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House Engrossed |
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State of Arizona House of Representatives Fifty-second Legislature Second Regular Session 2016
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CHAPTER 51
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HOUSE BILL 2188 |
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AN ACT
Amending title 20, chapter 2, Arizona Revised Statutes, by adding article 15; relating to the transaction of insurance business.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 20, chapter 2, Arizona Revised Statutes, is amended by adding article 15, to read:
Article 15. RISK MANAGEMENT AND SOLVENCY ASSESSMENT
20-491. Definitions
In this article, unless the context other requires:
1. "Insurance group" means for the purposes of conducting an ORSA those insurers and affiliates that are included within an insurance holding company system as defined in section 20‑481.
2. "Insurer":
(a) Means every person engaged in the business of making contracts of insurance.
(b) Does not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia or a state or political subdivision of a state.
3. "ORSA guidance manual" means the own risk and solvency assessment guidance manual that is developed and adopted by the national association of insurance commissioners.
4. "ORSA summary report" means a confidential high‑level ORSA summary of an insurer or insurance group.
5. "Own risk and solvency assessment" or "ORSA" means a confidential internal assessment, appropriate to the nature, scale and complexity of an insurer or insurance group, that is conducted by that insurer or insurance group of the material and relevant risks associated with the insurer's or insurance group's current business plan and the sufficiency of capital resources to support those risks.
20-491.01. Risk management framework required
An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing and reporting on its material and relevant risks. This requirement is satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer.
20-491.02. ORSA requirement
Subject to section 20‑491.04, an insurer or the insurance group of which the insurer is a member shall regularly conduct an ORSA consistent with a process comparable to the ORSA guidance manual. The ORSA shall be conducted annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member.
20-491.03. Submission of ORSA summary report; requirements
A. On the director's request, and not more than once each year, an insurer shall submit to the director an ORSA summary report, or any combination of reports that together contain the information described in the ORSA guidance manual, applicable to the insurer or the insurance group of which the insurer is a member. Notwithstanding any request from the director, if the insurer is a member of an insurance group, the insurer shall submit the report or set of reports required by this subsection if the director is the lead state director or commissioner of the insurance group as determined by the procedures within the financial analysis handbook adopted by the national association of insurance commissioners.
B. The report shall include a signature of the insurer or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process attesting to the best of that person's belief and knowledge that the insurer applies the enterprise risk management process described in the ORSA summary report and that a copy of the report has been provided to the insurer's board of directors or the appropriate governing committee.
C. An insurer may comply with subsection A of this section by providing the most recent and substantially similar report or reports provided by the insurer or another member of an insurance group of which the insurer is a member to the director or commissioner of another state or to a supervisor or regulator of a foreign jurisdiction if that report provides information that is comparable to the information described in the ORSA guidance manual. Any such report in a language other than English shall be accompanied by a translation of that report into the English language.
20-491.04. Exemptions from article requirements; reports
A. An insurer is exempt from the requirements of this article if both of the following apply:
1. The insurer has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premium reinsured with the federal crop insurance corporation and federal flood program, less than five hundred million dollars.
2. The insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premium reinsured with the federal crop insurance corporation and federal flood program, less than one billion dollars.
B. If an insurer qualifies for exemption pursuant to subsection A, paragraph 1 of this section but the insurance group of which the insurer is a member does not qualify for exemption pursuant to subsection A, paragraph 2 of this section, the ORSA summary report that may be required pursuant to section 20‑491.03 shall include every insurer within the insurance group. This requirement is satisfied by the submission of more than one ORSA summary report for any combination of insurers, provided any combination of reports includes every insurer within the insurance group.
C. If an insurer does not qualify for exemption pursuant to subsection A, paragraph 1 of this section but the insurance group of which the insurer is a member does qualify for exemption pursuant to subsection A, paragraph 2 of this section, the only ORSA summary report that may be required pursuant to section 20‑491.03 is the report applicable to that insurer.
D. If an insurer does not qualify for exemption pursuant to subsection A, paragraph 1 of this section, the insurer may apply to the director for a waiver from the requirements of this article based on unique circumstances. In deciding whether to grant the insurer's request for waiver, the director may consider the type and volume of business written, ownership and organizational structure and any other factor the director considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the director shall coordinate with the lead state director or commissioner of insurance and with the other domiciliary directors or commissioners in considering whether to grant the insurer's request for a waiver.
E. Notwithstanding the exemptions stated in this section, the director may require that an insurer maintain a risk management framework, conduct an ORSA and file an ORSA summary report:
1. Based on unique circumstances including the type and volume of business written, ownership and organizational structure, federal agency requests and international supervisor requests.
2. If the insurer has risk‑based capital for a company action level event as defined in section 20‑488, meets one or more of the standards of an insurer deemed to be in hazardous financial condition as prescribed in section 20‑220.01 or otherwise exhibits qualities of a troubled insurer as determined by the director.
F. If an insurer that qualifies for exemption pursuant to subsection A, paragraph 1 of this section subsequently no longer qualifies for that exemption due to changes in premium reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer has one year after the year the threshold is exceeded to comply with the requirement of this article.
20-491.05. ORSA summary report
A. Subject to the requirements of subsection B of this section, the ORSA summary report shall be prepared consistent with the ORSA guidance manual. Documentation and supporting information shall be maintained and made available on examination or on the request of the director.
B. The review of the ORSA summary report and any additional requests for information shall be made using similar procedures currently used in the analysis and examination of multistate or global insurers and insurance groups.
20-491.06. Confidentiality of ORSA documents; allowable uses
A. Documents, materials or other information, including the ORSA summary report, that is in the director's possession or control and that is obtained by, created by or disclosed to the director or any other person under this article, is recognized by this state as being proprietary and containing trade secrets. All such documents, materials or other information is confidential by law and privileged, is not considered a public record pursuant to title 39, chapter 1, is not subject to subpoena and is not subject to discovery or admissible in evidence in any private civil action. The director is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the director's official duties. The director may not otherwise make the documents, materials or other information public without the prior written consent of the insurer.
B. Neither the director nor any person who received documents, materials or other ORSA‑related information, through examination or otherwise, while acting under the authority of the director or with whom such documents, materials or other information is shared pursuant to this article, is allowed or required to testify in any private civil action concerning any confidential documents, materials or other information that is subject to subsection A of this section.
C. In order to assist in the performance of the director's regulatory duties, the director:
1. May share documents, materials or other ORSA‑related information, including the confidential and privileged documents, materials or other information subject to subsection A of this section, including proprietary and trade secret documents and materials, with other state, federal and international regulatory agencies, including members of any supervisory college as defined in section 20-481, with the national association of insurance commissioners and with any third-party consultants designated by the director, if the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA‑related documents, materials or other information and has verified in writing the legal authority to maintain confidentiality.
2. May receive documents, materials or ORSA‑related information, including otherwise confidential and privileged documents, materials or other information, including proprietary and trade secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college as defined in section 20-481, and from the national association of insurance commissioners and shall maintain as confidential or privileged any document, material or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or other information.
3. Shall enter into written agreements with the national association of insurance commissioners or a third‑party consultant governing sharing and use of information provided pursuant to this article, consistent with this subsection, that do all of the following:
(a) Specify procedures and protocols regarding the confidentiality and security of information shared with the national association of insurance commissioners or a third‑party consultant pursuant to this article, including procedures and protocols for sharing by the national association of insurance commissioners with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA‑related documents, materials or other information and has verified in writing the legal authority to maintain confidentiality.
(b) Specify that ownership of information shared with the national association of insurance commissioners or a third‑party consultant pursuant to this article remains with the director and that the national association of insurance commissioners' or a third-party consultant's use of the information is subject to the direction of the director.
(c) Prohibit the national association of insurance commissioners or a third‑party consultant from storing the information shared pursuant to this article in a permanent database after the underlying analysis is completed.
(d) Require prompt notice to be given to an insurer whose confidential information in the possession of the national association of insurance commissioners or a third‑party consultant pursuant to this article is subject to a request or subpoena to the national association of insurance commissioners or a third‑party consultant for disclosure or production.
(e) Require the national association of insurance commissioners or a third‑party consultant to consent to intervention by an insurer in any judicial or administrative action in which the national association of insurance commissioners or a third‑party consultant may be required to disclose confidential information about the insurer shared with the national association of insurance commissioners or a third‑party consultant pursuant to this article.
(f) In the case of an agreement involving a third‑party consultant, provide the insurer's written consent.
D. The sharing of information by the director pursuant to this article does not constitute a delegation of regulatory authority or rulemaking, and the director is solely responsible for the administration, execution and enforcement of this article.
E. A waiver of any applicable privilege or claim of confidentiality in the documents, materials or other information does not occur as a result of disclosure to the director under this section or as a result of sharing as authorized in this article.
F. Documents, materials or other information in the possession or control of the national association of insurance commissioners or a third‑party consultant pursuant to this article are confidential by law and privileged, are not considered public records pursuant to title 39, chapter 1, are not subject to subpoena and are not subject to discovery or admissible in evidence in any private civil action.
20-491.07. Civil penalties
An insurer who fails to file without just cause the orsa summary report required by this article after notice and a hearing shall pay a penalty of five hundred dollars for each day's delay in filing, not to exceed one hundred thousand dollars. The director may reduce the penalty if the insurer demonstrates that the imposition of the penalty would constitute a financial hardship to the insurer. The director shall deposit, pursuant to sections 35-146 and 35-147, the penalties collected in the state general fund.
Sec. 2. Severability
If a provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.
Sec. 3. Effective date
This act is effective from and after December 31, 2016.
APPROVED BY THE GOVERNOR MARCH 18, 2016.
FILED IN THE OFFICE OF THE SECRETARY OF STATE MARCH 18, 2016.