.060, an affiliate of the insurer, or other 10 state, federal, and international regulatory agencies for members of the internationally 11 active insurance group, that provide the basis for, or otherwise clarify, a regulatory 12 official's role as group-wide supervisor. 13 (h) A registered insurer subject to this section shall be liable for and shall pay 14 the reasonable expenses of the director's participation in the administration of this 15 section, including the engagement of attorneys, actuaries, and other professionals, and 16 all reasonable travel expenses. 17 * Sec. 6. AS 21.22.200 is amended by adding new paragraphs to read: 18 (17) "group-wide supervisor" means the regulatory official authorized 19 to engage in conducting and coordinating group-wide supervision activities who is 20 determined or acknowledged by the director under AS 21.22.117 to have sufficient 21 significant contacts with the internationally active insurance group; 22 (18) "internationally active insurance group" means an insurance 23 holding company system that includes an insurer registered under AS 21.22.060 and 24 that meets the following criteria: 25 (A) insurers that are part of the insurance holding company 26 system that write premiums in at least three countries; 27 (B) the percentage of gross premiums written outside the 28 United States is at least 10 percent of the insurance holding company system's total 29 gross written premiums; and 30 (C) based on a three-year rolling average, the total assets of the 31 insurance holding company system are at least $50,000,000,000 or the total gross
01 written premiums of the insurance holding company system are at least 02 $10,000,000,000. 03 * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to 04 read: 05 TRANSITION: REGULATIONS. The director of the division of insurance may adopt 06 regulations necessary to implement the changes made by this Act. The regulations take effect 07 under AS 44.62 (Administrative Procedure Act), but not before the effective date of the 08 relevant provisions of this Act. 09 * Sec. 8. This Act takes effect immediately under AS 01.10.070(c).