Bill Text: IA SSB1170 | 2013-2014 | 85th General Assembly | Introduced

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Bill Title: A study bill for an act relating to insurance holding company systems.

Spectrum: Unknown

Status: (N/A - Dead) 2013-02-13 - Commerce: Petersen Chair,McCoy, and Anderson, B.. [SSB1170 Detail]

Download: Iowa-2013-SSB1170-Introduced.html

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Senate Study Bill 1170 - Introduced
SENATE/HOUSE FILE _____
BY (PROPOSED DEPARTMENT OF
COMMERCE/INSURANCE DIVISION
BILL)
A BILL FOR
An Act relating to insurance holding company systems.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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DIVISION I
INSURANCE HOLDING COMPANY SYSTEMS
Section 1. NEW SECTION . 521A.101 Definitions.
As used in this chapter, unless the context otherwise
requires:
1. “Affiliate of” or person affiliated with, a specific
person, is a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under
common control with, the person specified.
2. “Commissioner” means the commissioner of insurance.
3. “Control” , including the terms “controlling” , “controlled
by” , and “under common control with” , means possession, direct
or indirect, of the power to direct or cause the direction
of the management and policies of a person, whether through
the ownership of voting securities, by contract other than
a commercial contract for goods or nonmanagement services,
or otherwise, unless the power is the result of an official
position with or corporate office held by the person.
Control shall be presumed to exist if any person, directly
or indirectly, owns, controls, holds with the power to vote,
or holds proxies representing, ten percent or more of the
voting securities of any other person. This presumption may be
rebutted by a showing made in the manner provided in section
521A.104, subsection 11, that control does not exist in fact.
The commissioner may determine, after furnishing all persons in
interest notice and opportunity to be heard and making specific
findings of fact to support the determination, that control
exists in fact, notwithstanding the absence of a presumption
to that effect.
4. “Domestic insurer” means an insurer organized or created
under the laws of this state.
5. “Insurance holding company system” means two or more
affiliated persons, one or more of which is an insurer.
6. “Insurer” means a company qualified and licensed by the
insurance division to transact the business of insurance in
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this state by certificate issued pursuant to chapter 508, 512B,
514, 514B, 515, 515E, or 520, except that it shall not include
agencies, authorities, or instrumentalities of the United
States, its possessions and territories, the commonwealth of
Puerto Rico, the District of Columbia, or a state or political
subdivision of a state.
7. “Enterprise risk” means any activity, circumstance,
event, or series of events, involving one or more affiliates
of an insurer that, if not remedied promptly, is likely to
have a material adverse effect upon the financial condition or
liquidity of the insurer or the insurer’s insurance holding
company system as a whole, including but not limited to
anything that would cause the insurer’s risk-based capital to
fall into a company-action-level event as set forth in section
521E.3 for insurers or section 521F.4 for health organizations,
or would cause the insurer to be in hazardous financial
condition as set forth in 191 IAC ch. 110.
8. A “person” is an individual, a corporation, a limited
liability company, a partnership, an association, a joint
stock company, a trust, an unincorporated organization, or
any similar entity or any combination of the foregoing acting
in concert, but does not include a joint venture partnership
exclusively engaged in owning, managing, leasing, or developing
real or tangible personal property.
9. A “securityholder” of a specified person is one who owns
any security of the specified person, including common stock,
preferred stock, debt obligations, and any other security
convertible into or evidencing the right to acquire any of the
foregoing.
10. A “subsidiary” of a specified person is an affiliate
controlled by such person directly or indirectly through one
or more intermediaries.
11. A “supervisory college” is a temporary or permanent
forum for communication and cooperation between regulators
charged with supervision of an insurer or its affiliates.
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12. “Ultimate controlling person” means a person that is not
controlled by any other person.
13. The term “voting security” shall include any security
convertible into or evidencing a right to acquire a voting
security.
Sec. 2. NEW SECTION . 521A.102 Subsidiaries of insurers.
1. Authorization. A domestic insurer, either by itself
or in cooperation with one or more persons, may organize or
acquire one or more subsidiaries. The subsidiaries may conduct
any kind of business or businesses and their authority to do
so shall not be limited by reason of the fact that they are
subsidiaries of a domestic insurer.
2. Additional investment authority. In addition to
investments in common stock, preferred stock, debt obligations
and other securities permitted under all other sections of this
subtitle, a domestic insurer may also:
a. Invest, in common stock, preferred stock, debt
obligations, and other securities of one or more subsidiaries,
amounts which do not exceed the lesser of ten percent of the
insurer’s assets or fifty percent of the insurer’s surplus as
regards policyholders, provided that after such investments the
insurer’s surplus as regards policyholders is reasonable in
relation to the insurer’s outstanding liabilities and adequate
to meet its financial needs. In calculating the amount of
such investments, investments in domestic or foreign insurance
subsidiaries and health maintenance organizations shall be
excluded and both of the following shall be included:
(1) Total net moneys or other consideration expended
and obligations assumed in the acquisition or formation
of a subsidiary, including all organizational expenses and
contributions to capital and surplus of the subsidiary whether
or not represented by the purchase of capital stock or issuance
of other securities.
(2) All amounts expended in acquiring additional common
stock, preferred stock, debt obligations, and other securities;
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and all contributions to the capital or surplus of a subsidiary
subsequent to its acquisition or formation.
b. Invest any amount in common stock, preferred stock, debt
obligations and other securities of one or more subsidiaries
engaged or organized to engage exclusively in the ownership
and management of assets authorized as investments for the
insurer, provided that each such subsidiary agrees to limit
its investments in any asset so that such investments will not
cause the amount of the total investment of the insurer to
exceed any of the investment limitations specified in paragraph
“a” or in chapters 511, 515, 518A, and 520. For the purposes of
this lettered paragraph “b” , “total investment of the insurer”
shall include both:
(1) Any direct investment by the insurer in an asset.
(2) The insurer’s proportionate share of any investment
in an asset by any subsidiary of the insurer, which shall
be calculated by multiplying the amount of the subsidiary’s
investment by the percentage of the insurer’s ownership of the
subsidiary.
c. With the approval of the commissioner, invest any greater
amount in common stock, preferred stock, debt obligations,
or other securities of one or more subsidiaries, provided
that after the investment the insurer’s surplus as regards
policyholders is reasonable in relation to the insurer’s
outstanding liabilities and adequate to meet its financial
needs.
d. Invest, reinvest, and trade in financial instruments as
defined in section 511.8, subsection 22, for its own account,
that of its parent, any subsidiary of its parent, or any
affiliate or subsidiary.
3. Exemption from investment restrictions. Investments
in common stock, preferred stock, debt obligations, or other
securities of subsidiaries made pursuant to subsection 2 shall
not be subject to any of the otherwise applicable restrictions
or prohibitions contained in this chapter applicable to such
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investments of insurers.
4. Qualification of investment —— when determined. Whether
any investment pursuant to subsection 2 meets the applicable
requirements of that subsection is to be determined before the
investment is made by calculating the applicable investment
limitations as though the investment had already been made,
taking into account the then outstanding principal balance on
all previous investments in debt obligations, and the value
of all previous investments in equity securities as of the
day they were made, net of any return of capital invested,
excluding dividends.
5. Cessation of control. If an insurer ceases to control
a subsidiary, it shall dispose of any investment therein
made pursuant to this section within three years from the
time of the cessation of control or within such further time
as the commissioner may prescribe, unless at any time after
the investment has been made, the investment has met the
requirements for investment under any other section of this
chapter, and the insurer has so notified the commissioner.
Sec. 3. NEW SECTION . 521A.103 Acquisition of control of or
merger with domestic insurer.
1. Filing requirements.
a. A person, other than the issuer, shall not make a
tender offer for or a request or invitation for tenders of,
or enter into any agreement to exchange securities for, seek
to acquire, or acquire, in the open market or otherwise,
any voting security of a domestic insurer if, after the
consummation thereof, the person would, directly or indirectly,
or by conversion or by exercise of any right to acquire, be in
control of the insurer, and a person shall not enter into an
agreement to merge with or otherwise to acquire control of a
domestic insurer unless, at the time the offer, request, or
invitation is made or the agreement is entered into, or prior
to the acquisition of the securities if no offer or agreement
is involved, the person has filed with the commissioner and has
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sent to the insurer, a statement containing the information
required by this section and such offer, request, invitation,
agreement, or acquisition has been approved by the commissioner
in the manner prescribed in this chapter.
b. For purposes of this section, a controlling person of
a domestic insurer seeking to divest the person’s controlling
interest in the domestic insurer in any manner, shall file with
the commissioner, with a copy to the insurer, confidential
notice of the controlling person’s proposed divestiture at
least thirty days prior to the cessation of control. The
commissioner shall determine those instances in which a
party seeking to divest a controlling interest in a domestic
insurer, shall be required to file for and obtain approval
of the transaction. The information filed shall remain
confidential until the conclusion of the transaction unless
the commissioner, in the commissioner’s discretion, determines
that confidential treatment of the information will interfere
with enforcement of this section. If the statement required in
paragraph “a” has been filed, this paragraph does not apply.
c. For purposes of this section, a “domestic insurer” shall
include any person controlling a domestic insurer unless the
person, as determined by the commissioner, is either directly
or through its affiliates primarily engaged in business other
than the business of insurance. For purposes of this section,
“person” does not include a securities broker holding, in the
usual and customary broker’s function, less than twenty percent
of the voting securities of an insurer or of any person that
controls an insurer.
2. Content of statement.
a. The statement to be filed with the commissioner shall be
made under oath or affirmation and shall contain the following
information:
(1) The name and address of each person by whom or on whose
behalf the merger or other acquisition of control referred
to in subsection 1 is to be effected, hereinafter called the
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“acquiring party” .
(a) If the person is an individual, the individual’s
principal occupation and all offices and positions held during
the past five years, and any conviction of crimes other than
minor traffic violations during the past ten years.
(b) If the person is not an individual, a report of the
nature of its business operations during the past five years
or for such lesser period as the person and any predecessors
shall have been in existence; an informative description of the
business intended to be done by the person and the person’s
subsidiaries; and a list of all individuals who are or who have
been selected to become directors or executive officers of the
person, or who perform or will perform functions appropriate to
such positions. Such list shall include for each individual
listed the information required by subparagraph division (a).
(2) The source, nature and amount of the consideration used
or to be used in effecting the merger or other acquisition
of control, a description of any transaction in which funds
were or are to be obtained for any such purpose, including
a pledge of the insurer’s stock or the stock of any of its
subsidiaries or controlling affiliates, and the identity of
persons furnishing the consideration. However, if a source
of the consideration is a loan made in the lender’s ordinary
course of business, the identity of the lender shall remain
confidential, if the person filing the statement so requests.
(3) Fully audited financial information as to the earnings
and financial condition of each acquiring party for the
preceding five fiscal years of each such acquiring party,
or for such lesser period as the acquiring party and any
predecessors of the acquiring party have been in existence, and
similar unaudited information as of a date not earlier than
ninety days prior to the filing of the statement.
(4) Any plans or proposals which each acquiring party may
have to liquidate the insurer, to sell the insurer’s assets
or merge or consolidate it with any person, or to make any
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other material change in the insurer’s business or corporate
structure or management.
(5) The number of shares of any security referred to in
subsection 1 which each acquiring party proposes to acquire,
and the terms of the offer, request, invitation, agreement, or
acquisition referred to in subsection 1, and a statement as to
the method by which the fairness of the proposal was arrived
at.
(6) The amount of each class of any security referred to
in subsection 1 which is beneficially owned or concerning
which there is a right to acquire beneficial ownership by each
acquiring party.
(7) A full description of any contracts, arrangements,
or understandings with respect to any security referred to
in subsection 1 in which any acquiring party is involved,
including but not limited to transfer of any of the securities,
joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or guarantees
of profits, division of losses or profits, or the giving
or withholding of proxies. The description shall identify
the persons with whom such contracts, arrangements, or
understandings have been entered into.
(8) A description of the purchase of any security
referred to in subsection 1 during the twelve calendar months
preceding the filing of the statement, by any acquiring party,
including the dates of purchase, names of the purchasers, and
consideration paid or agreed to be paid.
(9) A description of any recommendations to purchase any
security referred to in subsection 1 made during the twelve
calendar months preceding the filing of the statement, by any
acquiring party, or by anyone based upon interviews or at the
suggestion of the acquiring party.
(10) Copies of all tender offers for, requests or
invitations for tenders of, exchange offers for, and agreements
to acquire or exchange any securities referred to in subsection
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1, and, if distributed, of additional soliciting material
relating to the securities.
(11) The terms of any agreement, contract, or understanding
made with any broker-dealer as to solicitation of securities
referred to in subsection 1 for tender, and the amount of
any fees, commissions, or other compensation to be paid to
broker-dealers with regard to the securities.
(12) An agreement by the person required to file a statement
as provided in subsection 1, that the person will provide the
annual enterprise risk report, specified in section 521A.104,
subsection 12, for so long as the person’s control over the
insurer exists.
(13) An acknowledgment by the person required to file a
statement as provided in subsection 1 that the person and all
subsidiaries within the person’s control in the insurance
company holding system will provide information to the
commissioner upon request as necessary to evaluate enterprise
risk to the insurer.
(14) Additional information as the commissioner may by rule
prescribe as necessary or appropriate for the protection of
policyholders of the insurer or in the public interest.
b. If the person required to file the statement referred
to in subsection 1 is a partnership, limited partnership,
syndicate, or other group, the commissioner may require that
the information required by paragraph “a” , subparagraphs (1)
through (14) shall be given with respect to each partner
of the partnership or limited partnership, each member of
the syndicate or group, and each person who controls the
partner or member. If any partner, member, or person is a
corporation or the person required to file the statement
referred to in subsection 1 is a corporation, the commissioner
may require that the information required by paragraph “a” ,
subparagraphs (1) through (14) shall be given with respect to
the corporation, each officer and director of the corporation,
and each person who is directly or indirectly the beneficial
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owner of more than ten percent of the outstanding voting
securities of the corporation.
c. If any material change occurs in the facts set forth
in the statement filed with the commissioner and sent to the
insurer pursuant to this section, an amendment setting forth
the change, together with copies of all documents and other
material relevant to the change, shall be filed with the
commissioner and sent to the insurer within two business days
after the person learns of the change.
3. Alternative filing materials. If any offer, request,
invitation, agreement, or acquisition referred to in subsection
1 is proposed to be made by means of a registration statement
under the federal Securities Act of 1933, as amended, or in
circumstances requiring the disclosure of similar information
under the federal Securities Exchange Act of 1934, as amended,
or under a state law requiring similar registration or
disclosure, the person required to file the statement referred
to in subsection 1 may utilize such documents in furnishing the
information called for by that statement.
4. Approval by the commissioner —— hearings.
a. The commissioner shall approve any merger or other
acquisition of control referred to in subsection 1 if, after
a public hearing on such merger or acquisition of control,
the applicant has demonstrated to the commissioner all of the
following:
(1) After the merger or change of control, the domestic
insurer referred to in subsection 1 will be able to satisfy the
requirements for the issuance of a license to write the line or
lines of insurance for which it is presently licensed.
(2) The effect of the merger or other acquisition of control
will not substantially lessen competition in insurance in this
state or tend to create a monopoly.
(3) The financial condition of any acquiring party will not
jeopardize the financial stability of the insurer, or prejudice
the interest of its policyholders.
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(4) The plans or proposals which the acquiring party has to
liquidate the insurer, sell its assets, or consolidate or merge
the insurer with any person, or to make any other material
change in the insurer’s business or corporate structure or
management, are not unfair or unreasonable to policyholders of
the insurer and are not contrary to the public interest.
(5) The competence, experience, and integrity of those
persons who would control the operation of the insurer are
sufficient to indicate that the interests of policyholders of
the insurer and of the public will not be jeopardized by the
merger or other acquisition of control.
(6) The merger or other acquisition of control is not likely
to be hazardous or prejudicial to the members of the public
that buy insurance.
b. The public hearing referred to in paragraph “a” shall
be held within thirty days after the statement required by
subsection 1 is filed, and at least twenty days’ notice of
the public hearing shall be given by the commissioner to the
person filing the statement. Not less than seven days’ notice
of the public hearing shall be given by the person filing the
statement to the insurer and to such other persons as may be
designated by the commissioner. The commissioner shall make a
determination within the forty-five-day period preceding the
effective date of the proposed transaction. At the hearing,
the person filing the statement, the insurer, any person to
whom notice of hearing was sent, and any other person whose
interests may be affected shall have the right to present
evidence, examine and cross-examine witnesses, and offer oral
and written arguments and in connection therewith shall be
entitled to conduct discovery proceedings in the same manner as
is allowed in the district court of this state. All discovery
proceedings shall be concluded not later than three days prior
to the commencement of the public hearing.
c. If the proposed merger or acquisition of control will
require the approval of the commissioner of insurance from
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more than one jurisdiction, the public hearing referred to in
paragraph “a” may be held on a consolidated basis upon request
of the person filing the statement required in subsection 1.
Such a person may file the statement required in subsection 1
with the national association of insurance commissioners within
five days of making the request for a public hearing. The
commissioner may opt out of participating in a consolidated
hearing, and shall provide notice to the person requesting
the consolidated hearing of the opt-out within ten days of
receipt of the statement required in subsection 1. A hearing
conducted on a consolidated basis shall be public and shall
be held within the United States before the commissioners
of the jurisdictions in which the insurers are domiciled.
The commissioners shall hear and receive evidence. A
commissioner may attend a consolidated hearing in person or by
telecommunication.
d. The commissioner may retain, at the acquiring party’s
expense, any attorneys, actuaries, accountants, or other
experts not otherwise a part of the commissioner’s staff as may
be reasonably necessary to assist the commissioner in reviewing
the proposed merger or acquisition of control.
5. Exemptions. The provisions of this section shall
not apply to any offer, request, invitation, agreement, or
acquisition which the commissioner by order shall exempt as not
having been made or entered into for the purpose and not having
the effect of changing or influencing the control of a domestic
insurer or as otherwise not comprehended within the purposes of
this section.
6. Violations. The following shall be violations of this
section:
a. The failure to file any statement, amendment, or other
material required to be filed pursuant to subsection 1 or 2.
b. The effectuation or any attempt to effectuate an
acquisition of control of, divestiture of, or merger with, a
domestic insurer unless the commissioner has given approval
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thereto.
7. Jurisdiction —— consent to service of process. The courts
of this state are hereby vested with jurisdiction over every
person not resident, domiciled, or authorized to do business
in this state who files a statement with the commissioner
under this section, and over all actions involving such
person arising out of violations of this section, and each
such person shall be deemed to have performed acts equivalent
to and constituting an appointment by the person of the
commissioner to be the person’s true and lawful attorney upon
whom may be served all lawful process in any action, suit, or
proceeding arising out of violations of this section. Copies
of all lawful process shall be served on the commissioner and
transmitted by registered or certified mail by the commissioner
to the person at the person’s last known address.
Sec. 4. NEW SECTION . 521A.104 Registration of insurers.
1. Registration.
a. An insurer authorized to do business in this state
which is a member of an insurance holding company system shall
register with the commissioner, except a foreign insurer
subject to registration requirements and standards adopted by
statute or regulation in the jurisdiction of its domicile which
are substantially similar to those contained in this section
and all of the following:
(1) Section 521A.105, subsection 1, paragraph “a” , section
521A.105, subsection 2, and section 521A.105, subsection 4.
(2) Section 521A.105, subsection 1, paragraph “b” , or a
provision requiring each registered insurer to keep current
the information required to be disclosed in its registration
statement by reporting all material changes or additions within
fifteen days after the end of the month in which it learns of
each change or addition.
b. An insurer subject to registration under this section
shall register within fifteen days after it becomes subject
to registration and annually thereafter by March 31 of each
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year for the previous calendar year, unless the commissioner
for good cause shown extends the time for registration, and
then within the extended time. The commissioner may require
any insurer authorized to do business in the state which is a
member of an insurance holding company system, and which is
not subject to registration under this section, to furnish
a copy of the registration statement, the summary specified
in subsection 3, or other information filed by the insurance
company with the insurance regulatory authority of the
company’s domiciliary jurisdiction.
2. Information and form required. Every insurer subject
to registration shall file a registration statement with the
commissioner on a form and in a format prescribed by the
national association of insurance commissioners, which shall
contain current information about:
a. The capital structure, general financial condition,
ownership, and management of the insurer and any person
controlling the insurer.
b. The identity and relationship of every member of the
insurance holding company system.
c. The following agreements in force, and transactions
currently outstanding or which have occurred during the last
calendar year, between the insurer and its affiliates:
(1) Loans, other investments, or purchases, sales, or
exchanges of securities of the affiliates by the insurer or of
the insurer by its affiliates.
(2) Purchases, sales, or exchanges of assets.
(3) Transactions not in the ordinary course of business.
(4) Guarantees or undertakings for the benefit of an
affiliate which result in an actual contingent exposure of the
insurer’s assets to liability, other than insurance contracts
entered into in the ordinary course of the insurer’s business.
(5) All management agreements, service contracts, and
cost-sharing arrangements.
(6) Reinsurance agreements.
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(7) Dividends and other distributions to shareholders.
(8) Consolidated tax allocation agreements.
d. A pledge of the insurer’s stock, including stock of
a subsidiary or controlling affiliate, for a loan made to a
member of the insurance holding company system.
e. If requested by the commissioner, the insurer shall
include financial statements of or within an insurance
holding company system, including all affiliates. Financial
statements may include but are not limited to annual audited
financial statements filed with the United States securities
and exchange commission pursuant to the federal Securities Act
of 1933, as amended, or the federal Securities Exchange Act
of 1934, as amended. An insurer required to file financial
statements pursuant to this paragraph may satisfy the request
by providing the commissioner with the most recently filed
parent corporation financial statements that have been filed
with the securities and exchange commission.
f. Other matters concerning transactions between registered
insurers and any affiliates as may be included from time to
time in any registration forms adopted or approved by the
commissioner.
g. Statements that the insurer’s board of directors
oversees corporate governance and internal controls and that
the insurer’s officers or senior management have approved,
implemented, and continue to maintain and monitor corporate
governance and internal control procedures.
h. Any other information required by the commissioner by
rule.
3. Summary of changes to registration statement. All
registration statements shall contain a summary outlining
all items in the current registration statement representing
changes from the prior registration statement.
4. Materiality. Information need not be disclosed on the
registration statement if the information is not material for
the purposes of this section. Unless the commissioner by rule
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or order provides otherwise, sales, purchases, exchanges, loans
or extensions of credit, or investments or guarantees involving
one-half of one percent or less of an insurer’s admitted assets
as of the thirty-first day of December next preceding are not
material for purposes of this section.
5. Reporting of dividends to shareholders. Subject
to section 521A.105, subsection 2, a registered insurer
shall report to the commissioner all dividends and other
distributions to shareholders within fifteen days following
the declaration of the dividends or distributions. The report
shall also include a schedule setting forth all dividends or
other distributions made within the previous twelve months.
6. Information of insurers. Any person within an insurance
holding company system subject to registration is required to
provide complete and accurate information to an insurer if the
information is reasonably necessary to enable the insurer to
comply with the provisions of this chapter.
7. Termination of registration. The commissioner shall
terminate the registration of any insurer that demonstrates
that it no longer is a member of an insurance holding company
system.
8. Consolidated filing. The commissioner may require or
allow two or more affiliated insurers subject to registration
to file a consolidated registration statement.
9. Alternative registration. The commissioner may allow an
insurer authorized to do business in this state which is part
of an insurance holding company system to register on behalf
of any affiliated insurer which is required to register under
subsection 1 and to file all information and material required
to be filed under this section.
10. Exemptions. The provisions of this section shall not
apply to any insurer, information, or transaction if, and to
the extent that, the commissioner by rule, regulation, or order
exempts the same from the provisions of this section.
11. Disclaimer. Any person may file with the commissioner
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a disclaimer of affiliation with any authorized insurer, or an
insurer or any member of an insurance holding company system
may file a disclaimer of affiliation with any person. The
disclaimer shall fully disclose all material relationships and
the basis for affiliation between the person and the insurer
as well as the basis for disclaiming the affiliation. A
disclaimer of affiliation shall be deemed to have been allowed,
unless the commissioner within thirty days following receipt
of a complete disclaimer, notifies the filing party that the
disclaimer is disallowed. If a disclaimer is disallowed,
the commissioner shall grant a request for administrative
hearing on the disallowance made by the party that filed the
disclaimer. The disclaiming party shall be relieved of the
party’s duty to register under this section if the disclaimer
is deemed allowed or is allowed by the commissioner pursuant
to this subsection.
12. Enterprise risk filing.
a. Beginning May 1, 2014, and every May 1 thereafter,
the ultimate controlling person of every insurer subject to
registration under this section shall also file an annual
enterprise risk report. The commissioner may, for good cause
shown, extend the time for filing the annual report. The
report shall, to the best of the ultimate controlling person’s
knowledge and belief, identify material risks within the
insurance holding company system that could pose enterprise
risk to the insurer. The report shall be filed with the lead
state commissioner of the insurance holding company system
as determined by the procedures contained in the financial
analysis handbook adopted by the national association of
insurance commissioners.
b. An ultimate controlling person having direct written and
assumed premiums of less than five hundred million dollars in
any calendar year for all insurers cumulatively, may request
an exemption from the requirement to file an enterprise risk
report. An ultimate controlling person requesting such an
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exemption shall file with the commissioner a written statement
addressing the reasons why the exemption should be granted.
If the commissioner finds, upon review of this statement,
that the ultimate controlling person has direct written and
assumed premiums of less than five hundred million dollars and
that compliance with the requirements of this subsection will
constitute a financial or organizational hardship upon the
ultimate controlling person, the exemption shall be granted.
13. Violations. The failure to file a registration
statement or a summary of the registration statement, or an
enterprise risk report required by this section within the time
specified for the filing is a violation of this section.
Sec. 5. NEW SECTION . 521A.105 Standards for and management
of an insurer within an insurance holding company system.
1. Transactions within an insurance holding company system.
a. Transactions within an insurance holding company system
to which an insurer subject to registration is a party, are
subject to the following standards:
(1) The terms shall be fair and reasonable.
(2) Agreements for cost-sharing services and management
services shall include such provisions as required by rules
adopted by the commissioner.
(3) Charges or fees for services performed shall be
reasonable.
(4) Expenses incurred and payment received shall be
allocated to the insurer in conformity with customary insurance
accounting practices consistently applied.
(5) The books, accounts, and records of each party to
all such transactions shall be so maintained as to clearly
and accurately disclose the precise nature and details of
the transactions including such accounting information as is
necessary to support the reasonableness of the charges or fees
to the respective parties.
(6) After any material transaction with an affiliate and
after any dividends or distributions to shareholder affiliates,
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the insurer’s surplus as regards policyholders shall be
reasonable in relation to the insurer’s outstanding liabilities
and adequate to meet its financial needs.
b. A domestic insurer and a person in the domestic
insurer’s insurance holding company system shall not enter
into any of the transactions described in subparagraphs
(1) through (7), including amendments to or modifications
of affiliate agreements previously filed pursuant to this
section, which are subject to any materiality standards
contained in subparagraphs (1) through (7), unless the
domestic insurer notifies the commissioner in writing of its
intention to enter into the transaction at least thirty days
prior to entering into the transaction, or within a shorter
time permitted by the commissioner, and the commissioner has
not disapproved of the transaction within that time period.
Notice of amendments to or modifications of agreements shall
include the reasons for the change and the financial impact
of the change on the domestic insurer. Informal notice of a
change shall be reported to the commissioner, within thirty
days after termination of a previously filed agreement,
for a determination of the type of filing required, if any.
This lettered paragraph “b” is applicable to the following
transactions:
(1) Sales, purchases, exchanges, loans, extensions of
credit, or investments, if the transaction involves an amount
which is equal to or exceeds the following:
(a) With respect to nonlife insurers, the lesser of three
percent of the insurer’s admitted assets or twenty-five percent
of surplus as regards policyholders as of the thirty-first day
of December next preceding.
(b) With respect to life insurers, three percent of the
insurer’s admitted assets as of the thirty-first day of
December next preceding.
(2) Loans or extensions of credit to any person who is not
an affiliate, where the insurer makes loans or extensions of
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credit with the agreement or understanding that the proceeds of
the transactions, in whole or in substantial part, are to be
used to make loans or extensions of credit, to purchase assets
of, or to make investments in, any affiliate of the insurer
making the loans or extensions of credit if the transaction
involves an amount which is equal to or exceeds the following:
(a) With respect to nonlife insurers, the lesser of three
percent of the insurer’s admitted assets or twenty-five percent
of surplus as regards policyholders as of the thirty-first day
of December next preceding.
(b) With respect to life insurers, three percent of the
insurer’s admitted assets as of the thirty-first day of
December next preceding.
(3) Reinsurance agreements or modifications to such
agreements including the following:
(a) All reinsurance pooling agreements.
(b) All agreements or modifications to such agreements in
which the reinsurance premium or a change in the insurer’s
liabilities, or the projected reinsurance premium or a change
in the insurer’s liabilities in any of the next three years,
equals or exceeds five percent of the insurer’s surplus as
regards policyholders, as of the thirty-first day of December
next preceding, including those agreements which may require
as consideration the transfer of assets from an insurer to a
nonaffiliate, if an agreement or understanding exists between
the insurer and nonaffiliate that any portion of the assets
will be transferred to one or more affiliates of the insurer.
(4) All management agreements, service contracts, tax
allocation agreements, guarantees, and other cost-sharing
arrangements.
(5) Guarantees when made by a domestic insurer, provided,
however, that a guarantee that is quantifiable as to amount
is not subject to the notice requirements of this lettered
paragraph “b” unless the guarantee exceeds the lesser of
one-half of one percent of the insurer’s admitted assets or
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ten percent of surplus as regards policyholders as of the
thirty-first day of December next preceding. Further, all
guarantees that are not quantifiable as to amount are subject
to the notice requirements of this lettered paragraph “b” .
(6) Direct or indirect acquisitions of or investments in
a person that controls the insurer or is an affiliate of an
insurer in an amount that, together with its present holdings
in such investments, exceeds two and one-half percent of
the insurer’s surplus to policyholders. Direct or indirect
acquisitions of or investments in subsidiaries acquired
pursuant to section 521A.102, or in nonsubsidiary insurance
affiliates that are subject to the provisions of this chapter
are exempt from this requirement.
(7) Any material transactions, specified by regulation,
that the commissioner determines may adversely affect the
interests of the insurer’s policyholders.
c. Nothing in this subsection shall be deemed to authorize
or permit any transactions that, in the case of an insurer not
a member of the same insurance holding company system, would
be otherwise contrary to law.
d. A domestic insurer shall not enter into transactions
which are part of a plan or series of like transactions, with a
person or persons within the insurance holding company system
if the purpose of those separate transactions is to avoid
the statutory threshold amount and thus avoid review of the
transactions that would otherwise occur. If the commissioner
determines that separate transactions were entered into over
any twelve-month period for that purpose, the commissioner may
exercise authority under section 521A.111.
e. The commissioner, in reviewing transactions pursuant to
paragraph “b” , subparagraph (1), shall consider whether the
transactions comply with the standards set forth in paragraph
“a” , subparagraph (1), and whether the transactions may
adversely affect the interests of policyholders.
f. A domestic insurer shall notify the commissioner
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within thirty days of an investment of the insurer in any one
corporation if the total investment in the corporation by the
insurance holding company system exceeds ten percent of the
corporation’s voting securities.
2. Dividends and other distributions.
a. A domestic insurer may declare and pay dividends to its
shareholders only from earned surplus. Assets revalued by
the board of directors of the insurer shall not be included
in earned surplus until thirty days after the commissioner
has received notice of the revaluation and approved the
revaluation. The commissioner shall approve or disapprove the
revaluation within thirty days after receiving notice of the
revaluation, unless for good cause the commissioner extends the
approval period for an additional thirty days. For purposes
of this paragraph, “earned surplus” means surplus as regards
policyholders less paid-in and contributed surplus, and may
include a fair revaluation of assets by the board of directors
of the insurer that is reasonable under the circumstances.
b. (1) A domestic insurer shall not pay any extraordinary
dividend or make any other extraordinary distribution to
its shareholders until thirty days after the commissioner
has received notice of the declaration of the extraordinary
dividend or distribution, and within that thirty days the
commissioner has either approved payment of the dividend or
distribution or has not disapproved payment of the dividend or
distribution.
(2) For purposes of this lettered paragraph “b” ,
“extraordinary dividend or distribution” means any dividend
or distribution of cash or other property, whose fair market
value together with that of other dividends or distributions
made within the preceding twelve months exceeds the greater of
either of the following:
(a) Ten percent of the insurer’s surplus as regards
policyholders as of the thirty-first day of December next
preceding.
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(b) The net gain from operations of the insurer, if
the insurer is a life insurer, or the net income of the
insurer, if the insurer is not a life insurer, not including
realized capital gains, for the twelve-month period ending the
thirty-first day of December next preceding, but not including
pro rata distributions of any class of the insurer’s own
securities.
(3) Notwithstanding any other provision of law, an insurer
may declare an extraordinary dividend or distribution that
is conditional upon the commissioner’s approval, and the
declaration shall not confer rights upon shareholders until
either of the following occurs:
(a) The commissioner has approved payment of the dividend
or distribution within thirty days of receiving notice of the
declaration.
(b) The commissioner has not disapproved payment of the
dividend or distribution within thirty days of receiving notice
of the declaration.
3. Management of domestic insurers subject to registration.
a. Notwithstanding the control of a domestic insurer by any
person, the officers and directors of the insurer shall not be
relieved of any obligation or liability to which they would
otherwise be subject by law, and the insurer shall be managed
so as to ensure its separate operating identity consistent with
the provisions of this chapter.
b. Nothing in this section shall preclude a domestic insurer
from having or sharing common management or cooperative or
joint use of personnel, property, or services with one or more
other persons under arrangements that meet the standards set
forth in subsection 1, paragraph “a” .
c. Not less than one-third of the directors of a domestic
insurer, and not less than one-third of the members of each
committee of the board of directors of a domestic insurer shall
be persons who are not officers or employees of the insurer
or of any entity controlling, controlled by, or under common
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control with the insurer and who are not beneficial owners
of a controlling interest in the voting stock of the insurer
or entity. At least one such person must be included in any
quorum for the transaction of business at any meeting of the
board of directors or any committee of the board.
d. The board of directors of a domestic insurer shall
establish one or more committees comprised solely of directors
who are not officers or employees of the insurer or of any
entity controlling, controlled by, or under common control with
the insurer and who are not beneficial owners of a controlling
interest in the voting stock of the insurer or any such entity.
The committee or committees shall have responsibility for
nominating candidates for director for election by shareholders
or policyholders, evaluating the performance of officers deemed
to be principal officers of the insurer, and recommending to
the board of directors the selection and compensation of the
principal officers of the insurer.
e. The provisions of paragraphs “c” and “d” shall not
apply to a domestic insurer if the person controlling the
domestic insurer, such as an insurer, a mutual insurance
holding company, or a publicly held corporation, has a board
of directors and committees of that board that meet the
requirements of paragraphs “c” and “d” with respect to such
controlling entity.
f. An insurer may apply to the commissioner for a waiver
from the requirements of this subsection if the insurer’s
annual direct written and assumed premium, excluding premiums
reinsured with the federal crop insurance corporation and the
federal flood program, is less than three hundred million
dollars. An insurer may also apply to the commissioner for
a waiver from the requirements of this subsection based upon
unique circumstances. The commissioner may consider various
factors in determining whether to grant such a waiver including
but not limited to the type of business entity, the volume of
business written, availability of qualified board members, or
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the ownership or organizational structure of the entity.
4. Adequacy of surplus. For purposes of this chapter
in determining whether an insurer’s surplus as regards
policyholders is reasonable in relation to the insurer’s
outstanding liabilities and adequate to meet its financial
needs, the following factors, among others, shall be
considered:
a. The size of the insurer as measured by its assets,
capital and surplus, reserves, premium writings, insurance in
force, and other appropriate criteria.
b. The extent to which the insurer’s business is diversified
among the several lines of insurance.
c. The number and size of risks insured in each line of
business.
d. The extent of the geographical dispersion of the
insurer’s insured risks.
e. The nature and extent of the insurer’s reinsurance
program.
f. The quality, diversification, and liquidity of the
insurer’s investment portfolio.
g. The recent past and projected future trends in the size
of the insurer’s surplus as regards policyholders.
h. The surplus as regards policyholders maintained by other
comparable insurers.
i. The adequacy of the insurer’s reserves.
j. The quality and liquidity of investments in affiliates.
The commissioner may treat any such investment as a disallowed
asset for purposes of determining the adequacy of surplus as
regards policyholders whenever in the commissioner’s judgment
such investment so warrants.
Sec. 6. NEW SECTION . 521A.106 Examination.
1. Power of commissioner. Subject to the limitation
contained in this section and in addition to the powers
which the commissioner has under chapter 507 relating to the
examination of insurers, the commissioner has the power to
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examine any insurer registered under section 521A.104 and
its affiliates to ascertain the financial condition of the
insurer, including the enterprise risk to the insurer by the
ultimate controlling party, or by any entity or combination of
entities within the insurance holding company system, or by the
insurance holding company system on a consolidated basis.
2. Access to books and records.
a. The commissioner may order an insurer registered
under section 521A.104 to produce records, books, or other
information papers in the possession of the insurer or its
affiliates as reasonably necessary to determine compliance with
this chapter.
b. To determine compliance with this chapter, the
commissioner may order any insurer registered under section
521A.104 to produce information not in the possession of the
insurer if the insurer can obtain access to such information
pursuant to contractual relationships, statutory obligations,
or other methods. In the event an insurer cannot obtain the
information requested by the commissioner, the insurer shall
provide the commissioner a detailed explanation of the reason
that the insurer cannot obtain the information and the identity
of the holder of the information. Whenever it appears to the
commissioner that the detailed explanation is without merit,
the commissioner may require, after notice and hearing, the
insurer to pay a penalty of five hundred dollars for each day
of delay in providing the information, or may suspend or revoke
the insurer’s license.
3. Use of consultants. The commissioner may retain at
the registered insurer’s expense such attorneys, actuaries,
accountants, and other experts not otherwise a part of the
commissioner’s staff as shall be reasonably necessary to assist
in the conduct of the examination under subsection 1. Any
persons so retained shall be under the direction and control of
the commissioner and shall act in a purely advisory capacity.
4. Expenses. Each registered insurer producing for
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examination records, books, and papers pursuant to subsection
1 shall be liable for and shall pay the expense of such
examination in accordance with section 507.7.
5. Compelling production.
a. If an insurer fails to comply with an order to produce
information pursuant to this section, the commissioner
may examine the affiliates of the insurer to obtain the
information. The commissioner may also issue subpoenas,
administer oaths, and examine under oath any person, for
purposes of determining compliance with this section.
b. Upon the failure or refusal of any person to obey a
subpoena, the commissioner may petition a court of competent
jurisdiction, and upon proper showing, the court may enter
an order compelling the witness to appear and testify or to
produce documentary evidence. Failure to obey such a court
order shall be punishable as contempt of court. Every person
shall be obliged to attend as a witness at the time and place
specified in the subpoena, anywhere in the state. The witness
shall be entitled to the same fees, mileage, and actual
expenses, if claimed, that are allowed witnesses in district
court, which fees, mileage, and actual expenses, if any,
necessarily incurred in securing the attendance of witnesses
and their testimony, shall be itemized and charged against, and
paid by, the company being examined.
Sec. 7. NEW SECTION . 521A.107 Supervisory colleges.
1. Power of commissioner. With respect to any insurer
registered under section 521A.104, and in accordance with
subsection 3, the commissioner may participate in a supervisory
college for any domestic insurer that is part of an insurance
holding company system with international operations, in order
to determine compliance by the insurer with the provisions of
this chapter. The powers of the commissioner with respect
to a supervisory college include but are not limited to the
following:
a. Initiating the establishment of a supervisory college.
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b. Clarifying the membership and participation of other
supervisors in the supervisory college.
c. Clarifying the functions of the supervisory college and
the role of other regulators, including the establishment of a
group-wide supervisor.
d. Coordinating the ongoing activities of the supervisory
college, including planning meetings, supervisory activities,
and processes for sharing information.
e. Establishing a crisis management plan.
2. Expenses. Each registered insurer subject to this
section shall be liable for and shall pay the reasonable
expenses of the commissioner’s participation in a supervisory
college in accordance with subsection 3, including reasonable
travel expenses. For purposes of this section, a supervisory
college may be convened as either a temporary or permanent
forum for communication and cooperation between the regulators
charged with the supervision of an insurer and its affiliates,
and the commissioner may establish a regular assessment to the
insurer for the payment of expenses under this subsection.
3. Participation. In order to assess the business
strategy, financial position, legal and regulatory position,
risk exposure, risk management and governance processes,
and as part of the examination of individual insurers in
accordance with section 521A.106, the commissioner may
participate in a supervisory college with other regulators
charged with supervision of the insurer or its affiliates,
including other state, federal, and international regulatory
agencies. The commissioner may enter into agreements in
accordance with section 521A.108, subsection 3, providing the
basis for cooperation between the commissioner and the other
regulatory agencies, and the activities of the supervisory
college. Nothing in this section shall delegate to the
supervisory college the authority of the commissioner to
regulate or supervise the insurer or its affiliates within the
commissioner’s jurisdiction.
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Sec. 8. NEW SECTION . 521A.108 Confidential treatment.
1. All documents, materials, or other information in the
possession or control of the commissioner that is obtained
by or disclosed to the commissioner or any other person in
the course of an examination or investigation made pursuant
to section 521A.106 and all information reported pursuant to
section 521A.103, subsection 2, paragraph “a” , subparagraphs
(12) and (13), and sections 521A.104 and 521A.105, shall be
given confidential treatment and shall not be subject to
subpoena, shall not be subject to discovery or be admissible
in evidence in any private civil action, and shall not be
made public by the commissioner or any other person, except
to insurance departments of other jurisdictions, without the
prior written consent of the insurer to which the information
pertains unless the commissioner, after giving the insurer
and its affiliates who would be affected thereby notice and
opportunity to be heard, determines that the interests of
policyholders, shareholders, or the public will be served
by the publication of the information, in which event the
commissioner may publish all or any part of the information in
such manner as the commissioner may deem appropriate.
2. The commissioner or any other person who received
documents, materials, or other information while acting under
the authority of the commissioner or with whom such documents,
materials, or other information are shared pursuant to this
chapter shall not be permitted or required to testify in any
private civil action concerning any confidential documents,
materials, or other information subject to subsection 1.
3. In order to assist in the performance of the
commissioner’s duties, the commissioner may do any of the
following:
a. Share documents, materials, or other information,
including the confidential and privileged documents, materials,
or information subject to subsection 1, with other state,
federal, and international regulatory agencies, with the
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national association of insurance commissioners and its
affiliates and subsidiaries, and with state, federal, and
international law enforcement authorities, including members
of any supervisory college described in section 521A.107,
provided that the recipient agrees in writing to maintain
the confidentiality and privileged status of the documents,
materials, or other information, and verifies in writing the
legal authority to maintain confidentiality and privilege.
b. Notwithstanding paragraph “a” , the commissioner may
only share confidential and privileged documents, materials,
or other information reported pursuant to section 521A.104,
subsection 12, with commissioners of states having statutes
or regulations substantially similar to subsection 1 of this
section and who have agreed in writing not to disclose such
information.
c. Receive documents, materials, or other information,
including otherwise confidential and privileged documents,
materials, or other information from the national association
of insurance commissioners and its affiliates and subsidiaries,
and from regulatory and law enforcement officials of other
foreign or domestic jurisdictions, and shall maintain as
confidential or privileged any documents, materials, 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.
d. Enter into a written agreement with the national
association of insurance commissioners that is consistent with
this subsection, governing the sharing and use of information
provided pursuant to this chapter, and that does all of the
following:
(1) Specifies procedures and protocols regarding the
confidentiality and security of information shared with
the national association of insurance commissioners and its
affiliates and subsidiaries pursuant to this chapter, including
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procedures and protocols for the sharing of information by the
national association of insurance commissioners with other
state, federal, or international regulators.
(2) Specifies that ownership of information shared with
the national association of insurance commissioners and its
affiliates and subsidiaries pursuant to this chapter remains
with the commissioner and the national association of insurance
commissioners’ use of the information is subject to the
direction of the commissioner.
(3) Requires that prompt notice be given to an insurer whose
confidential or privileged information in the possession of
the national association of insurance commissioners pursuant
to this chapter is subject to a request or subpoena to the
national association of insurance commissioners for disclosure
or production.
(4) Requires the national association of insurance
commissioners and its affiliates and subsidiaries to consent to
intervention by an insurer in any judicial or administrative
action in which the national association of insurance
commissioners and its affiliates and subsidiaries may be
required to disclose confidential information about the insurer
that was shared with the national association of insurance
commissioners and its affiliates and subsidiaries pursuant to
this chapter.
4. The sharing of documents, materials, or other
information by the commissioner pursuant to this chapter
shall not constitute a delegation of regulatory authority or
rulemaking, and the commissioner is solely responsible for the
administration, execution, and enforcement of the provisions of
this chapter.
5. No waiver of any applicable privilege or claim of
confidentiality in documents, materials, or other information
shall occur as a result of their disclosure to the commissioner
under this section or as a result of the sharing of those
documents, materials, or other information as authorized in
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subsection 3.
6. Documents, materials, or other information in the
possession or control of the national association of insurance
commissioners pursuant to this chapter shall be confidential
and privileged, shall not be subject to chapter 22, shall not
be subject to subpoena, and shall not be subject to discovery
or admissible in evidence in any private civil action.
Sec. 9. NEW SECTION . 521A.109 Rules.
The commissioner may, upon notice and opportunity for all
interested persons to be heard, issue such rules and orders as
shall be necessary to carry out the provisions of this chapter.
Sec. 10. NEW SECTION . 521A.110 Injunctions —— prohibitions
against voting securities —— sequestration of voting securities.
1. Injunctions. Whenever it appears to the commissioner
that any insurer or any director, officer, employee, or agent
of the insurer has committed or is about to commit a violation
of this chapter or any rule, regulation, or order issued by the
commissioner under this chapter, the commissioner may apply to
the district court of the county in which the principal office
of the insurer is located or if such insurer has no such office
in this state then to the district court of Polk county for an
order enjoining the insurer or director, officer, employee, or
agent of the insurer from violating or continuing to violate
this chapter or any such rule, regulation, or order, and for
such other equitable relief as the nature of the case and
the interests of the insurer’s policyholders, creditors, and
shareholders or the public may require.
2. Voting of securities —— when prohibited. No security
which is the subject of any agreement or arrangement regarding
acquisition, or which is acquired or to be acquired, in
contravention of the provisions of this chapter or of any rule,
regulation, or order issued by the commissioner under this
chapter may be voted at any shareholders’ meeting, or may be
counted for quorum purposes, and any action of shareholders
requiring the affirmative vote of a percentage of shares
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may be taken as though such securities were not issued and
outstanding; but no action taken at any such meeting shall
be invalidated by the voting of such securities, unless the
action would materially affect control of the insurer or unless
the district court has so ordered. If any insurer or the
commissioner has reason to believe that any security of the
insurer has been or is about to be acquired in contravention
of the provisions of this chapter or of any rule, regulation,
or order issued by the commissioner under this chapter, the
insurer or the commissioner may apply to the district court of
Polk county or to the district court of the county in which
the insurer has its principal place of business to enjoin any
offer, request, invitation, agreement, or acquisition made in
contravention of section 521A.103 or any rule, regulation, or
order issued by the commissioner under that section to enjoin
the voting of any security so acquired, to void any vote of
the security already cast at any meeting of shareholders, and
for such other equitable relief as the nature of the case and
the interests of the insurer’s policyholders, creditors, and
shareholders or the public may require.
3. Sequestration of voting securities. In any case
where a person has acquired or is proposing to acquire any
voting securities in violation of this chapter or any rule,
regulation, or order issued by the commissioner under this
chapter, the district court of Polk county or the district
court of the county in which the insurer has its principal
place of business may, on such notice as the court deems
appropriate, upon the application of the insurer or the
commissioner seize or sequester any voting securities of the
insurer owned directly or indirectly by the person, and issue
such orders as may be appropriate to effectuate the provisions
of this chapter. Notwithstanding any other provisions of law,
for the purposes of this chapter the situs of the ownership of
the securities of domestic insurers shall be deemed to be in
this state.
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Sec. 11. NEW SECTION . 521A.111 Sanctions and penalties.
1. If the commissioner finds after notice and hearing that
an insurer subject to registration under section 521A.104
failed without just cause to file a registration statement as
required in this chapter, the insurer shall be required to pay
a penalty of one thousand dollars for each day of delay. The
penalty shall be recovered by the commissioner and deposited in
the general fund of the state. The maximum penalty under this
section is ten thousand dollars. The commissioner may reduce
the penalty if the insurer demonstrates that the imposition
of the penalty would constitute a financial hardship to the
insurer.
2. a. A director or officer of an insurance holding company
system who does any of the following is subject to the civil
penalty imposed under paragraph “b” :
(1) Knowingly participates in or assents to transactions or
investments which have not been properly reported or submitted
pursuant to section 521A.104, subsection 1, section 521A.105,
subsection 1, paragraph “b” , or section 521A.105, subsection 2.
(2) Knowingly permits any of the officers or agents of an
insurer to engage in transactions or make investments which
have not been properly reported or submitted pursuant to
section 521A.104, subsection 1, section 521A.105, subsection 1,
paragraph “b” , or section 521A.105, subsection 2.
(3) Knowingly violates any other provision of this chapter.
b. An officer or director of an insurance holding company
system who commits any of the acts or omissions listed
in paragraph “a” shall pay, in the person’s individual
capacity, a civil penalty of not more than one thousand
dollars per violation, after notice and hearing before the
commissioner. In determining the amount of the civil penalty,
the commissioner shall take into account the appropriateness
of the penalty with respect to the gravity of the violation,
the history of previous violations, and such other matters as
justice may require.
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3. Whenever it appears to the commissioner that an insurer
subject to this chapter or a director, officer, employee,
or agent of such an insurer, has engaged in a transaction
or entered into a contract which is subject to section
521A.105 and which would not have been approved had approval
been requested, the commissioner may order the insurer to
immediately cease and desist any further activity under
that transaction or contract. After notice and hearing, the
commissioner may also order the insurer to void any contracts
and restore the status quo if the commissioner finds that
action is in the best interest of the policyholders, creditors,
or the public.
4. Whenever it appears to the commissioner that an insurer
or a director, officer, agent, or employee of an insurer
has committed a willful violation of this chapter, the
commissioner may refer the matter to the attorney general or
to the appropriate county attorney who may institute criminal
proceedings against the insurer or the responsible director,
officer, agent, or employee in the district court of the county
in which the principal office of the insurer is located, or if
the insurer has no office in this state, then in the district
court of Polk county. An insurer or individual who willfully
violates this chapter is guilty of a class “D” felony.
5. A director, officer, or employee of an insurance holding
company system who willfully and knowingly subscribes to or
makes or causes to be made any false statements, false reports,
or false filings with the intent to deceive the commissioner in
the performance of the commissioner’s duties under this chapter
is guilty of a class “D” felony. Any fines imposed shall be
paid by the director, officer, or employee in the person’s
individual capacity.
6. Whenever it appears to the commissioner that a person
has violated the provisions of section 521A.103 and the
violation prevents the full understanding of the enterprise
risk to the insurer by affiliates or by the insurance holding
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company system, the violation may serve as an independent basis
for disapproving dividends or distributions and for placing
the insurer under an order of supervision in accordance with
chapter 507C.
Sec. 12. NEW SECTION . 521A.112 Receivership.
Whenever it appears to the commissioner that any person
has committed a violation of this chapter which so impairs
the financial condition of a domestic insurer as to threaten
insolvency or make the further transaction of business
by the insurer hazardous to its policyholders, creditors,
shareholders, or the public, then the commissioner may proceed
as provided in chapter 507C to take possession of the property
of the domestic insurer and to conduct the insurer’s business.
Sec. 13. NEW SECTION . 521A.113 Recovery.
1. Subject to subsections 2 through 4, if an order for
liquidation, conservation, or rehabilitation of a domestic
insurer has been entered, the receiver appointed under the
order may recover on behalf of the insurer either of the
following if the distribution or payment was made within one
year preceding the filing of the petition for liquidation,
conservation, or rehabilitation:
a. From a parent corporation, holding company, affiliate, or
other person who otherwise controlled the insurer, the amount
of distributions, other than distributions of shares of the
same class of stock, paid by the insurer on its capital stock.
b. Any payment in the form of a bonus, termination
settlement, or extraordinary lump sum salary adjustment made
by the insurer or a subsidiary of the insurer to a director,
officer, agent, or employee.
2. A distribution is not recoverable if the parent
corporation or affiliate, or other person, shows that when the
distribution was paid it was lawful and reasonable, and that
the insurer did not know and could not reasonably have known
that the distribution might adversely affect the ability of the
insurer to fulfill its contractual obligations.
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3. A person who was a parent corporation or holding company,
or a person who otherwise controlled the insurer or affiliate
at the time the distributions were paid is liable only up to
the amount of distributions or payments under subsection 1 that
the person received. A person who otherwise controlled the
insurer at the time the distributions were declared is liable
only up to the amount of distributions the person would have
received if the person had been paid immediately. If two or
more persons are liable with respect to the same distributions,
they shall be jointly and severally liable.
4. The maximum amount recoverable under this section shall
be the amount needed in excess of all other available assets
of the impaired or insolvent insurer to pay the contractual
obligations of the impaired or insolvent insurer and to
reimburse any guaranty funds.
5. To the extent that a person liable under subsection 3 is
insolvent or otherwise fails to pay claims due from the person
pursuant to this section, the person’s parent corporation,
holding company, or person who otherwise controlled it at the
time the distribution was paid, is jointly and severally liable
for any resulting deficiency in the amount recovered from the
parent corporation, holding company, or person who otherwise
controlled it.
Sec. 14. NEW SECTION . 521A.114 Revocation, suspension, or
nonrenewal of insurer’s license.
Whenever it appears to the commissioner that any person
has committed a violation of this chapter which makes the
continued operation of an insurer contrary to the interests
of policyholders or the public, the commissioner may, after
giving notice and an opportunity to be heard, determine to
suspend, revoke, or refuse to renew the insurer’s license
or authority to do business in this state for such period
as the commissioner finds is required for the protection of
policyholders or the public. Any such determination shall be
accompanied by specific findings of fact and conclusions of
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law.
Sec. 15. NEW SECTION . 521A.115 Judicial review —— mandamus.
1. Judicial review of the actions of the commissioner may be
sought in accordance with the terms of the Iowa administrative
procedure Act, chapter 17A.
2. Any person aggrieved by the failure of the commissioner
to act or to make a determination required by this chapter
may petition the district court for Polk county for an order
of mandamus directing the commissioner to act or to make a
determination.
Sec. 16. NEW SECTION . 521A.116 Conflicts with other laws.
The provisions of this chapter shall prevail wherever the
provisions conflict or are inconsistent with other laws of this
state.
Sec. 17. NEW SECTION . 521A.117 Severability.
If any provision of this chapter, or the application of this
chapter to any person or circumstance, is held invalid, such
holding shall not affect the provisions or applications of this
chapter which can be given effect without the invalid provision
or application, and to that end the provisions of this chapter
are severable.
Sec. 18. NEW SECTION . 521A.118 Mutual insurance holding
companies.
1. a. A domestic mutual insurance company, upon approval
of the commissioner, may reorganize by forming an insurance
holding company based upon a mutual plan and continuing the
corporate existence of the reorganizing insurance company
as a stock insurance company. The commissioner, after a
public hearing as provided in section 521A.103, subsection
4, paragraph “b” , if satisfied that the interests of the
policyholders are properly protected and that the plan of
reorganization is fair and equitable to the policyholders, may
approve the proposed plan of reorganization and may require as
a condition of approval such modifications of the proposed plan
of reorganization as the commissioner finds necessary for the
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protection of the policyholders’ interests. The commissioner
may retain consultants as provided in section 521A.103,
subsection 4, paragraph “d” . A reorganization pursuant to this
section is subject to section 521A.103, subsections 1, 2, and
3. The commissioner shall retain jurisdiction over a mutual
insurance holding company organized pursuant to this section to
assure that policyholder interests are protected.
b. All of the initial shares of the capital stock of the
reorganized insurance company shall be issued to the mutual
insurance holding company. The membership interests of the
policyholders of the reorganized insurance company shall
become membership interests in the mutual insurance holding
company. Policyholders of the reorganized insurance company
shall be members of the mutual insurance holding company in
accordance with the articles of incorporation and bylaws of the
mutual insurance holding company. The mutual insurance holding
company shall at all times own a majority of the voting shares
of the capital stock of the reorganized insurance company.
2. a. A domestic mutual insurance company, upon the
approval of the commissioner, may reorganize by merging its
policyholders’ membership interests into a mutual insurance
holding company formed pursuant to subsection 1 and continuing
the corporate existence of the reorganizing insurance company
as a stock insurance company subsidiary of the mutual insurance
holding company. The commissioner, after a public hearing as
provided in section 521A.103, subsection 4, paragraph “b” , if
satisfied that the interests of the policyholders are properly
protected and that the merger is fair and equitable to the
policyholders, may approve the proposed merger and may require
as a condition of approval such modifications of the proposed
merger as the commissioner finds necessary for the protection
of the policyholders’ interests. The commissioner may retain
consultants as provided in section 521A.103, subsection 4,
paragraph “d” . A merger pursuant to this section is subject to
section 521A.103, subsections 1, 2, and 3. The commissioner
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shall retain jurisdiction over the mutual insurance holding
company organized pursuant to this section to assure that
policyholder interests are protected.
b. All of the initial shares of the capital stock of the
reorganized insurance company shall be issued to the mutual
insurance holding company. The membership interests of the
policyholders of the reorganized insurance company shall
become membership interests in the mutual insurance holding
company. Policyholders of the reorganized insurance company
shall be members of the mutual insurance holding company in
accordance with the articles of incorporation and bylaws of the
mutual insurance holding company. The mutual insurance holding
company shall at all times own a majority of the voting shares
of the capital stock of the reorganized insurance company.
A merger of policyholders’ membership interests in a mutual
insurance company into a mutual insurance holding company shall
be deemed to be a merger of insurance companies pursuant to
chapter 521 and chapter 521 is also applicable.
c. A foreign mutual insurance company, or a foreign health
service corporation, which if a domestic corporation would be
organized under chapter 514, may reorganize upon the approval
of the commissioner and in compliance with the requirements of
any law or regulation which is applicable to the foreign mutual
insurance company or foreign health service corporation by
merging its policyholders’ or subscribers’ membership interests
into a mutual insurance holding company formed pursuant to
subsection 1 and continuing the corporate existence of the
reorganizing foreign mutual insurance company or reorganizing
foreign health service corporation as a foreign stock insurance
company subsidiary of the mutual insurance holding company.
The commissioner, after a public hearing as provided in section
521A.103, subsection 4, paragraph “b” , may approve the proposed
merger. The commissioner may retain consultants as provided
in section 521A.103, subsection 4, paragraph “d” . A merger
pursuant to this paragraph is subject to section 521A.103,
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subsections 1, 2, and 3. The reorganizing foreign mutual
insurance company or reorganizing foreign health service
corporation may remain a foreign company or foreign corporation
after the merger, and may be admitted to do business in this
state. A foreign mutual insurance company or foreign mutual
health service corporation which is a party to the merger may
at the same time redomesticate in this state by complying with
the applicable requirements of this state and its state of
domicile. The provisions of paragraph “b” shall apply to a
merger authorized under this paragraph, except that a reference
to policyholders in that paragraph is also deemed to include
subscribers in the case of a health service corporation.
3. A mutual insurance holding company resulting from
the reorganization of a domestic mutual insurance company
organized under chapter 491 shall be incorporated pursuant to
chapter 491. This requirement shall supersede any conflicting
provisions of section 491.1. The articles of incorporation and
any amendments to such articles of the mutual insurance holding
company shall be subject to approval of the commissioner in the
same manner as those of an insurance company.
4. A mutual insurance holding company is deemed to be
an insurer subject to chapter 507C and shall automatically
be a party to any proceeding under chapter 507C involving
an insurance company which as a result of a reorganization
pursuant to subsection 1 or 2 is a subsidiary of the mutual
insurance holding company. In any proceeding under chapter
507C involving the reorganized insurance company, the assets of
the mutual insurance holding company are deemed to be assets of
the estate of the reorganized insurance company for purposes of
satisfying the claims of the reorganized insurance company’s
policyholders. A mutual insurance holding company shall not
dissolve or liquidate without the approval of the commissioner
or as ordered by the district court pursuant to chapter 507C.
5. a. Chapters 508B and 515G are not applicable to a
reorganization or merger pursuant to this section.
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b. Chapter 508B is applicable to demutualization of a
mutual insurance holding company which resulted from the
reorganization of a domestic mutual life insurance company
organized under chapter 508 as if it were a mutual life
insurance company.
c. Chapter 515G is applicable to demutualization of a
mutual insurance holding company which resulted from the
reorganization of a domestic mutual property and casualty
insurance company organized under chapter 515 as if it were a
mutual property and casualty insurance company.
6. A membership interest in a domestic mutual insurance
holding company shall not constitute a security as defined in
section 502.102.
7. a. The majority of the voting shares of the capital
stock of the reorganized insurance company, which is required
by this section to be at all times owned by a mutual insurance
holding company, shall not be conveyed, transferred, assigned,
pledged, subjected to a security interest or lien, encumbered,
or otherwise hypothecated or alienated by the mutual insurance
holding company or intermediate holding company. Any
conveyance, transfer, assignment, pledge, security interest,
lien, encumbrance, or hypothecation or alienation of, in or on
the majority of the voting shares of the reorganized insurance
company which is required by this section to be at all times
owned by a mutual insurance holding company, is in violation of
this section and shall be void in inverse chronological order
of the date of such conveyance, transfer, assignment, pledge,
security interest, lien, encumbrance, or hypothecation or
alienation, as to the shares necessary to constitute a majority
of such voting shares. The majority of the voting shares of
the capital stock of the reorganized insurance company which is
required by this section to be at all times owned by a mutual
insurance holding company shall not be subject to execution
and levy as provided in chapter 626. The shares of the
capital stock of the surviving or new company resulting from a
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merger or consolidation of two or more reorganized insurance
companies or two or more intermediate holding companies
which were subsidiaries of the same mutual insurance holding
company are subject to the same requirements, restrictions, and
limitations as provided in this section to which the shares of
the merging or consolidating reorganized insurance companies
or intermediate holding companies were subject by this section
prior to the merger or consolidation.
b. As used in this section, “majority of the voting shares
of the capital stock of the reorganized insurance company”
means shares of the capital stock of the reorganized insurance
company which carry the right to cast a majority of the votes
entitled to be cast by all of the outstanding shares of the
capital stock of the reorganized insurance company for the
election of directors and on all other matters submitted
to a vote of the shareholders of the reorganized insurance
company. The ownership of a majority of the voting shares of
the capital stock of the reorganized insurance company which
are required by this section to be at all times owned by a
parent mutual insurance holding company includes indirect
ownership through one or more intermediate holding companies in
a corporate structure approved by the commissioner. However,
indirect ownership through one or more intermediate holding
companies shall not result in the mutual insurance holding
company owning less than the equivalent of a majority of the
voting shares of the capital stock of the reorganized insurance
company. The commissioner shall have jurisdiction over an
intermediate holding company as if it were a mutual insurance
holding company. As used in this section, “intermediate holding
company” means a holding company which is a subsidiary of a
mutual insurance holding company, and which either directly
or through a subsidiary intermediate holding company has one
or more subsidiary reorganized insurance companies of which
a majority of the voting shares of the capital stock would
otherwise have been required by this section to be at all times
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owned by the mutual insurance holding company.
Sec. 19. REPEAL. Sections 521A.1 through 521A.14, Code
2013, are repealed.
DIVISION II
COORDINATING PROVISIONS
Sec. 20. Section 505.23, Code 2013, is amended to read as
follows:
505.23 Hearings.
If an evidentiary hearing is conducted in a proceeding
pursuant to section 508B.7 , 515G.7 , 521A.3 521A.103 , or 521A.14
521A.118 , or in a proceeding with respect to a merger or
consolidation pursuant to chapter 521 , the proceeding is a
contested case subject to chapter 17A .
Sec. 21. Section 507C.2, subsection 5, Code 2013, is amended
to read as follows:
5. “Control” means the same as defined in section 521A.1
521A.101 , subsection 3 .
Sec. 22. Section 508.33A, subsection 1, paragraph b, Code
2013, is amended to read as follows:
b. “Parent” means a person as defined in section 521A.1
521A.101 who directly or indirectly through one or more
intermediaries wholly owns the organizing life insurance
company.
Sec. 23. Section 508.33A, subsection 2, paragraph b, Code
2013, is amended to read as follows:
b. A limited purpose subsidiary life insurance company
shall submit a plan of operation to the commissioner, and the
commissioner shall approve the plan of operation with such
amendments as the commissioner requires, before the limited
purpose subsidiary life insurance company assumes any risks
under a reinsurance contract. The plan of operation and any
records, books, documents, reports, or other information that
the commissioner requires a limited purpose subsidiary life
insurance company to produce or disclose pursuant to rules
adopted under subsection 6 or pursuant to an order of the
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commissioner shall be treated the same as information obtained
by or disclosed to the commissioner pursuant to section 521A.6
521A.106 and the commissioner shall have the powers enumerated
in section 521A.6 521A.106 as to that insurer.
Sec. 24. Section 508.33A, subsection 8, Code 2013, is
amended to read as follows:
8. The provisions of sections 508.5 , 508.6 , and 511.8 ,
section 521.2, subsection 4 , sections 521A.4 521A.104 and
521A.5 521A.105 , and chapter 521E shall not be applicable to
a limited purpose subsidiary life insurance company organized
pursuant to this section .
Sec. 25. Section 508B.13, Code 2013, is amended to read as
follows:
508B.13 Prohibitions on certain offers to acquire shares.
Prior to and for a period of five years following the
effective date of the conversion, and in the case of the
plans of conversion specified in section 508B.3, subsections
1 and 3 , five years following the date of distribution of
consideration to the policyholders in exchange for their
membership interests, a person, other than the reorganized
company, other than an employee benefit plan or employee
benefit trust sponsored by the reorganized company, or as
otherwise specifically provided for in the plan of conversion,
shall not directly or indirectly acquire or offer to acquire
the beneficial ownership of more than five percent of any
class of voting security of the reorganized company, and a
person, other than the reorganized company or other than an
employee benefit plan or employee benefit trust sponsored by
the reorganized company, who acquires five percent or more of
any class of voting security of the reorganized company prior
to the conversion or as specifically provided for in the plan
of conversion, shall not directly or indirectly acquire or
offer to acquire the beneficial ownership of additional voting
securities of the reorganized company, unless the acquisition
is approved by the commissioner as not being contrary to the
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interests of the policyholders of the reorganized company or
its life insurance company subsidiary and by the board of
directors of the reorganized company. The commissioner and
the board of directors may consider the factors set forth in
section 490.1108A . The provisions of section 521A.3 521A.103 ,
except section 521A.3 521A.103 , subsection 4 , paragraph “a” ,
shall be applicable to a proposed acquisition subject to this
section . An approved plan of conversion may include a stock
option plan. As used in this section , “beneficial ownership”
means, with respect to a security, the sole or shared power to
vote or direct the voting of the security or the sole power to
dispose or direct the disposition of the security.
Sec. 26. Section 510A.2, subsection 2, Code 2013, is amended
to read as follows:
2. “Control” or “controlled” has the meaning ascribed in
section 521A.1 521A.101 , subsection 3 .
Sec. 27. Section 511.8, subsection 22, paragraph b,
subparagraph (2), unnumbered paragraph 1, Code 2013, is amended
to read as follows:
Be between an insurer and a conduit and be collateralized
by cash or obligations which are eligible under subsection
1, 2, 3, 5, 19, or 24 , are deposited with a custodian bank
as defined in subsection 21 , and are held under a written
agreement with the custodian bank that complies with subsection
21 and provides for the proceeds of the collateral, subject to
the terms and conditions of the applicable collateral or other
credit support agreement, to be remitted to the legal reserve
deposit of the company or association and to vest in the state
in accordance with section 508.18 whenever proceedings under
that section are instituted. Paragraphs “c” , “d” , and “e” of
this subsection are not applicable to investments in financial
instruments used in hedging transactions eligible pursuant to
this subparagraph. As used in this subparagraph, “conduit”
means a person within an insurer’s insurance holding company
system, as defined in section 521A.1 521A.101 , subsection 5 ,
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which aggregates hedging transactions by other persons within
the insurance holding company system and replicates them with
counterparties.
Sec. 28. Section 511.8, subsection 22, paragraph b,
subparagraph (3), Code 2013, is amended to read as follows:
(3) Financial instruments used in hedging transactions
shall be eligible only as provided by this paragraph “b” and
rules adopted by the commission pursuant to chapter 17A setting
standards for hedging transactions between an insurer and a
conduit as authorized under section 521A.5 521A.105 , subsection
1 , paragraph “b” .
Sec. 29. Section 515B.2, subsection 4, paragraph b,
subparagraph (1), subparagraph division (j), Code 2013, is
amended to read as follows:
(j) That is an obligation owed to or on behalf of an
affiliate of, as defined in section 521A.1 521A.101 , an
insolvent insurer.
Sec. 30. Section 515G.1, subsection 2, Code 2013, is amended
to read as follows:
2. “Control” has the meaning assigned to it in section
521A.1 521A.101 , subsection 3 .
Sec. 31. Section 518C.3, subsection 4, paragraph b,
subparagraph (1), subparagraph division (g), Code 2013, is
amended to read as follows:
(g) An amount that is an obligation owed to or on behalf
of an affiliate of, as defined in section 521A.1 521A.101 , an
insolvent insurer.
Sec. 32. Section 521.1, subsection 4, Code 2013, is amended
to read as follows:
4. “Company” means a company or association organized under
chapter 508 , 514B , 515 , 518 , 518A , or 520 , and includes a
mutual insurance holding company organized pursuant to section
521A.14 521A.118 .
Sec. 33. Section 521.16, Code 2013, is amended to read as
follows:
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521.16 Applicability of section 521A.3 521A.103 .
For an insurer subject to chapter 521A , the provisions of
section 521A.3 521A.103 shall also be applicable to a merger
or consolidation subject to this chapter . As used in this
section , “insurer” means the same as defined in section 521A.1
521A.101 .
EXPLANATION
This bill contains new and modified provisions relating to
the regulation of insurance company holding systems. The bill
repeals current provisions relating to such regulation.
The bill defines “control” over a person to provide that
the presumption of control over a person may be rebutted by
a showing that control does not in fact exist. However, the
commissioner may, after notice and hearing, determine that
control does exist, even in the absence of a presumption to
that effect.
The bill also includes a new definition of “enterprise risk”
which means any activity, circumstance, event, or series of
events involving one or more affiliates of an insurer that, if
not remedied promptly, is likely to have a material adverse
effect upon the financial condition or liquidity of the insurer
or the insurer’s insurance holding company system, as a whole.
The bill authorizes a domestic insurer, either on its own or
in cooperation with one or more persons, to organize or acquire
one or more subsidiaries. A subsidiary may conduct any kind
of business, not limited by the fact that it is a subsidiary of
a domestic insurer. The bill limits the investment authority
of domestic insurers and in relation to their subsidiaries, as
specified in the bill.
The bill sets forth requirements for acquisition of control
of or merger with a domestic insurer. A person shall not
propose to acquire, control, or merge with a domestic insurer
without filing a statement with the commissioner of insurance
setting forth the particulars of the proposal and containing
the information specified in the bill. The statement shall
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include an agreement by the person filing the statement that
the person will provide an annual enterprise risk report for
so long as control over the insurer exists and the person and
all subsidiaries within the person’s control in the insurance
company holding system will provide information to the
commissioner, as requested, as necessary to evaluate enterprise
risk to the insurer. Failure to file the statement or other
required materials, or an attempt to effectuate an acquisition
of control of, divestiture of, or merger with a domestic
insurer without the commissioner’s approval is a violation of
the bill.
The commissioner of insurance shall determine when a
party seeking to divest a controlling interest in a domestic
insurer will be required to file for and obtain approval of the
transaction. The commissioner shall approve a merger or other
acquisition of control after a public hearing and upon finding
that the applicant has demonstrated the factors specified in
the bill. If the proposed merger or acquisition of control
will require the approval of commissioners of insurance
from more than one jurisdiction, the public hearing can be
held on a consolidated basis in the United States before the
commissioners of the jurisdictions in which the insurers are
domiciled.
Every insurer authorized to do business in the state which
is a member of an insurance holding company system is required
to register and file a registration statement on a form and in
a format prescribed by the national association of insurance
commissioners. If requested by the commissioner, the insurer
must include financial statements of or within an insurance
holding company system. A person or a member of an insurance
holding company system may file a disclaimer of affiliation
with another person. A disclaimer shall be deemed to be
allowed by the commissioner unless the disclaimer is disallowed
within 30 days of filing. The disclaiming person may file a
request for an administrative hearing on a disallowance.
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Beginning May 1, 2014, and every May 1 thereafter, the
ultimate controlling person of every insurer subject to
registration must file an annual enterprise risk report. The
report shall identify material risks within the insurance
holding company system that could pose enterprise risk to
the insurer. The report shall be filed with the lead state
commissioner of the insurance holding company system. An
ultimate controlling person having direct written and assumed
premiums of less than $500 million in any calendar year
may request an exemption from the enterprise risk report
requirement by filing a written statement with the commissioner
of insurance discussing the reasons why an exemption should
be granted. The commissioner shall grant the exemption upon
finding that the ultimate controlling person has the requisite
amount of written and assumed premiums and that compliance
with the report requirement will constitute a financial
or organizational hardship upon that person. “Ultimate
controlling person” is defined as a person that is not
controlled by any other person.
The bill contains standards and requirements for management
of an insurer within an insurance holding company system.
Certain transactions within an insurance holding company
system to which an insurer is a party are subject to specified
standards and must be reported to the commissioner in writing
30 days prior to entering into the transaction. Notice shall
include reasons for amendments or modifications of agreements
and the financial impact of the change on the domestic insurer.
A domestic insurer shall not enter into transactions which are
part of a plan or series of like transactions with a person
within the insurance holding company system if the purpose of
the separate transactions is to avoid the statutory threshold
amount for reporting the transaction and the ensuing review of
the transaction. In reviewing a transaction, the commissioner
shall consider whether the transaction complies with the
standards set forth in the bill and whether the transaction may
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adversely affect the interests of policyholders.
The bill provides that a domestic insurer may declare and pay
dividends to its shareholders only from earned surplus. Assets
revalued by the board of directors of the insurer cannot be
included in earned surplus until 30 days after the commissioner
has received notice of the revaluation and approved it.
A domestic insurer shall not pay any extraordinary
dividend or make any other extraordinary distribution to
its shareholders until 30 days after the commissioner has
received notice of the declaration of the extraordinary
dividend or distribution and either approved the payment or not
disapproved the payment. The bill defines what constitutes an
extraordinary dividend or distribution.
The bill provides that, notwithstanding the control of a
domestic insurer by any person, the officers and directors
of the insurer must maintain the obligation and liability
to which they are otherwise subject by law and the insurer
must be managed to assure its separate operating identity
consistent with the provisions of the bill. The bill contains
requirements for the makeup of the board of directors and
committees of the board of a domestic insurer.
The bill contains standards for determining whether an
insurer’s surplus as regards policyholders is reasonable in
relation to the insurer’s outstanding liabilities and adequate
to meet the insurer’s financial needs.
The commissioner of insurance has the power to examine
any insurer required to register under the provisions of the
bill. The commissioner may order the insurer to produce
books, records, and other information reasonably necessary
to determine the insurer’s compliance with the provisions of
the bill. The commissioner may use consultants to assist
in the conduct of an examination and assess the insurer
for examination expenses incurred by the commissioner. The
commissioner has the power to issue subpoenas, administer
oaths, and examine under oath any person for the purpose of
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determining an insurer’s compliance with the bill’s provisions.
The commissioner may petition a court for an order compelling
testimony and production of evidence.
The commissioner is authorized to participate in a
supervisory college for any domestic insurer that is part
of an insurance holding company system with international
operations in order to assess the business strategy, financial
position, legal and regulatory position, risk exposure, and
risk management and governance processes of the insurer. The
insurer shall be liable to pay the reasonable expenses of the
commissioner’s participation in a supervisory college. A
“supervisory college” is defined as a temporary or permanent
forum for communication and cooperation between regulators.
All documents, materials, or other information in the
possession or control of the commissioner that are obtained
by or disclosed to the commissioner or to any other person
in the course of an examination or investigation, and all
information reported in a statement concerning a merger or
acquisition, including an enterprise risk report, shall be
treated as confidential and are not subject to discovery or
admissible in evidence in any private civil action. The
commissioner or any other person who receives such documents,
materials, or other information shall not be permitted or
required to testify in any private civil action concerning
them. The commissioner may share the information with other
state, federal, and international regulatory agencies, with
the national association of insurance commissioners, and with
state, federal, and international law enforcement authorities,
including members of a supervisory college, if the person to
whom the information is disclosed agrees in writing not to
disclose the information.
The commissioner may issue rules and orders to carry out the
provisions of the bill. The commissioner may seek injunctive
relief if it appears that an insurer or agent of an insurer has
committed or is about to commit a violation of the provisions
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of the bill or any rule or order issued pursuant to those
provisions.
If the commissioner finds after notice and hearing that an
insurer subject to registration failed to file a registration
statement as required by the bill, the insurer shall be
required to pay a penalty of $1,000 per day for each day of
delay. The penalty shall be recovered by the commissioner
and deposited in the general fund of the state. The maximum
penalty is $10,000 and may be reduced if the commissioner finds
that imposition of the penalty would constitute a financial
hardship to the insurer.
A director or officer of an insurance holding company system
who commits specified violations of the bill’s provisions must
pay, in the person’s individual capacity, a civil penalty of
not more than $1,000 per violation, after notice and hearing
before the commissioner. The commissioner may also order an
insurer or an officer, director, employee, or agent of the
insurer to cease and desist action that is a violation of the
bill and to void any contracts if the commissioner finds that
such an order is in the best interest of the policyholders,
creditors, or the public. If it appears that an individual has
committed a willful violation, the commissioner may refer the
matter to the attorney general or to the appropriate county
attorney for possible prosecution. A willful violation of
the bill’s provisions is punishable as a class “D” felony.
A class “D” felony is punishable by confinement for no more
than five years and a fine of at least $750 but not more than
$7,500. A violation that prevents full understanding of the
enterprise risk to an insurer by affiliates or by the insurance
holding company system may serve as an independent basis for
disapproving dividends or distributions and for placing the
insurer under an order of supervision.
When it appears to the commissioner that a person has
committed a violation which so impairs the financial condition
of a domestic insurer as to threaten insolvency or to make the
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further transaction of business by the insurer hazardous to
its policyholders, creditors, shareholders, or the public, the
commissioner may proceed as provided in Code chapter 507C to
take possession of the property of the insurer and to conduct
the insurer’s business.
If an order for liquidation, conservation, or rehabilitation
of a domestic insurer has been entered, the receiver appointed
under the order may recover certain distributions or payments
made within one year preceding the petition for liquidation,
conservation, or rehabilitation.
If a person has committed a violation of the bill’s
provisions which makes the continued operation of an insurer
contrary to the interests of policyholders or the public, the
commissioner may, after notice and hearing, suspend, revoke,
or refuse to renew the insurer’s license or authority to do
business in the state. Judicial review of the commissioner’s
actions shall be sought as provided in Code chapter 17A. The
bill’s provisions supersede other laws of this state that are
inconsistent or in conflict with the bill. If any provisions
of the bill are held invalid, the rest of the bill’s provisions
are severable in order to give them effect without the invalid
provision or application.
The bill authorizes a domestic mutual insurance company
to reorganize by forming an insurance holding company based
upon a mutual plan and continuing the corporate existence
of the reorganizing insurance company as a stock insurance
company, or by merging its policyholders’ membership interests
into a mutual insurance holding company, upon approval of the
commissioner.
Coordinating amendments are made in various Code sections
to correct internal references to the Code sections of Code
chapter 521A that are repealed by the bill.
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