Bill Text: MI HB5823 | 2013-2014 | 97th Legislature | Introduced
Bill Title: Insurance; insurers; procedures for own risk and solvency assessment; provide for. Amends 1956 PA 218 (MCL 500.100 - 500.8302) by adding ch. 17. TIE BAR WITH: HB 5792'14
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2014-12-18 - Laid Over One Day Under The Rules [HB5823 Detail]
Download: Michigan-2013-HB5823-Introduced.html
HOUSE BILL No. 5823
September 17, 2014, Introduced by Rep. Lund and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
(MCL 500.100 to 500.8302) by adding chapter 17.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
CHAPTER 17
RISK MANAGEMENT AND OWN RISK AND SOLVENCY ASSESSMENT
Sec. 1701. As used in this chapter:
(a) "Insurance group" means, for the purpose of conducting an
ORSA, insurers and affiliates included within an insurance holding
company system.
(b) "Insurer" means that term as defined in section 106.
Insurer also includes a fraternal benefit society as that term is
defined in section 8164. Insurer does not include agencies,
authorities, or instrumentalities of the United States, its
possessions and territories, the commonwealth of Puerto Rico, the
District of Columbia, or a state or political subdivision of a
state.
(c) "Own risk and solvency assessment" or "ORSA" means a
confidential internal assessment, appropriate to the nature, scale,
and complexity of an insurer or insurance group, conducted by that
insurer or insurance group, of the material and relevant risks
associated with the insurer or insurance group's current business
plan, and the sufficiency of capital resources to support those
risks.
(d) "ORSA guidance manual" means the own risk and solvency
assessment guidance manual as adopted and prescribed by the
director. A change in the ORSA guidance manual is effective on the
January 1 following the calendar year in which the changes have
been adopted and prescribed by the director.
(e) "ORSA summary report" means a confidential high-level
summary of an insurer or insurance group's ORSA.
Sec. 1703. An insurer shall maintain a risk management
framework to assist the insurer with identifying, assessing,
monitoring, managing, and reporting on its material and relevant
risks. This requirement may be satisfied if the insurance group of
which the insurer is a member maintains a risk management framework
applicable to the operations of the insurer.
Sec. 1705. Subject to section 1709, an insurer, or the
insurance group of which the insurer is a member, shall regularly
conduct an ORSA consistent with a process comparable to the ORSA
guidance manual. The ORSA shall be conducted no less than annually
but also at any time when there are significant changes to the risk
profile of the insurer or the insurance group of which the insurer
is a member.
Sec. 1707. (1) Upon the director's request, and no more than
once each year, an insurer shall submit to the director an ORSA
summary report, or any combination of reports that together contain
the information as described in the ORSA guidance manual,
applicable to the insurer, the insurance group of which it is a
member, or both. Notwithstanding any request from the director, if
the insurer is a member of an insurance group, the insurer shall
submit a report required by this subsection if the director is the
lead state regulator of the insurance group as determined by the
procedures within the national association of insurance
commissioners financial analysis handbook as adopted by the
director.
(2) A report required under subsection (1) must include a
signature of the insurer or insurance group's chief risk officer or
other executive having responsibility for the oversight of the
insurer's enterprise risk management process attesting to the best
of his or her belief and knowledge that the insurer applies the
enterprise risk management process described in the ORSA summary
report and that a copy of the report has been provided to the
insurer's board of directors or appropriate committee of the
insurer's board of directors.
(3) An insurer may comply with subsection (1) by providing the
most recent and substantially similar report provided by the
insurer or another member of an insurance group of which the
insurer is a member to a commissioner of another state or to a
supervisor or regulator of a foreign jurisdiction, if that report
provides information that is comparable to the information
prescribed by the ORSA guidance manual. A report in a language
other than English must be accompanied by a translation of that
report into the English language.
Sec. 1709. (1) Except as otherwise provided in subsection (5),
an insurer is exempt from the requirements of this chapter, if both
of the following apply:
(a) The insurer has annual direct written and unaffiliated
assumed premium, including international direct and assumed premium
but excluding premiums reinsured with the federal crop insurance
corporation and federal flood program, less than $500,000,000.00.
(b) The insurance group of which the insurer is a member has
annual direct written and unaffiliated assumed premium, including
international direct and assumed premium but excluding premiums
reinsured with the federal crop insurance corporation and federal
flood program, less than $1,000,000,000.00.
(2) If an insurer qualifies for exemption under subsection
(1)(a) but the insurance group of which the insurer is a member
does not qualify for exemption under subsection (1)(b), the ORSA
summary report that may be required under section 1707 must include
every insurer within the insurance group. This requirement may be
satisfied by the submission of more than 1 ORSA summary report for
any combination of insurers if the combination of reports includes
every insurer within the insurance group.
(3) If an insurer does not qualify for exemption under
subsection (1)(a) but the insurance group of which it is a member
qualifies for exemption under subsection (1)(b), the only ORSA
summary report that may be required under section 1707 is the
report applicable to the insurer.
(4) Subject to subsection (5), an insurer that does not
qualify for exemption under subsection (1) may apply to the
director for a waiver from the requirements of this chapter based
upon unique circumstances. In deciding whether to grant the
insurer's request for a waiver, the director may consider the type
and volume of business written, ownership and organizational
structure, and any other factor the director considers relevant to
the insurer or insurance group of which the insurer is a member. If
the insurer is part of an insurance group with insurers domiciled
in more than 1 state, the director shall coordinate with the lead
state commissioner and with the other domiciliary commissioners in
considering whether to grant the insurer’s request for a waiver.
(5) Notwithstanding the exemption provided in subsection (1),
the director may require 1 or more of the following:
(a) The director may require that an insurer maintain a risk
management framework, conduct an ORSA, and file an ORSA summary
report based on unique circumstances including, but not limited to,
the type and volume of business written, ownership and
organizational structure, federal agency requests, and
international supervisor requests.
(b) The director may require that an insurer maintain a risk
management framework, conduct an ORSA, and file an ORSA summary
report if the director determines 1 or more of the following:
(i) The insurer has risk-based capital for a company action
level event.
(ii) The insurer meets 1 or more of the conditions described in
section 436.
(iii) The operation of the insurer is hazardous to
policyholders, creditors, or the public under section 436a.
(iv) The insurer exhibits qualities of a troubled insurer.
(6) If an insurer that qualifies for an exemption under
subsection (1) subsequently no longer qualifies for that exemption
because of an increase in premium as reflected in the insurer's
most recent annual statement or in the most recent annual
statements of the insurers within the insurance group of which the
insurer is a member, the insurer has 1 year following the year the
premium exceeded the limitation provided in subsection (1) to
comply with this chapter.
Sec. 1711. (1) Subject to subsection (2), an insurer shall
prepare an ORSA summary report under section 1707 consistent with
the ORSA guidance manual prescribed by the director. The insurer
shall maintain and make available to the director documentation and
supporting information relating to the ORSA summary report.
(2) The director shall review an ORSA summary report and any
additional requests for information using similar procedures used
in the analysis and examination of multistate or global insurers
and insurance groups.
Sec. 1713. (1) Documents, materials, or other information,
including the ORSA summary report, in the possession or control of
the director that are obtained by, created by, or disclosed to the
director or any other person under this chapter are considered
proprietary and to contain trade secrets. The documents, materials,
or other information are confidential and privileged, are not
subject to disclosure under the freedom of information act, 1976 PA
442, MCL 15.231 to 15.246, are not subject to subpoena, and are not
subject to discovery or admissible in evidence in a private civil
action. However, the director may use the documents, materials, or
other information in the furtherance of any regulatory or legal
action brought as a part of the director’s official duties. The
director shall not otherwise make the documents, materials, or
other information public without the prior written consent of the
insurer to which it pertains.
(2) The director or any person who received documents,
materials, or other ORSA-related information, through examination
or otherwise, while acting under the authority of the director or
with whom the documents, materials, or other information are shared
under this act shall not testify in a private civil action
concerning confidential documents, materials, or information
described in subsection (1).
(3) The director may do all of the following:
(a) Except as otherwise provided in this subdivision, on
request, share documents, materials, or other ORSA-related
information, including the confidential and privileged documents,
materials, or information described in subsection (1), including
proprietary and trade secret documents and materials with other
state, federal, and international financial regulatory agencies,
including members of a supervisory college described in chapter 13,
with the NAIC and with any third-party consultants designated by
the director. The director shall not share documents, materials, or
other ORSA-related information described in this subdivision unless
the recipient agrees in writing to maintain the confidentiality and
privileged status of the ORSA-related documents, materials, or
other information and has verified in writing the legal authority
to maintain confidentiality.
(b) Subject to this subdivision, receive documents, materials,
or other ORSA-related information, including otherwise confidential
and privileged documents, materials, or information, including
proprietary and trade-secret information or documents, from
regulatory officials of other foreign or domestic jurisdictions,
including members of a supervisory college described in chapter 13,
and from the NAIC. The director shall maintain as confidential or
privileged any documents, materials, or information received with
notice or the understanding that it is confidential or privileged
under the laws of the jurisdiction that is the source of the
document, material, or information.
(4) The director shall enter into a written agreement with the
NAIC or a third-party consultant governing sharing and use of
information provided under this chapter. The written agreement must
do all of the following:
(a) Specify procedures and protocols regarding the
confidentiality and security of information shared with the NAIC or
a third-party consultant under this chapter, including procedures
and protocols for sharing by the NAIC with other state regulators
from states in which the insurance group has domiciled insurers.
(b) Contain a statement that the recipient agrees in writing
to maintain the confidentiality and privileged status of the ORSA-
related documents, materials, or other information and has verified
in writing the legal authority to maintain confidentiality.
(c) Specify that the director owns the information shared with
the NAIC or a third-party consultant under this chapter and that
the NAIC's or third-party consultant's use of the information is
subject to the direction of the director.
(d) Prohibit the NAIC or third-party consultant from storing
the information shared under this chapter in a permanent database
after the underlying analysis is completed.
(e) Require prompt notice to be given to an insurer whose
confidential information in the possession of the NAIC or third-
party consultant under this chapter is subject to a request or
subpoena to the NAIC or third-party consultant for disclosure or
production.
(f) Require the NAIC or third-party consultant to consent to
intervention by an insurer in any judicial or administrative action
in which the NAIC or third-party consultant may be required to
disclose confidential information about the insurer shared with the
NAIC or third-party consultant under this chapter.
(g) For an agreement involving a third-party consultant,
provide for the insurer's written consent.
(5) The sharing of information and documents by the director
under this chapter is not a delegation of regulatory authority or
rule-making, and the director is solely responsible for the
administration, execution, and enforcement of this chapter.
(6) The disclosure or sharing of documents, proprietary and
trade-secret materials, or other ORSA-related information to the
director or other person under this chapter is not a waiver of an
applicable privilege or claim of confidentiality.
(7) Documents, materials, or other information in the
possession or control of the NAIC or third-party consultants under
this chapter are confidential and privileged, are not subject to
disclosure under the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246, are not subject to subpoena, and are not subject
to discovery or admissible in evidence in a private civil action.
Sec. 1715. An insurer that does not, without just cause,
timely file an ORSA summary report as required in this chapter
shall pay a penalty of $1,000.00 for each day's delay, to be
recovered by the director and paid into the general fund. The
maximum penalty under this section is $75,000.00. The director may
reduce the penalty if the insurer demonstrates to the director that
the penalty would cause a financial hardship to the insurer.
Enacting section 1. This amendatory act does not take effect
unless House Bill No. 5792 of the 97th Legislature is enacted into
law.
