Bill Text: HI HB2271 | 2014 | Regular Session | Introduced
Bill Title: Insurance
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-02-10 - The committee(s) on CPC recommend(s) that the measure be deferred. [HB2271 Detail]
Download: Hawaii-2014-HB2271-Introduced.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
2271 |
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TWENTY-SEVENTH LEGISLATURE, 2014 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO INSURANCE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I
SECTION 1. Section 431:4A-101, Hawaii Revised Statutes, is amended to read as follows:
"§431:4A-101 Credit allowed a domestic ceding insurer.
(a) Credit for reinsurance shall be
allowed a domestic ceding insurer as either an asset or a [deduction] reduction
from liability on [the domestic ceding insurer's financial statements on]
account of reinsurance ceded only when the reinsurer meets the requirements of
[paragraph (1), (2), (3), (4), or (5). The requirements of paragraph (6)
must also be met if the reinsurer attempts to meet the requirements of
paragraph (3) or (4).] subsection (b), (c), (d), (e), or (f). Credit
shall be allowed under subsection (b) or (c) only as respects cessions of those
kinds or classes of business that the assuming insurer is licensed or otherwise
permitted to write or assume in its state of domicile or, in the case of a
United States branch of an alien assuming insurer, in the state through which
it is entered and licensed to transact insurance or reinsurance. Credit shall
be allowed under subsection (c) or (d) only if the applicable requirements of
subsection (g) have been satisfied.
[(1)] (b) Credit shall be
allowed when the reinsurance is ceded to an assuming insurer that is licensed
to transact insurance or reinsurance in this State[.
(2) Credit shall be allowed when the
reinsurance is ceded to an assuming insurer that], or is accredited by
the commissioner as a reinsurer in this State. [An accredited reinsurer
is one that:] To be eligible for accreditation, a reinsurer shall:
[(A)
Files] (1) File with the commissioner evidence of its
submission to this State's jurisdiction;
[(B) Submits]
(2) Submit to this State's authority to examine its books and
records;
[(C) Is] (3)
Be licensed to transact insurance or reinsurance in at least one state,
or in the case of a United States branch of an alien assuming insurer, [is]
be entered through and licensed to transact insurance or reinsurance in
at least one state;
[(D) Files] (4)
File annually with the commissioner a copy of its annual statement filed
with the insurance department of its state of domicile and a copy of its most
recent audited financial statement; and [either:
(i) Maintains a surplus as regards
policyholders in an amount that is not less than $20,000,000 and whose
accreditation has not been denied by the commissioner within ninety days of its
submission; or
(ii) Maintains a surplus as regards
policyholders in an amount less than $20,000,000 and whose accreditation has
been approved by the commissioner.
No credit shall be allowed a
domestic ceding insurer, if the assuming insurer's accreditation has been
revoked by the commissioner after notice and hearing.]
(5) Demonstrate to the satisfaction of the commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders in an amount not less than $20,000,000 and its accreditation has not been denied by the commissioner within ninety days after submission of its application.
[(3)] (c) Credit shall be
allowed when the reinsurance is ceded to an assuming insurer that is domiciled
[and licensed] in, or in the case of a United States branch of an alien
assuming insurer is entered through, a state that employs standards regarding
credit for reinsurance equal to or exceeding those applicable under this
article and the assuming insurer or United States branch of an alien assuming
insurer:
[(A)] (1)
Maintains a surplus as regards policyholders in an amount not less than
$20,000,000; and
[(B)] (2)
Submits to the authority of this State to examine its books and records;
provided that [the requirement of subparagraph
(A)] paragraph (1) does not apply to reinsurance ceded and assumed
pursuant to pooling arrangements among insurers in the same holding company
system.
[(4)] (d)
Credit shall be allowed as follows:
[(A)] (1) Credit shall be allowed when the
reinsurance is ceded to an assuming insurer that maintains a trust fund in a
qualified United States financial institution, as defined in section
431:4A-103(b), for the payment of the valid claims of its United States [policyholders
and] ceding insurers, their assigns[,] and successors in
interest. [The assuming insurer shall report annually to the commissioner
information substantially the same as that required to be reported on the
National Association of Insurance Commissioners annual statement form by
licensed insurers to enable the commissioner to determine the sufficiency of
the trust fund. In the case of] To enable the commissioner to determine
the sufficiency of the trust fund, the assuming insurer shall report annually
to the commissioner information substantially the same as that required to be
reported on the National Association of Insurance Commissioners' annual
statement form by licensed insurers. The assuming insurer shall submit to
examination of its books and records by the commissioner and bear the expense
of examination;
(2) Credit for reinsurance shall not be granted under this subsection unless the form of the trust and any amendments to the trust have been approved by:
(A) The commissioner of the state where the trust is domiciled; or
(B) The commissioner of another state who, pursuant to the terms of the trust instrument, has accepted principal regulatory oversight of the trust.
The form of the trust and any trust amendments shall also be filed with the commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States.
The trust shall vest legal title to its assets in its trustees for the benefit of the assuming insurer’s United States ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the commissioner.
The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. No later than February 28 of each year, the trustee of the trust shall report to the commissioner in writing the balance of the trust and listing the trust's investments at the preceding year-end and shall certify the date of termination of the trust, if so planned, or certify that the trust will not expire prior to the following December 31;
(3) The following requirements shall apply to these categories of assuming insurers:
(A) The trust fund for a single
assuming insurer[, the trust] shall consist of [a trusteed account
representing the] funds in trust in an amount not less than the
assuming insurer's liabilities attributable to [business written in the
United States] reinsurance ceded by United States ceding insurers,
and, in addition, the assuming insurer shall maintain a trusteed surplus of not
less than $20,000,000[.], except as provided in subparagraph (B);
(B) At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of United States ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates, and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty per cent of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust;
(C) In the case of a group including
incorporated and individual unincorporated underwriters[, the trust shall
consist of a trusteed account representing the group's liabilities attributable
to business written in the United States and, in addition,]:
(i) For reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several liabilities attributable to business ceded by United States domiciled ceding insurers to any underwriter of the group;
(ii) For reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992, and not amended or renewed after that date, notwithstanding the other provisions of this article, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several insurance and reinsurance liabilities attributable to business written in the United States; and
(iii) In addition to these trusts,
the group shall maintain in trust a trusteed surplus of which
$100,000,000 shall be held jointly for the benefit of United States domiciled
ceding insurers of any member of the group[; the] for all years of
account.
The incorporated members of the
group shall not be engaged in any business other than underwriting as a member
of the group and shall be subject to the same level of [solvency]
regulation and solvency control by the group's domiciliary regulator as
are the unincorporated members[; and].
Within ninety days after its
financial statements are due to be filed with the group's domiciliary regulator,
the group shall [make available] provide to the commissioner an
annual certification [of the solvency of each underwriter] by the
group's domiciliary regulator [and its] of the solvency of each
underwriter member; or if a certification is unavailable, financial statements,
prepared by independent public accountants[;], of each underwriter member of the group;
[(B)] (D) In the case of a group
of incorporated [insurers] underwriters under common
administration [that complies with the filing requirements contained in
subparagraph (A), and that has], the group shall:
(i) Have continuously transacted
an insurance business outside the United States for at least three years
immediately prior to making application for accreditation[, and that submits
to this State's authority to examine its books and records and bears the
expense of the examination, and that has];
(ii) Maintain aggregate
policyholders' surplus of at least $10,000,000,000[, the];
(iii) Maintain a trust [shall be]
fund in an amount [equal to] not less than the group's
several liabilities attributable to business ceded by United States domiciled
ceding insurers to any member of the group pursuant to reinsurance contracts
issued in the name of such group; [and the group shall maintain]
(iv) Maintain a joint trusteed
surplus[,] of which $100,000,000 shall be held jointly for the benefit
of United States domiciled ceding insurers of any member of the group as
additional security for [any such] these liabilities[, and
each member of the group shall]; and
(v) Within ninety days after its
financial statements are due to be filed with the group's domiciliary
regulator, make available to the commissioner an annual certification of [the]
each underwriter member's solvency by the member's domiciliary regulator
and financial statements of each underwriter member of the group prepared by
its independent public accountant[;
(C) The trust shall be established
in a form approved by the commissioner. The trust instrument shall provide
that contested claims shall be valid and enforceable upon the final order of
any court of competent jurisdiction in the United States. The trust shall vest
legal title to its assets in the trustees of the trust for its United States policyholders and ceding insurers, their assigns, and successors in
interest. The trust and the assuming insurer shall be subject to examination
as determined by the commissioner. The trust must remain in effect for as long
as the assuming insurer shall have outstanding obligations due under the
reinsurance agreements subject to the trust; and
(D) No later than February 28 of
each year, the trustees of the trust shall report to the commissioner in
writing setting forth the balance of the trust and listing the trust's
investments at the preceding year end and shall certify the date of termination
of the trust, if so planned, or certify that the trust shall not expire prior
to the next following December 31].
(e) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the commissioner as a reinsurer in this State and secures its obligations in accordance with the requirements of this subsection as follows:
(1) To be eligible for certification, the assuming insurer shall:
(A) Be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to paragraph (3);
(B) Maintain minimum capital and surplus, or its equivalent, in an amount to be determined by the rules adopted by the commissioner;
(C) Maintain financial strength ratings from two or more rating agencies deemed acceptable by the rules adopted by the commissioner;
(D) Agree to submit to the jurisdiction of this State, appoint the commissioner as its agent for service of process in this State, and agree to provide security for one hundred per cent of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment;
(E) Agree to meet applicable information filing requirements as determined by the commissioner, both with respect to an initial application for certification and on an ongoing basis; and
(F) Satisfy any other requirements for certification deemed relevant by the commissioner;
(2) An association including incorporated and individual unincorporated underwriters may be a certified reinsurer. To be eligible for certification, in addition to satisfying the requirements of paragraph (1):
(A) The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents (net of liabilities) of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association or any of its members, in an amount determined by the commissioner to provide adequate protection;
(B) The incorporated members of the association shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the association's domiciliary regulator as are the unincorporated members; and
(C) Within ninety days after its financial statements are due to be filed with the association's domiciliary regulator, the association shall provide to the commissioner an annual certification by the association's domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association;
(3) The commissioner shall create and publish a list of qualified jurisdictions under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the commissioner as a certified reinsurer. In addition:
(A) To determine whether the domiciliary jurisdiction of a non-United States assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits, and the extent of reciprocal recognition afforded by the non-United States jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction shall agree to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the commissioner has determined that the jurisdiction does not adequately and promptly enforce final United States judgments and arbitration awards. Additional factors may be considered in the discretion of the commissioner;
(B) A list of qualified jurisdictions shall be published through the National Association of Insurance Commissioners committee process. The commissioner shall consider this list in determining qualified jurisdictions. If the commissioner approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the commissioner shall provide thoroughly documented justification in accordance with criteria to be developed under rules adopted by the commissioner;
(C) United States jurisdictions that meet the requirement for accreditation under the National Association of Insurance Commissioners financial standards and accreditation program shall be recognized as qualified jurisdictions; and
(D) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, the commissioner has the discretion to suspend the reinsurer's certification indefinitely, in lieu of revocation;
(4) The commissioner shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable pursuant to rules adopted by the commissioner. The commissioner shall publish a list of all certified reinsurers and their ratings;
(5) A certified reinsurer shall secure obligations assumed from United States ceding insurers under this subsection at a level consistent with its rating, as specified in rules adopted by the commissioner. In addition:
(A) In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the commissioner and consistent with section 431:4A-102, or in a multibeneficiary trust in accordance with subsection (d), except as otherwise provided in this subsection;
(B) If a certified reinsurer maintains a trust to fully secure its obligations subject to subsection (d), and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subsection or comparable laws of other United States jurisdictions and for its obligations subject to subsection (d). It shall be a condition to the grant of certification under this subsection that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account;
(C) The minimum trusteed surplus requirements provided in subsection (d) shall not be applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subsection, except that such trust shall maintain a minimum trusteed surplus of $10,000,000;
(D) With respect to obligations incurred by a certified reinsurer under this subsection, if the security is insufficient, the commissioner shall reduce the allowable credit by an amount proportionate to the deficiency, and has the discretion to impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurer's obligations will not be paid in full when due;
(E) For purposes of this subsection:
(i) A certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure one hundred per cent of its obligations;
(ii) "Terminated" means revoked, suspended, voluntary surrendered, or placed on inactive status; and
(iii) If the commissioner continues to assign a higher rating as permitted by other provisions of this section, this requirement shall not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended;
(6) If an applicant for certification has been certified as a reinsurer in an National Association of Insurance Commissioners accredited jurisdiction, the commissioner has the discretion to defer to that jurisdiction's certification, and has the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall be considered to be a certified reinsurer in this State; and
(7) A certified reinsurer that ceases to assume new business in this State may request to maintain its certification in inactive status to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this subsection, and the commissioner shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.
[(5)]
(f) Credit shall be allowed when the reinsurance is ceded to an assuming
insurer not meeting the requirements of [paragraph (1), (2), (3), or (4),]
subsection (b), (c), (d), or (e), but only with respect to the insurance
of risks located in jurisdictions where the reinsurance is required by
applicable law or regulation of that jurisdiction.
[(6)] (g) If the assuming
insurer is not licensed, or accredited, or certified to transact
insurance or reinsurance in this State, the credit permitted by [paragraphs
(3) and (4)] subsections (c) and (d) shall not be allowed unless the
assuming insurer agrees in the reinsurance agreements:
[(A)] (1) That
in the event of the failure of the assuming insurer to perform its obligations
under the terms of the reinsurance agreement, the assuming insurer, at the
request of the ceding insurer, shall submit to the jurisdiction of any court of
competent jurisdiction in any state of the United States, [will] shall
comply with all requirements necessary to give [that] the court
jurisdiction, and [will] shall abide by the final decision of
that court or of any appellate court in the event of an appeal; and
[(B)] (2) To designate the commissioner or a designated attorney as its true
and lawful attorney upon whom may be served any lawful process in any action,
suit, or proceeding instituted by or on behalf of the ceding [company.] insurer.
This [paragraph] subsection
is not intended to conflict with or override the obligation of the parties to a
reinsurance agreement to arbitrate their disputes, if [such an] this
obligation is created in the agreement.
(h) If the assuming insurer does not meet the requirements of subsection (b) or (c), the credit permitted by subsection (d) or (e) shall not be allowed unless the assuming insurer agrees in the trust agreements to the following conditions:
(1) Notwithstanding any other provisions in the trust instrument to the contrary, if the trust fund is inadequate because it contains an amount less than the amount required by subsection (d)(3), or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the commissioner with regulatory oversight over the trust or with an order of any court of competent jurisdiction in any state of the United States directing the trustee to transfer to the commissioner with regulatory oversight all of the assets of the trust fund;
(2) The assets shall be distributed by and claims shall be filed with and valued by the commissioner with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies;
(3) If the commissioner with regulatory oversight determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the United States ceding insurers of the grantor of the trust, the assets or part thereof shall be returned by the commissioner with regulatory oversight to the trustee for distribution in accordance with the trust agreement; and
(4) The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this provision.
(i) If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the commissioner may suspend or revoke the reinsurer's accreditation or certification. In addition:
(1) The commissioner shall give the reinsurer notice and opportunity for hearing. The suspension or revocation may not take effect until after the commissioner's order after a hearing, unless:
(A) The reinsurer waives its right to a hearing;
(B) The commissioner's order is based on regulatory action by the reinsurer's domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under subsection (e)(6); or
(C) The commissioner finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the commissioner's action;
(2) While a reinsurer's accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit except to the extent that the reinsurer's obligations under the contract are secured in accordance with section 431:4A-102. If a reinsurer's accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation except to the extent that the reinsurer's obligations under the contract are secured in accordance with subsection (e)(5) or section 431:4A-102.
(j) A ceding insurer shall take steps to:
(1) Manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the commissioner within thirty days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceeds fifty per cent of the domestic ceding insurer's last reported surplus to policyholders, or after it is determined that reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer; and
(2) Diversify its reinsurance program. A domestic ceding insurer shall notify the commissioner within thirty days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than twenty per cent of the ceding insurer's gross written premium in the prior calendar year, or after it has determined that the reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer."
SECTION 2. Section 431:4A-102, Hawaii Revised Statutes, is amended to read as follows:
"[[]§431:4A-102[]
Reduction] Asset or reduction from liability for
reinsurance ceded by a domestic insurer to an assuming insurer. [A]
An asset or reduction from liability for the reinsurance ceded by a
domestic insurer to an assuming insurer not meeting the requirements of section
431:4A-101 shall be allowed in an amount not exceeding the liabilities carried
by the ceding insurer. The reduction shall be in the amount of funds held by
or on behalf of the ceding insurer, including funds held in trust for the
ceding insurer, under a reinsurance contract with the assuming insurer as
security for the payment of obligations thereunder, if that security is held in
the United States subject to withdrawal solely by, and under the exclusive
control of, the ceding insurer; or, in the case of a trust, held in a qualified
United States financial institution[.] as defined in section
431:4A-103(b). This security may be in the form of:
(1) Cash;
(2) Securities listed by the securities valuation office of the National Association of Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the securities valuation office, and qualifying as admitted assets;
(3) Clean, irrevocable, and
unconditional letters of credit, issued or confirmed by a qualified United
States financial institution, as defined in section 431:4A-103, effective
no later than December [31st in respect] 31 of the year
for which the filing is being made, and in the possession of, or in
trust for, the ceding [company] insurer on or before the
filing date of its annual statement[.];
(4) Letters of credit [issued by issuing
(or confirming) institutions] meeting applicable standards of issuer
acceptability as of the dates of their issuance (or confirmation) shall,
notwithstanding the issuing (or confirming) institution's subsequent failure to
meet applicable standards of issuer acceptability, continue to be acceptable as
security until their expiration, extension, renewal, modification, or amendment,
whichever first occurs; or
[(4)] (5) Any
other form of security acceptable to the commissioner."
SECTION 3. Section 431:4A-105, Hawaii Revised Statutes, is repealed.
["[§431:4A-105]
Reinsurance agreements affected. Sections 431:4A-101 through
431:4A-104 shall apply to all cessions after June 12, 1992, under reinsurance agreements which have had an inception, anniversary, or renewal date not less
than six months after June 12, 1992."]
PART II
SECTION 4. Section 431:5-307, Hawaii Revised Statutes, is amended to read as follows:
"§431:5-307 Standard valuation law; life. (a) This section shall be known as the standard valuation law.
(b) [Reserve
valuation:]
(1) For policies and contracts issued prior to the operative date of the valuation manual:
(A) The commissioner[, annually,
shall value,] shall annually value, or cause to be valued, the
reserve liabilities, hereinafter called reserves, for all outstanding life
insurance[,] policies and annuity[,] and pure endowment
contracts of every life [insurer] insurance company doing
business in this State[. The commissioner may certify the amount of any
reserves, specifying the mortality table or tables, rate or rates of interest,
and methods (net level premium method or others) used in the calculation of the
reserves.] issued on or after January 1, 1956, and prior to the operative date of the valuation manual. In calculating the reserves, the
commissioner may use group methods and approximate averages for fractions of a
year or otherwise. In lieu of the valuation of the reserves required [under
this section of any] of a foreign or alien [insurer,] company,
the commissioner may accept [any] a valuation made, or caused to
be made, by the insurance supervisory official of any state or other jurisdiction,
when the valuation complies with the minimum standard under this section [,
and if the official of that state or jurisdiction accepts as sufficient and
valid for all legal purposes the certificate of valuation of the commissioner
when the certification states the valuation to have been made in a specified
manner according to which the aggregate reserves would be at least as large as
if they had been computed in the manner prescribed by the law of that state or
jurisdiction;
(2) The actual cost of making valuations
under this section shall be assessed on the insurer, whose policies are so
valued, by the commissioner; and
(3) Any
insurer, at any time, that has adopted any standard of valuation producing
greater aggregate reserves than those calculated according to the minimum
standard herein provided, with the approval of the commissioner, may adopt any
lower standard of valuation, but not lower than the minimum provided in this
section.];
(B) Subsections (e), (f), (g), (h), (i), (j), (k), (l), (m), and (n) shall apply to all policies and contracts, as appropriate, subject to this section issued on or after January 1, 1956, and prior to the operative date of the valuation manual, provided that subsections (o) and (p) shall not apply to those policies and contracts;
(C) The minimum standard for the valuation of policies and contracts issued prior to January 1, 1956, shall be that provided by the laws in effect immediately prior to that date;
(2) For policies and contracts issued on or after the operative date of the valuation manual:
(A) The commissioner shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every company issued on or after the operative date of the valuation manual. In lieu of the valuation of the reserves required of a foreign or alien company, the commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this section; and
(B) Subsections (o) and (p) shall apply to all policies and contracts issued on or after the operative date of the valuation manual.
(c) For an actuarial opinion prior to the operative date of the valuation manual:
(1) Every life insurance company doing business in this State shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by rules are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with the applicable laws of this State. The commissioner shall define by rules the specifics of this opinion and add any other items deemed to be necessary to its scope;
(2) For actuarial analysis of reserves and assets supporting the reserves:
(A) Every life insurance company, except as exempted by rules, shall also include annually in the opinion required by paragraph (1), an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by rules, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including but not limited to the benefits under and expenses associated with the policies and contracts; and
(B) The commissioner may provide by rules for a transition period for establishing any higher reserves that the qualified actuary may deem necessary to render the opinion required by this section;
(3) Each opinion required by paragraph (2) shall be governed by the following:
(A) A memorandum, in form and substance acceptable to the commissioner as specified by rules, shall be prepared to support each actuarial opinion; and
(B) If the insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified by rules, or if the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by rules, or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the insurance company to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the commissioner; and
(4) Every opinion required by paragraph (1) shall be governed by the following:
(A) The opinion shall be submitted with the annual statement reflecting the valuation of the reserve liabilities for each year ending on or after December 31, 1995;
(B) The opinion shall apply to all business in force including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by rules;
(C) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board or its successor and on any additional standards as the commissioner may prescribe by rules;
(D) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State;
(E) For the purposes of this subsection, "qualified actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in the regulation;
(F) Except in cases of fraud or wilful misconduct, the qualified actuary shall not be liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision, or conduct with respect to the actuary's opinion;
(G) Disciplinary action by the commissioner against the company or the qualified actuary shall be as defined by rules;
(H) Except as provided in subparagraphs (L), (M), and (N), documents, materials, or other information in the possession or control of the insurance division that are part of a memorandum in support of the opinion, and any other material provided by the company to the commissioner in connection with the memorandum, shall be confidential by law and privileged, shall not be subject to chapter 92F, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties;
(I) Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subparagraph (H);
(J) To assist in the performance of the commissioner's duties, the commissioner:
(i) May share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subparagraph (H) with other state, federal, and international regulatory agencies, with the National Association of Insurance Commissioners and its affiliates and subsidiaries, and with state, federal, and international law enforcement authorities; provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information; and
(ii) May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or 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 document, material, 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;
(K) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the commissioner under this subsection or as a result of sharing as authorized in subparagraph (J);
(L) A memorandum in support of the opinion, and any other material provided by the company to the commissioner in connection with the memorandum, may be subject to subpoena for the purpose of defending an action seeking damages from the actuary submitting the memorandum by reason of an action required by this subsection or related rules adopted by the commissioner;
(M) The memorandum or other material may otherwise be released by the commissioner with the written consent of the company or to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material; and
(N) Once any portion of the confidential memorandum is cited by the company in its marketing or is cited before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum shall be no longer confidential.
(d) For actuarial opinions of reserves after the operative date of the valuation manual:
(1) Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and subject to regulation by the commissioner shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this State. The valuation manual shall prescribe the specifics of this opinion including any items deemed to be necessary to its scope;
(2) Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and subject to regulation by the commissioner, except as exempted in the valuation manual, also shall annually include in the opinion required by paragraph (1), an opinion of the same appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts including, but not limited to, the benefits under and expenses associated with the policies and contracts;
(3) Each opinion required by this subsection shall be governed by the following provisions:
(A) A memorandum, in form and substance as specified in the valuation manual and acceptable to the commissioner, shall be prepared to support each actuarial opinion; and
(B) If the company fails to provide a supporting memorandum at the request of the commissioner within a period specified in the valuation manual, or the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the valuation manual, or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the insurance company to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the commissioner; and
(4) Every opinion subject to this subsection shall be governed by the following provisions:
(A) The opinion shall be in form and substance as specified in the valuation manual and acceptable to the commissioner;
(B) The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after the operative date of the valuation manual;
(C) The opinion shall apply to all policies and contracts subject to paragraph (2), plus other actuarial liabilities as may be specified in the valuation manual;
(D) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board or its successor and on such additional standards as may be prescribed in the valuation manual;
(E) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State;
(F) Except in cases of fraud or wilful misconduct, the appointed actuary shall not be liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision, or conduct with respect to the appointed actuary′s opinion; and
(G) Disciplinary action by the commissioner against the company or the qualified actuary shall be defined by rules adopted by the commissioner.
[(c) Computation of minimum standard:
(1) Old
policies:] (e) Except as otherwise provided in [paragraph (3),]
subsections (f), (g), and (n), the minimum standard for the valuation of
[all] policies and contracts issued prior to [the operative date of
section 431:10D-104,] January 1, 1956, shall be that provided by the
laws in effect immediately prior to January 1, 1956[;
(2)].
Except as otherwise provided in [paragraph (3),] subsections (f),
(g), and (n), the minimum standard for the valuation of all policies and
contracts issued on or after [the operative date of section 431:10D-104,]
January 1, 1956, shall be the commissioner's reserve valuation methods
defined in subsections [(d), (e), and] (h), (i), (l), and (n),
three and one-half per cent interest[;], or in the case of life
insurance policies and contracts, other than annuity and pure endowment
contracts, issued on or after June 1, 1976, four per cent interest[;]
for [the] policies issued prior to June 1, 1979, five and one-half per
cent interest for single premium life insurance policies, and four and
one-half per cent interest for all other policies issued on or after June 1,
1979[;], and the following tables:
[(A)] (1) For
[all] ordinary policies of life insurance issued on the standard basis,
excluding any accident and health or sickness and accidental death benefits in
the policies[--]: the Commissioners 1941 Standard Ordinary
Mortality Table for the policies issued prior to the operative date of section
[431:10D-104(e)(8), and] 431:10D-104(e)(6), the Commissioners
1958 Standard Ordinary Mortality Table for the policies issued on or after the
operative date[;] of section 431:10D-104(e)(6) and prior to the
operative date of section 431:104(e)(8); provided that for any category of
the policies issued on female risks, all modified net premiums and present
values referred to in this section may be calculated according to an age not
more than six years younger than the actual age of the insured; and for the
policies issued on or after the operative date of section 431:10D-104(e)(8)[,
the]:
(A) The Commissioners 1980
Standard Ordinary Mortality Table[, or at];
(B) At
the election of the company for any one or more specified plans of life
insurance, the Commissioners 1980 Standard Ordinary Mortality Table with
Ten-Year Select Mortality Factors[, or any];
(C) Any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by rules adopted by the commissioner for use in determining the minimum standard of valuation for the policies;
[(B)] (2)
For [all] industrial life insurance policies issued on the standard
basis, excluding any accident and health or sickness and accidental death
benefits in the policies[--]: the 1941 Standard Industrial
Mortality Table for the policies issued prior to the operative date of section
431:10D-104(e)(7), and for [the] policies issued on or after the
operative date[,] of section 431:10D-104(e)(7), the Commissioners
1961 Standard Industrial Mortality Table or any industrial mortality table
adopted after 1980 by the National Association of Insurance Commissioners[,]
that is approved by rules adopted by the commissioner for use in determining
the minimum standard of valuation for [those] the policies;
[(C)] (3)
For individual annuity and pure endowment contracts, excluding any accident and
health or sickness and accidental death benefits in the policies[--]:
the 1937 Standard Annuity Mortality Table, or[,] at the option of
the [insurer,] company, the Annuity Mortality Table for 1949,
ultimate, or any modification of either of these tables approved by the
commissioner;
[(D)] (4)
For group annuity and pure endowment contracts, excluding any accident and
health or sickness and accidental death benefits in the policies[--]:
the Group Annuity Mortality Table for 1951, [any] a modification
of the table approved by the commissioner, or[,] at the option of
the [insurer,] company, any of the tables or modifications of
tables specified for individual annuity and pure endowment contracts;
[(E)] (5)
For total and permanent disability benefits in or supplementary to ordinary
policies or contracts[--]: for policies or contracts issued
after December 31, 1965, the tables of period 2 disablement rates and the 1930
to 1950 termination rates of the 1952 disability study of the Society of
Actuaries, with due regard to the type of benefit or any tables of disablement
rates and termination rates[,] adopted after 1980 by the National Association
of Insurance Commissioners, that are approved by rules adopted by the
commissioner for use in determining the minimum standard of valuation for [the]
those policies; for policies or contracts issued after December 31,
1960, and prior to January 1, 1966, either the tables or, at the option of the
[insurer,] company, the Class (3) Disability Table (1926); and
for policies issued prior to January 1, 1961, the Class (3) Disability Table
(1926). Any table, for active lives, shall be combined with a mortality table
permitted for calculating the reserves for life insurance policies;
[(F)] (6)
For accidental death benefits in or supplementary to policies[--for policies]
issued after December 31, 1965[,]: the 1959 Accidental Death
Benefits Table or any accidental death benefits table[,] adopted after
1980 by the National Association of Insurance Commissioners, that is approved
by rules adopted by the commissioner for use in determining the minimum
standard of valuation for [the] those policies[;],
for policies issued after December 31, 1960, and prior to January 1, 1966,
either [the] that table or, at the option of the [insurer,]
company, the Inter-company Double Indemnity Mortality Table[; and for
policies issued prior to January 1, 1961, the Inter-company Double Indemnity
Mortality Table]. Either table shall be combined with a mortality table [permitted]
for calculating the reserves for life insurance policies; and
[(G)] (7)
For group life insurance, life insurance issued on the substandard basis, and
other special benefits[--any]: tables [that may be]
approved by the commissioner[;].
[(3)] (f) Except as provided in
[paragraph (4)] subsection (g), the minimum standard [for the]
of valuation [of all] for individual annuity and pure
endowment contracts issued on or after the operative date of this [paragraph,]
subsection and for [all] annuities and pure [endowments] endowment
contracts purchased on or after the operative date under group annuity and
pure endowment contracts, shall be the commissioner's reserve valuation methods
defined in subsections [(d) and (e)] (h) and (i) and the
following tables and interest rates:
[(A)] (1)
For individual annuity and pure endowment contracts issued prior to June 1,
1979, excluding any accident and health or sickness and accidental death
benefits in the contracts[--]: the 1971 Individual Annuity
Mortality Table, or any modification of this table approved by the
commissioner, and six per cent interest for single premium immediate annuity
contracts, and four per cent interest for all other individual annuity and pure
endowment contracts;
[(B)] (2)
For individual single premium immediate annuity contracts issued on or after
June 1, 1979, excluding any accident and health or sickness and accidental
death benefits in the contracts[--]: the 1971 Individual Annuity
Mortality Table[,] or any individual annuity mortality table[,]
adopted after 1980 by the National Association of Insurance Commissioners, that
is approved by rules adopted by the commissioner for use in determining the
minimum standard of valuation for [the] these contracts, or any
modification of these tables approved by the commissioner, and seven and
one-half per cent interest;
[(C)] (3)
For individual annuity and pure endowment contracts issued on or after June 1,
1979, other than single premium immediate annuity contracts, excluding any
accident and health or sickness and accidental death benefits in [the] those
contracts[--]: the 1971 Individual Annuity Mortality Table or
any individual annuity mortality table[,] adopted after 1980 by the
National Association of Insurance Commissioners, that is approved by rules
adopted by the commissioner for use in determining the minimum standard of
valuation for [the] those contracts, or any modification of these
tables approved by the commissioner, and five and one-half per cent interest
for single premium deferred annuity and pure endowment contracts and four and
one-half per cent interest for all other individual annuity and pure endowment
contracts; [and]
[(D)] (4)
For annuities and pure endowment contracts purchased prior to June 1, 1979,
under group annuity and pure endowment contracts, excluding any accident and
health or sickness and accidental death benefits purchased under those
contracts: the 1971 Group Annuity Mortality Table or any modification of this
table approved by the commissioner, and six per cent interest; and
(5) For
[all] annuities and pure [endowments] endowment contracts
purchased on or after June 1, 1979, under group annuity and pure endowment
contracts, excluding any accident and health or sickness and accidental death
benefits [in the] purchased under those contracts[--]:
the 1971 Group Annuity Mortality Table, or any group annuity mortality
table[,] adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by rules adopted by the commissioner for use in
determining the minimum standard of valuation for the annuities and pure [endowments]
endowment contracts, or any modification of these tables approved by the
commissioner, and seven and one-half per cent interest.
After June 1, 1976, any [insurer] company
may file with the commissioner a written notice of its election to comply with
this [paragraph] subsection after a specified date before January
1, 1979, which shall be the operative date of this [paragraph] subsection
for [the insurer; provided that an insurer may elect a different operative
date for individual annuity and pure endowment contracts from that elected for
group annuity and pure endowment contracts.] that company. If [an
insurer] a company makes no election, the operative date of this [paragraph]
subsection for [the insurer] that company shall be January 1, 1979[; and
(4) Applicability of this section:
(A) The interest rates used in
determining the minimum for the valuation of:
(i) All life insurance policies
issued in a particular calendar year, on or after the operative date of section
431:10D-104(e)(8);
(ii) All
individual annuity and pure endowment contracts issued in a particular calendar
year after December 31, 1982;
(iii) All
annuities and pure endowments purchased in a particular calendar year after
December 31, 1982, under group annuity and pure endowment contracts; and
(iv) The
net increase, if any, in a particular calendar year after 1982, in amounts held
under guaranteed interest contracts shall be the calendar year statutory
valuation rates as defined in this paragraph;].
(g) (1) The interest rates used in determining the minimum standard for the valuation of the following shall be the calendar year statutory valuation interest rates as defined in this section:
(A) Life insurance policies issued in a particular calendar year, on or after the operative date of section 431:10D-104(e)(8);
(B) Individual annuity and pure endowment contracts issued in a particular calendar year after December 31, 1982;
(C) Annuities and pure endowment contracts purchased in a particular calendar year after December 31, 1982, under group annuity and pure endowment contracts; and
(D) The net increase, if any, in a particular calendar year after January 1, 1983, in amounts held under guaranteed interest contracts;
[(B)] (2) The
calendar year statutory valuation interest rates, I, shall be determined as
follows and the results rounded to the nearer one-quarter of one per cent:
[(i)] (A) For life insurance,
W
I = .03 + W (R1 - .03) + — (R2 - .09);
2
[(ii)]
(B) For single premium immediate annuities and for annuity benefits
involving life contingencies arising from other annuities with cash settlement
options and from guaranteed interest contracts with cash settlement options,
I = .03 + W (R - .03)
where
R1 is the lesser of R and .09, R2 is the greater of R and
.09, R is the reference interest rate defined in this [section,] subsection,
and W is the weighting factor defined in this [section;] subsection;
[(iii)]
(C) For other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options, valued on an issue year basis,
except as stated in [clause (ii),] subparagraph (B), the formula
for life insurance stated in [clause (i)] subparagraph (A) shall
apply to annuities and guaranteed interest contracts with guarantee durations
in excess of ten years[,] and the formula for single premium immediate
annuities stated in [clause (ii)] subparagraph (B) shall apply to
annuities and guaranteed interest contracts with guarantee duration of ten
years or less;
[(iv)]
(D) For other annuities with no cash settlement options and for
guaranteed interest contracts with no cash settlement options, the formula for
single premium immediate annuities stated in [clause (ii)] subparagraph
(B) shall apply; and
[(v)]
(E) For other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options, valued on a change in fund
basis, the formula for single premium immediate annuities stated in [clause
(ii)] subparagraph (B) shall apply[;].
[(C) However, if] If the calendar year statutory valuation interest rate for
any life insurance policies issued in any calendar year determined without
reference to this sentence differs from the corresponding actual rate for
similar policies issued in the immediately preceding calendar year by less than
one-half of one per cent, the calendar year statutory valuation interest rate
for [those] the life insurance policies shall be equal to the
corresponding actual rate for the immediately preceding calendar year. For
purposes of applying the immediately preceding sentence, the calendar year
statutory valuation interest rate for life insurance policies issued in a
calendar year shall be determined for 1980 (using the reference interest rate
defined for 1979) and shall be determined for each subsequent calendar year
regardless of when section 431:10D-104(e)(8) becomes operative;
[(D)] (3) The
weighting factors referred to in the formulas stated above are given in the
following tables:
[(i)] (A) Weighting factors for life insurance:
Guarantee
Duration Weighting
(Years) Factors
10 or [fewer] (less)
.50
More than 10, but not more
than 20 .45
More than 20 .35
For life insurance, the guarantee duration is the maximum number of years
the life insurance can remain in force on a basis guaranteed in the policy[,]
or under options to convert to plans of life insurance with premium rates or
nonforfeiture values[,] or both, which are guaranteed in the original
policy;
[(ii)]
(B) Weighting factor for single premium immediate annuities and for
annuity benefits involving life contingencies arising from other annuities with
cash settlement options and guaranteed interest contracts with cash settlement
options: .80; and
[(iii)]
(C) Weighting factors for other annuities and for guaranteed interest
contracts, except as stated in [clause (ii),] subparagraph (B),
shall be as specified in the tables below, according to the rules and definitions
stated below:
Table I:
For annuities and guaranteed interest contracts valued on an issue year basis;
Guarantee Weighting Factor
Duration For Plan Type
(Years) A B C
5 or less: .80 .60 .50
More than 5, but not more
than 10: .75 .60 .50
More than 10, but not more
than 20: .65 .50 .45
More than 20: .45 .35 .35
Plan Type
Table II: A B C
For annuities and guaranteed
interest contracts valued on
a change in fund basis, the
factors shown in [clause (i)]
Table I increased by: .15 .25 .05
Plan Type
Table III: A B C
For annuities and guaranteed
interest contracts valued on
an issue year basis (other
than those with no cash
settlement options) [which] that
do not guarantee interest on
considerations received more
than one year after issue or
purchase[,] and for annuities
and guaranteed interest
contracts valued on a change
in fund basis [which] that do
not guarantee interest rates on
considerations received more
than twelve months beyond the
valuation date, the factors
shown in Table I or derived in
Table II increased by: .05 .05 .05
For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence. Plan type as used in the above tables is defined as follows:
Plan Type A: At any time the policyholder may withdraw funds only: (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; (2) without an adjustment, but in installments over five years or more; (3) as an immediate life annuity; or (4) no withdrawal permitted;
Plan Type B: Before expiration of the interest rate guarantee, the policyholder may withdraw funds only: (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; (2) without an adjustment, but in installments over five years or more; or (3) no withdrawal permitted. At the end of the interest rate guarantee, funds may be withdrawn without adjustment in a single sum or in installments over less than five years;
Plan Type C: The policyholder may withdraw funds before expiration of the interest rate guarantee in a single sum or in installments over less than five years either: (1) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.
A company may elect to value guaranteed interest contracts with cash
settlement options and annuities with cash settlement options on either an
issue year basis or on a change in fund basis. Guaranteed interest contracts
with no cash settlement options and other annuities with no cash settlement
options shall be valued on an issue year basis. As used in this [section,
an issue year basis of valuation refers to] subsection, "issue year
basis of valuation" means a valuation basis under which the interest
rate used to determine the minimum valuation standard for the entire duration
of the annuity or guaranteed interest contract is the calendar year valuation
interest rate for the year of issue or year of purchase of the annuity or
guaranteed interest contract, and [the change in fund basis of valuation
refers to] "change in fund basis of valuation" means a
valuation basis under which the interest rate used to determine the minimum
valuation standard applicable to each change in the fund held under the annuity
or guaranteed interest contract is the calendar year valuation interest rate
for the year of the change in the fund;
[(E)] (4) The
reference interest rate referred to in paragraph [(4)(B)] (2)
shall be defined as follows:
[(i)] (A)
For [all] life insurance, the lesser of the average over a period of
thirty-six months and the average over a period of twelve months, ending on
June 30 of the calendar year [next] preceding the year of issue, of [Moody's
Corporate Bond Yield Average-Monthly Average Corporates,] the monthly
average of composite yield on seasoned corporate bonds, as published by
Moody's Investors Service, Inc.;
[(ii)] (B)
For single premium immediate annuities and for annuity benefits involving life
contingencies arising from other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, the average over a
period of twelve months, ending on June 30 of the calendar year of issue or
year of purchase, [of Moody's Corporate Bond Yield Average-Monthly Average
Corporates,] of the monthly average of the composite yield on seasoned
corporate bonds, as published by Moody's Investors Service, Inc.;
[(iii)] (C)
For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a year of issue basis, except
as stated in [clause (ii),] subparagraph (B), with guarantee
duration in excess of ten years, the lesser of the average over a period of
thirty-six months and the average over a period of twelve months, ending on
June 30 of the calendar year of issue or purchase, [of Moody's Corporate
Bond Yield Average-Monthly Average Corporates,] of the monthly average of
the composite yield on seasoned corporate bonds, as published by Moody's
Investors Service, Inc.;
[(iv)] (D)
For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a year of issue basis, except
as stated in [clause (ii),] subparagraph (B), with guarantee
duration of ten years or less, the average over a period of twelve months,
ending on June 30 of the calendar year of issue or purchase, [of Moody's
Corporate Bond Yield Average-Monthly Average Corporates,] of the monthly
average of the composite yield on seasoned corporate bonds, as published by
Moody's Investors Service, Inc.;
[(v)] (E)
For other annuities with no cash settlement options and for guaranteed interest
contracts with no cash settlement options, the average over a period of twelve
months, ending on June 30 of the calendar year of issue or purchase, [of
Moody's Corporate Bond Yield Average-Monthly Average Corporates,] of the
monthly average of the composite yield on seasoned corporate bonds, as
published by Moody's Investors Service, Inc.; and
[(vi)] (F)
For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a change in fund basis,
except as stated in [clause (ii),] subparagraph (B), the average
over a period of twelve months, ending on June 30 of the calendar year of the
change in the fund, [of Moody's Corporate Bond Yield Average-Monthly Average
Corporates,] of the monthly average of the composite yield on seasoned
corporate bonds, as published by Moody's Investors Service, Inc.; and
[(F) Alternative
method for determining references interest rates:]
(5) In the event that [Moody's Corporate
Bond Yield Average-Monthly Average Corporates] the monthly average of
the composite yield on seasoned corporate bonds is no longer published by
Moody's Investors Service, Inc., or in the event that the National Association
of Insurance Commissioners determines that [Moody's Corporate Bond Yield
Average-Monthly Average Corporates as published] the monthly average of
the composite yield on seasoned corporate bonds as published by Moody's
Investors Service, Inc., is no longer appropriate for the determination of the
reference interest rate, then an alternative method for determination of the
reference interest rate[, which is] adopted by the National Association
of Insurance Commissioners and approved by rules adopted by the commissioner[,]
may be substituted.
[(d) Commissioner's reserve valuation
methods:
(1)] (h) (1) Except as otherwise provided in
subsections [(e) and (h),] (i), (l), and (n), reserves, according
to the commissioner's reserve valuation [methods,] method, for
the life insurance and endowment benefits of policies providing for a uniform
amount of insurance and requiring the payment of uniform premiums shall be the
excess, if any, of the present value, at the date of valuation, of the future
guaranteed benefits provided for by the policies, over the then present value
of any future modified net premiums therefor. The modified net premiums for [any
such] a policy shall be the uniform percentage of the respective
contract premiums for the benefits [(excluding extra premiums on a
substandard policy)] such that the present value, at the date of
issue of the policy, of all the modified net premiums shall be equal to the sum
of the then present value of the benefits provided for by the policy and the
excess of subparagraph (A) over subparagraph (B) as follows:
(A) A net level annual premium equal to the
present value, at the date of issue, of the benefits provided for after the
first policy year, divided by the present value, at the date of issue, of an
annuity of one [a year] per annum payable on the first and each
subsequent anniversary of the policy on which a premium falls due; provided
that the net level annual premium shall not exceed the net level annual premium
on the nineteen-year premium whole life plan for insurance of the same amount
at an age one year higher than the age of issue of the policy; and
(B) A net
one-year term premium for the benefits provided for in the first policy year[;
provided that for any];
(2) For a
life insurance policy issued on or after January 1, 1986, for which the
contract premium in the first policy year exceeds that of the second year, and for
which no comparable additional benefit is provided in the first year for
the excess, [which] and that provides an endowment benefit, a
cash surrender value, or a combination thereof, in an amount greater than the
excess premium, the reserve, according to the commissioner's reserve valuation
method as of any policy anniversary occurring on or before the assumed ending
date, defined herein as the first policy anniversary on which the sum of any
endowment benefit and any cash surrender value then available is greater than
the excess premium, except as otherwise provided in subsection [(h),] (l),
shall be the greater of the reserve as of the policy anniversary
calculated as described above and the reserve as of the policy anniversary
calculated as described, but with:
[(i)]
(A) The value defined in [subparagraph (A)] paragraph (1)
being reduced by fifteen per cent of the amount of the excess first year
premium;
[(ii)]
(B) All present values of benefits and premiums being determined
without reference to premiums or benefits provided for by the policy after the
assumed ending date;
[(iii)]
(C) The policy being assumed to mature on that date as an endowment;
and
[(iv)]
(D) The cash surrender value provided on that date being considered as
an endowment benefit.
In
making the above comparison, the mortality and interest bases stated in [subsection
(c)(2) and (3)] subsections (e) and (g) shall be used; and
[(2) Reserve] (3) Reserves
according to the commissioner's reserve valuation [methods for:] method
shall be calculated by a method consistent with the principles of the preceding
paragraphs for:
(A) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums;
(B) Group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the Internal Revenue Code, as now or hereafter amended;
(C) Accident and health or sickness and accidental death benefits in all policies and contracts; and
(D) All other benefits, except life insurance
and endowment benefits in life insurance policies and benefits provided by all
other annuity and pure endowment contracts[;
shall be calculated by a method
consistent with the principles of this subsection].
[(e)] (i) This subsection shall
apply to all annuity and pure endowment contracts other than group annuity and
pure endowment contracts purchased under a retirement plan or plan of deferred
compensation, established or maintained by an employer (including a partnership
or sole proprietorship) or by an employee organization, or by both, other than
a plan providing individual retirement accounts or individual retirement
annuities under section 408 of the Internal Revenue Code, as now or hereafter
amended.
Reserves
according to the commissioner's annuity reserve method for benefits under
annuity or pure endowment contracts, excluding any accident and health or
sickness and accidental death benefits in [those] the contracts,
shall be the greatest of the respective excesses of the present values, at the
date of valuation, of the future guaranteed benefits, including guaranteed
nonforfeiture benefits, provided for by [those] the contracts at
the end of each respective contract year, over the present value, at the date
of valuation, of any future valuation considerations derived from future gross
considerations, required by the terms of the contract, that become payable
prior to the end of [such] the respective contract year. The
future guaranteed benefits shall be determined by using the mortality table, if
any, and the interest rate, or rates, specified in the contracts for
determining guaranteed benefits. The valuation considerations are the portions
of the respective gross considerations applied under the terms of the contracts
to determine nonforfeiture values.
[(f) Minimum
aggregate reserves:] (j) In no event shall [an insurer's] a
company's aggregate reserves for all life insurance policies,
excluding accident and health or sickness and accidental death benefits, issued
on or after [the operative date of section 431:10D-104,] January 1,
1956, be less than the aggregate reserves calculated in accordance with the
methods set forth in subsections [(d), (e), (h), and (i),] (h), (i),
(l), and (m), and the mortality table or tables and rate or
rates of interest used in calculating nonforfeiture benefits for those
policies. In no event shall the aggregate reserves for all policies,
contracts, and benefits be less than the aggregate reserves determined by the [qualified]
appointed actuary to be necessary to render the opinion required by [subsection
(j).] subsections (c) and (d).
[(g)
Optional reserves bases:] (k) With regard to optional reserve
calculation:
(1) Reserves for [any category of]
policies[,] and contracts[, or benefits as established by the
commissioner, issued on or after the operative date of section 431:10D-104,]
issued prior to January 1, 1956, may be calculated, at the option of the
[insurer,] company, according to any standards [which] that
produce greater aggregate reserves for [the category than those calculated
according to the minimum standard herein provided. The rates of interest used
for policies and contracts, other than annuity and pure endowment contracts,
shall not be higher than the corresponding rates of interest used in
calculating any nonforfeiture benefits provided for therein. Any] all
such policies and contracts than the minimum reserves required by the laws in
effect immediately prior to that date;
(2) Reserves for any category of policies, contracts, or benefits established by the commissioner, issued on or after January 1, 1956, may be calculated, at the option of the company, according to any standards that produce greater aggregate reserves for the category than those calculated according to the minimum standard provided herein, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided in the policies or contracts; and
(3) A
company, which adopts at any time [shall have adopted any]
a standard valuation producing greater aggregate reserves than those
calculated according to the minimum standard [herein] provided[,]
under this section, may adopt a lower standard of valuation with the
approval of the commissioner, [may adopt any lower standard of valuation,]
but not lower than the minimum [herein] provided[;] herein;
provided that for the purposes of this section, the holding of additional
reserves previously determined by [a qualified] the appointed
actuary to be necessary to render the opinion required by [subsection (j)]
subsections (c) and (d) shall not be deemed to be the adoption of a
higher standard of valuation.
[(h) Minimum reserve:] (l) If
in any contract year the gross premium charged by [any life insurer] a
company on [any] a policy or contract is less than the
valuation net premium for the policy or contract calculated by the method used
in calculating the reserve [thereon] but using the minimum valuation
standards of mortality and rate of interest, the minimum reserve required for [that]
the policy or contract shall be the greater of either the reserve
calculated according to the mortality table, rate of interest, and method
actually used for the policy or contract, or the reserve calculated by the
method actually used for the policy or contract, but using the minimum valuation
standards of mortality and rate of interest and replacing the valuation net
premium by the actual gross premium in each contract year for which the
valuation net premium exceeds the actual gross premium. The minimum valuation
standards of mortality and rate of interest referred to in this [section]
subsection are those standards stated in [subsection (c)(1), (2), and
(4); provided that for any] subsections (f) and (g). For a life
insurance policy issued on or after January 1, 1986, for which the gross
premium in the first policy year exceeds that of the second year and for which
no comparable additional benefit is provided in the first year for the excess
and [which] that provides an endowment benefit or a cash
surrender value, or a combination thereof, in an amount greater than the excess
premium, this subsection shall be applied as if the method actually used in
calculating the reserve for the policy were the method described in subsection
[(d),] (h), ignoring the second paragraph of that subsection.
The minimum reserve at each policy anniversary of such a policy shall be the
greater of the minimum reserve calculated in accordance with subsection [(d),]
(h), including subsection [(d)(2)] (h)(2) and the minimum
reserve calculated in accordance with this subsection.
[(i)] (m)
In the case of any plan of life insurance [which] that provides
for future premium determination, the amounts of which are to be determined by
the insurance company based on then estimates of future experience, or in the
case of any plan of life insurance or annuity [which] that is of
such a nature that the minimum reserves cannot be determined by the methods
described in subsections [(d), (e), and] (h), (i), and (l), the
reserves [which] that are held under [any such] the
plan [must:] shall:
(1) Be appropriate in relation to the benefits and the pattern of premiums for that plan; and
(2) Be computed by a method [which] that
is consistent with the principles of this section, as determined by rules
adopted by the commissioner.
[(j) The actuarial opinion of reserves and
this subsection shall become effective December 31, 1995.
(1) Every life insurance company doing
business in this State shall annually submit the opinion of a qualified actuary
as to whether the reserves and related actuarial items held in support of the
policies and contracts specified by the commissioner, by rules, are computed
appropriately, are based on assumptions which satisfy contractual provisions,
are consistent with prior reported amounts, and comply with the applicable laws
of this State. The commissioner, by rules, shall define the specifics of
this opinion and add any other items deemed to be necessary to its scope;
(2) Actuarial analysis of reserves and
assets supporting the reserves:
(A) Every life
insurance company, except as exempted by or pursuant to rules, also shall
include annually in the opinion required by paragraph (1), an opinion of the
same qualified actuary as to whether the reserves and related actuarial items
held in support of the policies and contracts specified by the commissioner by
rules, when considered in light of the assets held by the company with respect
to the reserves and related actuarial items, including but not limited to the
investment earnings on the assets and the considerations anticipated to be
received and retained under the policies and contracts, make adequate provision
for the company's obligations under the policies and contracts, including but
not limited to the benefits under, and expenses associated with, the policies
and contracts; and
(B) The commissioner may provide, by
rules, for a transition period for establishing any higher reserves which the
qualified actuary may deem necessary in order to render the opinion required by
this section;
(3) Each opinion required by paragraph
(2) shall be governed by the following:
(A) A memorandum, in form and
substance acceptable to the commissioner as specified by rules, shall be
prepared to support each actuarial opinion; and
(B) If the insurance company fails
to provide a supporting memorandum at the request of the commissioner within a
period specified by rules or if the commissioner determines that the supporting
memorandum provided by the insurer fails to meet the standards prescribed by
rules or is otherwise unacceptable to the commissioner, the commissioner may
engage a qualified actuary at the expense of the insurer to review the opinion
and the basis for the opinion and prepare any supporting memorandum that is
required by the commissioner; and
(4) Every opinion shall be governed by
the following:
(A) The opinion shall be submitted
with the annual statement reflecting the valuation of reserve liabilities for
each year ending on or after December 31, 1995;
(B) The opinion shall apply to all
business in force including individual and group health insurance plans, in
form and substance acceptable to the commissioner as specified by rules;
(C) The opinion shall be based on
standards adopted from time to time by the Actuarial Standards Board and on any
[additional] standards that the commissioner may prescribe by rules;
(D) In the case of an opinion
required to be submitted by a foreign or alien insurer, the commissioner may
accept the opinion filed by that insurer with the insurance supervisory
official of another state if the commissioner determines that the opinion
reasonably meets the requirements applicable to an insurer domiciled in this
State;
(E) For the purposes of this
section, "qualified actuary" means a member in good standing of the
American Academy of Actuaries who meets the requirements set forth in the
regulations adopted by the American Academy of Actuaries;
(F) Except in cases of fraud or
wilful misconduct, the qualified actuary shall not be liable for damages to any
person, other than the insurer and the commissioner, for any act, error,
omission, decision, or conduct with respect to the actuary's opinion; and
(G) Any memorandum in support of the
opinion, and any other material provided by the insurer to the commissioner in
connection therewith, shall be kept confidential by the commissioner and shall
not be made public and shall not be subject to subpoena, other than for the
purpose of defending an action seeking damages from any person by reason of any
action required by this section, or by rules adopted hereunder; provided that the
memorandum or other material may otherwise be released by the commissioner with
the written consent of the insurer or be released to the American Academy of
Actuaries upon request stating that the memorandum or other material is
required for the purpose of professional disciplinary proceedings and setting
forth procedures satisfactory to the commissioner for preserving the
confidentiality of the memorandum or other material. Once any portion of
the confidential memorandum is cited by the insurer in its marketing material
or is cited before any governmental agency, other than a state insurance
department, or is released by the insurer to the news media, all portions of
the confidential memorandum shall no longer be confidential.]
(n) For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under subsection (b)(2). For accident and health or sickness insurance contracts issued on or after January 1, 1956, and prior to the operative date of the valuation manual, the minimum standard of valuation is the standard adopted by the commissioner by rule.
(o)(1) For policies issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under subsection (b)(2), except as provided under paragraph (5) or (7);
(2) The operative date of the valuation manual is January 1 of the first calendar year following the first July 1 as of which all of the following have occurred:
(A) The valuation manual has been adopted by the National Association of Insurance Commissioners by an affirmative vote of at least forty-two members, or three-fourths of the members voting, whichever is greater;
(B) The Standard Valuation Law, as amended by the National Association of Insurance Commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than seventy-five per cent of the direct premiums written as reported in the following annual statements submitted for 2008: life, accident and health annual statements; health annual statements; or fraternal annual statements; and
(C) The Standard Valuation Law, as amended by the National Association of Insurance Commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least forty-two of the following fifty-five jurisdictions: the fifty states of the United States, American Samoa, the American Virgin Islands, the District of Columbia, Guam, and Puerto Rico;
(3) Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual shall be effective on January 1 following the date when all of the following have occurred:
(A) The change to the valuation manual has been adopted by the National Association of Insurance Commissioners by an affirmative vote representing:
(i) At least three-fourths of the members of the National Association of Insurance Commissioners voting, but not less than a majority of the total membership, and
(ii) Members of the National Association of Insurance Commissioners representing jurisdictions totaling greater than seventy-five per cent of the direct premiums written as reported in the following annual statements most recently available prior to the vote in clause (i): life, accident and health annual statements; health annual statements; or fraternal annual statements; and
(B) The valuation manual becomes effective pursuant to rules adopted by the commissioner;
(4) The valuation manual shall specify all of the following:
(A) Minimum valuation standards for and definitions of the policies or contracts subject to subsection (b)(2). These minimum valuation standards shall be:
(i) The commissioner's reserve valuation method for life insurance contracts, other than annuity contracts, subject to subsection (b)(2);
(ii) The commissioner's annuity reserve valuation method for annuity contracts subject to subsection (b)(2); and
(iii) Minimum reserves for all other policies or contracts subject to subsection (b)(2);
(B) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in subsection (p)(1) and the minimum valuation standards consistent with those requirements;
(C) For policies and contracts subject to a principle-based valuation under subsection (p):
(i) Requirements for the format of reports to the commissioner under subsection (p)(2)(C) that shall include information necessary to determine if the valuation is appropriate and in compliance with this section;
(ii) Assumptions shall be prescribed for risks over which the company does not have significant control or influence;
(iii) Procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures;
(D) For policies not subject to a principle-based valuation under subsection (p), the minimum valuation standard shall either:
(i) Be consistent with the minimum standard of valuation prior to the operative date of the valuation manual; or
(ii) Develop reserves that quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring;
(E) Other requirements including, but not limited to, those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules, and internal controls; and
(F) The data and form of the data required under subsection (q), with whom the data shall be submitted, and may specify other requirements including data analyses and reporting of analyses;
(5) In the absence of a specific valuation requirement or if a specific valuation requirement in the valuation manual is not, in the opinion of the commissioner, in compliance with this section, then the company shall, with respect to these requirements, comply with minimum valuation standards prescribed by the commissioner by rule;
(6) The commissioner may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a company's compliance with any requirement set forth in this section. The commissioner may rely upon the opinion, regarding provisions contained within this section, of a qualified actuary engaged by the commissioner of another state, district, or territory of the United States. As used in this paragraph, "engage" includes employment and contracting; and
(7) The commissioner may require a company to change any assumption or method that in the opinion of the commissioner is necessary to comply with the requirements of the valuation manual or this section, and the company shall adjust the reserves as required by the commissioner. The commissioner may take other disciplinary action as permitted pursuant to this chapter.
(p)(1) A company shall establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:
(A) Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, the valuation shall reflect conditions appropriately adverse to quantify the tail risk;
(B) Incorporate assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical to, those used within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods;
(C) Incorporate assumptions that are prescribed in the valuation manual, or for assumptions that are not prescribed, the assumptions shall:
(i) Be established using the company's available experience, to the extent it is relevant and statistically credible; or
(ii) To the extent that company data is not available, relevant, or statistically credible, be established using other relevant, statistically credible experience; and
(D) Provide margins for uncertainty including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve;
(2) A company using a principle-based valuation for one or more policies or contracts subject to this section as specified in the valuation manual shall:
(A) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual;
(B) Provide to the commissioner and to the company's board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. These controls shall be designed to assure that all material risks inherent in the liabilities and associated assets subject to the valuation are included in the valuation, and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year; and
(C) Develop and file with the commissioner, upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual; and
(3) A principle-based valuation may include a prescribed formulaic reserve component.
(q) On or after the operative date of the valuation manual, a company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the valuation manual.
(r)(1) With respect to privilege for, and confidentiality of, confidential information:
(A) Except as provided in this subsection, a company's confidential information is confidential by law and privileged, and shall not be subject to chapter 92F, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action; provided that the commissioner may use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the commissioner's official duties;
(B) Neither the commissioner nor any person who received confidential information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential information;
(C) To assist in the performance of the commissioner's duties, the commissioner may share confidential information:
(i) With other state, federal, and international regulatory agencies and with the National Association of Insurance Commissioners and its affiliates and subsidiaries; and
(ii) In the case of confidential information specified in paragraph (3)(A)(i) and (3)(B)(iv) only, with the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with the state, federal, and international law enforcement officials in the case of clauses (i) and (ii); provided that the recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of the documents, materials, data, and other information in the same manner and to the same extent as required for the commissioner;
(D) The commissioner may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information, from the National Association of Insurance Commissioners and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions, and from the Actuarial Board for Counseling and Discipline or its successor and shall maintain as confidential or privileged any document, material, data, 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;
(E) The commissioner may enter into agreements governing the sharing and use of information consistent with this paragraph;
(F) No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure to the commissioner under this subsection or as a result of sharing as authorized in subparagraph (C);
(G) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this paragraph shall be available and enforced in any proceeding in, and in any court of, this State;
(2) Notwithstanding paragraph (1), any confidential information specified in paragraph (3)(A)(i) and (iv):
(A) May be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under subsections (c) and (d) or principle-based valuation report developed under subsection (p)(2)(C) by reason of an action required by this section or by rules adopted hereunder;
(B) May otherwise be released by the commissioner with the written consent of the company; and
(C) Once any portion of a memorandum in support of an opinion submitted under subsections (c) and (d) or a principle-based valuation report developed under subsection (p)(2)(C) is cited by the company in its marketing, is publicly volunteered to or before a governmental agency other than a state insurance department, or is released by the company to the news media, all portions of the memorandum or report shall no longer be confidential; and
(3) For purposes of this section:
(A) "Confidential information" means:
(i) A memorandum in support of an opinion submitted under subsections (c) and (d) and any other documents, materials, and other information, including but not limited to all working papers and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such memorandum;
(ii) All documents, materials, and other information, including but not limited to all working papers and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in the course of an examination made under subsection (o)(6); provided that if an examination report or other material prepared in connection with an examination made under section 431:2-302 is not held as private and confidential information under section 431:2-305, an examination report or other material prepared in connection with an examination made under subsection (o)(6) shall not be "confidential information" to the same extent as if the examination report or other material had been prepared under section 431:2-305;
(iii) Any reports, documents, materials, and other information developed by a company in support of, or in connection with, an annual certification by the company under subsection (p)(2)(B) evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials, and other information, including but not limited to all working papers and copies thereof, created, produced, or obtained by, or disclosed to the commissioner or any other person in connection with such reports, documents, materials, and other information;
(iv) Any principle-based valuation report developed under subsection (p)(2)(C) and any other documents, materials, and other information, including but not limited to all working papers and copies thereof, created, produced, or obtained by, or disclosed to the commissioner or any other person in connection with the report; and
(v) Any documents, materials, data, and other information submitted by a company under subsection (q) (collectively, "experience data") and any other documents, materials, data, and other information, including but not limited to all working papers and copies thereof, created or produced in connection with the experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the commissioner (together with any "experience data", the "experience materials") and any other documents, materials, data, and other information, including but not limited to all working papers and copies thereof, created, produced, or obtained by, or disclosed to the commissioner or any other person in connection with the experience materials; and
(B) "Regulatory agency", "law enforcement agency", and "National Association of Insurance Commissioners" include but shall not be limited to, their employees, agents, consultants, and contractors.
(s) The commissioner may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in this State from the requirements of subsection (o); provided that:
(1) The commissioner has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing; and
(2) The company computes reserves using assumptions and methods used prior to the operative date of the valuation manual in addition to any requirements established by the commissioner and adopted by rule.
For any company granted an exemption under this subsection, subsections (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), and (n) shall be applicable. With respect to any company applying this exemption, any reference to subsection (o) found in subsections (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), and (n) shall not be applicable.
(t) As used in this section, the following definitions shall apply on or after the operative date of the valuation manual:
"Accident and health insurance" means a contract that incorporates morbidity risk and provides protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the valuation manual.
"Appointed actuary" means a qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required in subsection (d).
"Company" means an entity that:
(1) Has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and has at least one such policy in force or on claim; or
(2) Has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this State.
"Deposit-type contract" means a contract that does not incorporate mortality or morbidity risks and as may be specified in the valuation manual.
"Life insurance" means a contract that incorporates mortality risk, including an annuity and a pure endowment contract, and as may be specified in the valuation manual.
"Policyholder behavior" means any action that a policyholder, contract holder, or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this section including, but not limited to, lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by the policy or contract, but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract.
"Principle-based valuation" means a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with subsection (p) as specified in the valuation manual.
"Qualified actuary" means an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries qualification standards for actuaries signing the statement and who meets the requirements specified in the valuation manual.
"Tail risk" means a risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude.
"Valuation manual" means the manual of valuation instructions adopted by the National Association of Insurance Commissioners as specified in this section or as subsequently amended."
PART III
SECTION 5. Section 431:10D-104, Hawaii Revised Statutes, is amended to read as follows:
"§431:10D-104
Standard nonforfeiture law[;] for life insurance [contracts].
(a) This section shall be known as the Standard Nonforfeiture Law for
Life Insurance.
(b) [Nonforfeiture
provisions - life:] With regard to nonforfeiture benefits of life
insurance:
(1) In the case of policies issued on or
after the operative date of this section as defined in subsection (i), no
policy of life insurance, except as stated in subsection (h), shall be
delivered or issued for delivery in this State unless it contains in substance
the following provisions, or corresponding provisions [which] that
in the opinion of the commissioner are at least as favorable to the defaulting
or surrendering policyholder as are the minimum requirements hereinafter
specified and are essentially in compliance with subsection (g):
(A) That, in the event of default in any
premium payment, the [insurer will] company shall grant, upon
proper request not later than sixty days after the due date of the premium in
default, a paid-up nonforfeiture benefit on a plan stipulated in the policy,
effective as of the due date, of [such value] an amount as may be
hereinafter specified. In lieu of [such] the stipulated paid-up
nonforfeiture benefit, the [insurer] company may substitute, upon
proper request no later than sixty days after the due date of the premium in
default, an actuarially equivalent alternative paid-up nonforfeiture benefit [which]
that provides a greater amount or longer period of death benefits or, if
applicable, a greater amount or earlier payment of endowment benefits.
(B) That,
upon surrender of the policy within sixty days after the due date of any
premium payment in default after premiums have been paid for at least three
full years in the case of ordinary insurance or five full years in the case of
industrial insurance, the [insurer will] company shall pay, in
lieu of any paid-up nonforfeiture benefit, a cash surrender value of [such]
an amount as may be hereinafter specified.
(C) That a specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make the election elects another available option not later than sixty days after the due date of the premium in default.
(D) That,
if the policy has been [paid-up] paid up by completion of all
premium payments or if it is continued under any paid-up nonforfeiture benefit
[which] that became effective on or after the third policy
anniversary in the case of ordinary insurance or the fifth policy anniversary
in the case of industrial insurance, the [insurer will] company shall
pay, upon surrender of the policy within thirty days after any policy
anniversary, a cash surrender value of [such] an amount as may be
hereinafter specified.
(E) In
the case of policies [which] that cause, on a basis
guaranteed in the policy, unscheduled changes in benefits or premiums,
or [which] that provide an option for changes in benefits or
premiums other than a change to a new policy, a statement of the mortality
table, interest rate, and method used in calculating cash surrender values and
the paid-up nonforfeiture benefits available under the policy. In the
case of all other policies, a statement of the mortality table and interest
rate used in calculating the cash surrender values and the paid-up
nonforfeiture benefits available under the policy, together with a table
showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if
any, available under the policy on each policy anniversary either during the
first twenty policy years or during the term of the policy, whichever is
shorter, [such] the values and benefits to be calculated upon the
assumption that there are no dividends or paid-up additions credited to the
policy and that there is no indebtedness to the [insurer] company
on the policy.
(F) A
statement that the cash surrender values and the paid-up nonforfeiture benefits
available under the policy are not less than the minimum values and benefits
required by or pursuant to the insurance law of the jurisdiction in which the
policy is delivered; an explanation of the manner in which the cash surrender
values and the paid-up nonforfeiture benefits are altered by the existence of
any paid-up additions credited to the policy or any indebtedness to the [insurer]
company on the policy; if a detailed statement of the method of
computation of the values and benefits shown in the policy is not stated
therein, a statement that the method of computation has been filed with the
insurance supervisory official of the jurisdiction in which the policy is
delivered; and a statement of the method to be used in calculating the cash
surrender value and a paid-up nonforfeiture benefit available under the
policy on any policy anniversary beyond the last anniversary for which [such]
values and benefits are consecutively shown in the policy.
(2) Any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy.
(3) The
[insurer] company shall reserve the right to defer the payment of
any cash surrender value for a period of six months after demand therefor with
surrender of the policy.
(c) [Cash surrender value - life:] With
regard to the computation of cash surrender value:
(1) Any
cash surrender value available under the policy in the event of default in a
premium payment due on any policy anniversary, [whether or not required by]
regardless of subsection (b), shall be an amount not less than the
excess, if any, of the present value, on the anniversary, of the future
guaranteed benefits that would have been provided for by the policy,
including any existing paid-up additions, if there had been no default, over
the sum of:
(A) The then present value of the adjusted premiums as defined in subsection (e) corresponding to premiums that would have fallen due on and after the anniversary; and
(B) The amount of any indebtedness to the [insurer]
company on [account of or secured by] the policy; [provided
that:
(i)]
(2) For any policy issued on or after the
operative date of subsection (e)(8) that provides supplemental life insurance
or annuity benefits at the option of the insured and for an identifiable
additional premium by rider or supplemental policy provision, the cash
surrender value referred to in [this] paragraph (1) shall be an
amount not less than the sum of the cash surrender value for an otherwise
similar policy issued at the same age without [such] the rider or
supplemental policy provision and the cash surrender value as defined in
paragraph (1) for a policy that provides only the benefits otherwise
provided by [such] the rider or supplemental policy provision;
and
[(ii)] (3)
For any family policy issued on or after the operative date of subsection
(e)(8) that defines a primary insured and provides term insurance on the life
of the spouse of the primary insured expiring before the spouse's seventy-first
birthday, the cash surrender value referred to in [this] paragraph (1)
shall be an amount not less than the sum of the cash surrender value for an
otherwise similar policy issued at the same age without [such] term
insurance on the life of the spouse and the cash surrender value [for an
otherwise similar policy issued at the same age without such rider or
supplemental policy provision and the cash surrender value] as defined
in paragraph (1) for a policy that provides only the benefits otherwise
provided by [such] term insurance on the life of the spouse.
[(2)] (4) Any
cash surrender value available within thirty days after any policy anniversary[,
of the future guaranteed benefits provided for by the policy including any
existing paid-up additions, shall be decreased by any indebtedness to the
insurer on account of or secured by the policy.] under any policy paid
up by completion of all premium payments or any policy continued under any
paid-up nonforfeiture benefit, regardless of subsection (b), shall be an amount
not less than the present value, on the anniversary, of the future guaranteed
benefits provided for by the policy, including any existing paid-up additions,
decreased by any indebtedness to the company on the policy.
(d) [Paid-up nonforfeiture benefit - life: Any]
With regard to the computation of paid-up nonforfeiture benefits, for any
paid-up nonforfeiture benefit available under the policy in the event of
default in a premium payment due on any policy anniversary shall be such that
its present value as of the anniversary shall be at least equal to the cash
surrender value then provided for by the policy or, if none is provided for,
that cash surrender value [which] that would have been required
by this section in the absence of the condition that premiums shall have been
paid for at least a specified period.
(e) [The adjusted premium - life:
(1) This
paragraph] With regard to the calculation of adjusted premiums:
(1) This section shall not apply to policies issued on or after the operative date
of paragraph (8) [as defined therein]. Except as provided in
paragraph (4), the adjusted premiums for any policy shall be calculated on an
annual basis and shall be [such] a uniform percentage of the
respective premiums specified in the policy for each policy year, excluding [extra
premiums on a substandard policy, that the present value, at the date of issue
of the policy,] amounts stated in the policy as extra premiums to cover
impairments or special hazards of the present value at the date of issue of the
policy, of all such adjusted premiums shall be equal to the sum of:
(A) The then present value of the future guaranteed benefits provided for by the policy;
(B) Two per cent of the amount of insurance, if the insurance is uniform in amount, or of the equivalent uniform amount, as hereinafter defined, if the amount of insurance varies with duration of the policy;
(C) Forty per cent of the adjusted premium for the first policy year; and
(D) Twenty-five per cent of either the adjusted premium for the first policy year or the adjusted premium for a whole life policy of the same uniform or equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance, whichever is less.
(2) [This paragraph shall not apply to
policies issued on or after the operative date of paragraph (8).] In
applying the percentages specified in paragraph (1)(C) and (D), no adjusted
premium shall be deemed to exceed four per cent of the amount of insurance or [uniform]
level amount equivalent [thereto. Whenever the plan or term of a
policy has been changed, either by request of the insured or automatically in
accordance with the policy, the date of inception of the changed policy for the
purposes of determining a nonforfeiture benefit or cash surrender value shall
be the date as of which the age of the insured is determined for the purposes
of the changed policy]. The date of issue of a policy for the purpose
of this subsection shall be the date as of which the rated age of the insured
is determined.
(3) [This
paragraph shall not apply to policies issued on or after the operative date of
paragraph (8).] In the case of a policy providing an amount of insurance
varying with duration of the policy, the equivalent [uniform] level
amount [thereof] for the purpose of this [paragraph] subsection
shall be deemed to be the [uniform] level amount of insurance
provided by an otherwise similar policy, containing the same endowment benefit
or benefits, if any, issued at the same age and for the same term, the amount
of which does not vary with duration and the benefits under which have the same
present value at the [date of issue as the benefits under the policy.
In the case of a policy providing a varying amount of insurance issued on the
life of a child under age ten, the equivalent uniform amount may be computed as
though the amount of insurance provided by the policy prior to the attainment
of age ten was the amount provided by the policy at age ten.
(4) This
paragraph shall not apply to policies issued on or after the operative date of
paragraph (8).] inception of the insurance as the benefits under the
policy.
(4) The
adjusted premiums for any policy providing term insurance benefits by rider or
supplemental policy provision shall be equal to [the]:
(A) The adjusted premiums for an
otherwise similar policy issued at the same age without [such] the
term insurance benefits, increased, during the period for which premiums for [such]
the term insurance benefits are payable, by [the]
(B) The adjusted premiums for the term
insurance. The foregoing amounts in [paragraph (1)(A] subparagraphs
(A) and (B) being calculated separately and as specified in paragraphs (1)[,
(2),] and (3), except that, for the purposes of [paragraph
(1)(B), (C), and (D),] paragraph (1)(B), (1)(C), and (1)(D), the
amount of insurance or equivalent uniform amount of insurance used in the
calculation of the adjusted premiums referred to in paragraph (1)(B) shall be
equal to the excess of the corresponding amount determined for the entire
policy over the amount used in the calculation of the adjusted premiums in [paragraph
(1)(A).] subparagraph (A).
(5) [This paragraph shall not apply to
policies issued on or after the operative date of paragraph (8).] Except
as otherwise provided in paragraphs (6) and (7), all adjusted premiums and
present values referred to in this section shall for all policies of ordinary
insurance be calculated on the basis of the Commissioners 1941 Standard
Ordinary Mortality Table; provided that for any category of ordinary insurance
issued on female risks, adjusted premiums and present values may be calculated
according to [an] any age not more than three years younger than
the actual age of the insured[,] and [such] the
calculations for all policies of industrial insurance shall be made on the
basis of the 1941 Standard Industrial Mortality Table. All calculations shall
be made on the basis of the rate of interest, not exceeding three and one-half
per cent a year, specified in the policy for calculating cash surrender values
and paid-up nonforfeiture benefits.
In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than one hundred thirty per cent of the rates of mortality according to the applicable table.
For
insurance issued on a substandard basis, the calculation of any [such]
adjusted premiums and present values may be based on [such] any
other table of mortality as may be specified by the [insurer] company
and approved by the commissioner.
(6) This paragraph shall not apply to
ordinary policies issued on or after the operative date of paragraph (8). In
the case of ordinary policies issued on or after the operative date of this
paragraph, all adjusted premiums and present values referred to in this section
shall be calculated on the basis of the Commissioners 1958 Standard Ordinary
Mortality Table[.
The] and the rate of
interest specified in the policy for calculating cash surrender values and
paid-up nonforfeiture benefits; provided that the rate of interest shall
not exceed three and one-half per cent a year, except that:
(A) A rate of interest not exceeding four per cent a year may be used for policies issued after June 1, 1976, and prior to June 1, 1979;
(B) A rate of interest not exceeding five and one-half per cent a year may be used for policies issued on or after June 1, 1979; and
(C) For any single premium whole life or endowment insurance policy, a rate of interest not exceeding six and one-half per cent a year may be used.
For any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than six years younger than the actual age of the insured.
In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1958 Extended Term Insurance Table.
For
insurance issued on a substandard basis, the calculation of any adjusted
premiums and present values may be based on such other table of mortality as
may be specified by the [insurer] company and approved by the
commissioner.
After
June 1, 1959, any [insurer] company may file with the
commissioner a written notice of its election to comply with [the provisions
of] this paragraph after a specified date before January 1, 1966. After
the filing of such notice, [then] upon [such] the
specified date (which shall be the operative date of this paragraph for [such
insurer),] that company), this paragraph shall become operative with
respect to the ordinary policies thereafter issued by [such insurer.] the
company. If [an insurer] a company makes no such election,
the operative date of this paragraph for [such insurer] the company
shall be January 1, 1966.
(7) This paragraph shall not apply to
industrial policies issued on or after the operative date of paragraph
(8). In the case of industrial policies issued on or after the operative
date of this paragraph, all adjusted premiums and present values referred to in
this section shall be calculated on the basis of the Commissioners 1961
Standard Industrial Mortality Table[.
The] and the rate of
interest specified in the policy for calculating cash surrender values and
paid-up nonforfeiture benefits; provided that the rate of interest shall
not exceed three and one-half per cent a year, except that:
(A) A rate of interest not exceeding four per cent a year may be used for policies issued on or after June 1, 1976, and prior to June 1, 1979;
(B) A rate of interest not exceeding five and one-half per cent a year may be used for policies issued on or after June 1, 1979; and
(C) For any single premium whole life or endowment insurance policy a rate of interest not exceeding six and one-half per cent a year may be used.
In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1961 Industrial Extended Term Insurance Table.
For
insurance issued on a substandard basis, the calculation of any adjusted
premiums and present values may be based on such other table of mortality as
may be specified by the [insurer] company and approved by the
commissioner.
After
May 8, 1965, any [insurer] company may file with the commissioner
a written notice of its election to comply with [the provisions of] this
paragraph after a specified date before January 1, 1968. After the filing of [such]
the notice, [then] upon [such] the specified date
(which shall be the operative date of this paragraph for [such insurer),]
that company), this paragraph shall become operative with respect to the
industrial policies thereafter issued by [such insurer.] the company.
If [an insurer] a company makes no such election, the operative
date of this paragraph for [such insurer] the company shall be January 1, 1968.
(8) (A) This paragraph shall apply to all
policies issued on or after the operative date of this paragraph. Except as
provided in subparagraph (G), the adjusted premiums for any policy shall be
calculated on an annual basis and shall be [such] a uniform
percentage of the respective premiums specified in the policy for each policy
year, excluding amounts payable as extra premiums to cover impairments or
special hazards and also excluding any uniform annual contract charge or policy
fee specified in the policy in a statement of the method to be used in
calculating the cash surrender values and paid-up nonforfeiture benefits, that
the present value, at the date of issue of the policy, of all adjusted premiums
shall be equal to the sum of:
(i) The then present value of the future guaranteed benefits provided for by the policy;
(ii) One per cent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years; and
(iii) One hundred twenty-five per cent of the nonforfeiture net level premium as hereinafter defined.
In applying the percentage specified in clause (iii), no nonforfeiture net level premium shall be deemed to exceed four per cent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years. The date of issue of a policy for the purpose of this paragraph shall be the date as of which the rated age of the insured is determined.
(B) The nonforfeiture net level premium shall
be equal to the present value, at the date of issue of the policy, of the
guaranteed benefits provided for by the policy divided by the present value, at
the date of issue of the policy, of an annuity of one per annum payable on the
date of issue of the policy and on each anniversary of [such] the
policy on which a premium falls due.
(C) In the case of policies that cause,
on a basis guaranteed in the policy, unscheduled changes in benefits or
premiums, or that provide an option for changes in benefits or premiums,
other than a change to a new policy, the adjusted premiums and present values
shall initially be calculated on the assumption that future benefits and
premiums do not change from those stipulated at the date of issue of the policy
[immediately after the change]. At the time of any such change in the
benefit or premiums, the future adjusted premiums, nonforfeiture net
level premiums, and present values shall be recalculated on the
assumption that future benefits and premiums do not change from those
stipulated by the policy immediately after the change.
(D) Except as otherwise provided in
subparagraph (G), the recalculated future adjusted premiums for any [such]
policy shall be [such] the uniform percentage of the respective
future premiums specified in the policy for each policy year, excluding amounts
payable as extra premiums to cover impairments and special hazards, and also
excluding any uniform annual contract charge or policy fee specified in the
policy in a statement of the method to be used in calculating the cash
surrender values and paid-up nonforfeiture benefits, that the present value, at
the time of change to the newly defined benefits or premiums, of all [such]
the future adjusted premiums shall be equal to the excess of the sum of:
(i) The then present value of the then future guaranteed benefits provided for by the policy; and
(ii) The additional expense allowance, if any, over the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.
(E) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of:
(i) One per cent of the excess, if positive, of the average amount of insurance at the beginning of each of the first ten policy years subsequent to the change over the average amount of insurance prior to the change at the beginning of each of the first ten policy years subsequent to the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and
(ii) One hundred twenty-five per cent of the increase, if positive, in the nonforfeiture net level premium.
(F) The recalculated nonforfeiture net level premium shall be equal to the result obtained by dividing the value defined in clause (i) by the value defined in clause (ii):
(i) The nonforfeiture net level premium applicable prior to the charge times the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of the charges on which a premium would have fallen due had the change not occurred, plus the present value of the increase in future guaranteed benefits provided for by the policy; and
(ii) The present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of charge on which a premium falls due.
(G) Notwithstanding any other provision of
this paragraph to the contrary, in the case of a policy issued on a substandard
basis that provides reduced graded amounts of insurance so that, in each policy
year, such policy has the same tabular mortality cost as an otherwise similar
policy issued on the standard basis that provides higher uniform amounts of
insurance, adjusted premiums and present values for [such] the
substandard policy may be calculated as if it were issued to provide such
higher uniform amounts of insurance on the standard basis.
(H) All adjusted premiums and present values
referred to in this section shall: for all policies of ordinary insurance be
calculated on the basis of either the Commissioners 1980 Standard Ordinary
Mortality Table[,]; or, at the election of the company for
any one or more specified plans of life insurance, the Commissioners 1980
Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors; for
all policies of industrial insurance be calculated on the basis of the Commissioners
1961 Standard Industrial Mortality Table; and for all policies issued in a
particular calendar year be calculated on the basis of a rate of interest not
exceeding the nonforfeiture interest rate as defined in this paragraph for
policies issued in that calendar year; provided that:
(i) At the option of the company, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding nonforfeiture interest rate, as defined in this paragraph, for policies issued in the immediately preceding calendar year;
(ii) Under any paid-up nonforfeiture benefit,
including any paid-up dividend additions, any cash surrender value available, [whether
or not required by] regardless of subsection (b), shall be
calculated on the basis of the mortality table and rate of interest used in
determining the amount of such paid-up nonforfeiture benefit and paid-up
dividend additions, if any;
(iii) A company may calculate the amount of any guaranteed paid-up nonforfeiture benefit, including any paid-up additions under the policy on the basis of an interest rate no lower than that specified in the policy for calculating cash surrender values;
(iv) In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1980 Extended Term Insurance Table for policies of ordinary insurance and not more than the Commissioners 1961 Industrial Extended Term Insurance Table for policies of industrial insurance;
(v) For insurance issued on a substandard
basis, the calculation of any [such] adjusted premiums and present
values may be based on appropriate modifications of the aforementioned tables;
(vi) [Any] For policies issued prior
to the operative date of the valuation manual, any commissioners standard
ordinary mortality tables, adopted after 1980 by the National Association of
Insurance Commissioners, that are approved by rule by the commissioner for use
in determining the minimum nonforfeiture standard may be substituted for the
Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year
Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance
Table[; and].
For policies issued on or after the operative date of the valuation manual, the valuation manual shall provide the commissioners standard mortality table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table. If the commissioner approves by rule any commissioners standard ordinary mortality table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual;
(vii) [Any] For policies issued prior
to the operative date of the valuation manual, any commissioners standard
industrial mortality tables, adopted after 1980 by the National Association of
Insurance Commissioners, that are approved by rule by the commissioner for use
in determining the minimum nonforfeiture standard may be substituted for the
Commissioners 1961 Standard Industrial Mortality Table or the Commissioners
1961 Industrial Extended Term Insurance Table.
For policies issued on or after the operative date of the valuation manual, the valuation manual shall provide the Commissioners Standard mortality table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table. If the commissioner approves by rule any Commissioners Standard industrial mortality table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issues on or after the operative date of the valuation manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual.
(I) [The nonforfeiture interest rate per
annum for any policy issued in a particular calendar year] As used in
this paragraph, "nonforfeiture interest rate" means:
(i) For policies issued prior to the
operative date of the valuation manual, the nonforfeiture interest rate per
annum for any policy issued in a particular calendar year shall be equal to
one hundred twenty-five per cent of the calendar year statutory valuation
interest rate for such policy as defined in the Standard Valuation Law, rounded
to the nearer one quarter of one per cent[.]; and
(ii) For policies issued on or after the operative date of the valuation manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be as provided by the valuation manual.
(J) Notwithstanding any other provision in
this [code] chapter to the contrary, any refiling of
nonforfeiture values or their methods of computation for any previously approved
policy form that involves only a change in the interest rate or mortality table
used to compute nonforfeiture values shall not require refiling of any other
provisions of that policy form.
(K) After
the effective date of this paragraph, any company may file with the
commissioner a written notice of its election to comply with this paragraph
after a specified date before January 1, 1989, which shall be the operative
date of this paragraph for [such] the company. If a company
makes no [such] election, the operative date of this paragraph for [such]
the company shall be January 1, 1989.
(L) In
the case of any plan of life insurance that provides for future premium
determination, the amounts of which are to be determined by the insurance
company based on [then] estimates of future experience, or in the case
of any plan of life insurance that is of such a nature that minimum values
cannot be determined by the methods described in subsections (b), (c), (d), and
(e), then:
(i) The commissioner shall be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by subsections (b), (c), (d), and (e);
(ii) The commissioner shall be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds; and
(iii) The cash surrender values and paid-up
nonforfeiture benefits provided by [such] the plan shall not be
less than the minimum values and benefits required for the plan computed by a
method consistent with the principles of this Standard Nonforfeiture Law for
Life Insurance, as determined by rules adopted by the commissioner.
(f) [Calculation of values - life:]
Any cash surrender value and [any paid-up value and] any paid-up
nonforfeiture benefit, available under the policy in the event of default in a
premium payment due at any time other than on the policy anniversary, shall be
calculated with allowance for the lapse of time and the payment of fractional
premiums beyond the last preceding policy anniversary. All values referred to
in subsections (c), (d), and (e) may be calculated upon the assumption that any
death benefit is payable at the end of the policy year of death. The net value
of any paid-up additions, other than paid-up term additions, shall be not less
than the amounts used to provide such additions. Notwithstanding subsection
(c)[,] to the contrary, additional benefits payable:
(1) In the event of death or dismemberment by accident or accidental means;
(2) In the event of total and permanent disability;
(3) As reversionary annuity or deferred reversionary annuity benefits;
(4) As term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this section would not apply;
(5) As term insurance on the life of a child
or on the lives of children provided in a policy on the life of a parent of the
child, if [such] the term insurance expires before the child's
age is twenty-six, is uniform in amount after the child's age is one, and has
not become paid up by reason of the death of a parent of the child; and
(6) As other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits,
shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this section, and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits.
(g) This subsection, in addition to all other
applicable subsections [of this section,], shall apply to all
policies issued on or after January 1, 1985. Any cash surrender value
available under the policy in the event of default in a premium payment due on
any policy anniversary shall be in an amount that does not differ by more than
two-tenths of one per cent of either the amount of insurance, if the insurance
be uniform in amount, or the average amount of insurance at the beginning of
each of the first ten policy years, from the sum of the greater of zero and the
basic cash value hereinafter specified, and the present value of any existing
paid-up additions less the amount of any indebtedness to the company under the
policy.
The
basic cash value shall be equal to the present value, on [such] the
anniversary, of the future guaranteed benefits that would have been provided
for by the policy, excluding any existing paid-up additions and before
deduction of any indebtedness to the company, if there had been no default,
less the then present value of the nonforfeiture factors, as hereinafter
defined, corresponding to premiums that would have fallen due on and after [such]
the anniversary. The effects on the basic cash value of
supplemental life insurance or annuity benefits or of family coverage, as
described in subsection (c) or (e)(1), (2), (3), (4), and (5), whichever is
applicable, shall be the same as are the effects specified in subsection (c) or
(e)(1), (2), (3), (4), and (5), whichever is applicable, on the cash surrender values
defined in that subsection.
The
nonforfeiture factor for each policy year shall be an amount equal to a
percentage of the adjusted premium for the policy year, as defined in
subsection (e)(1), (2), (3), (4), and (5) or subsection (e)(8), whichever is
applicable. Except as is required by the next succeeding sentence of this
paragraph, [such] the percentage:
(1) Shall be the same for each policy year between the second policy anniversary and the later of:
(A) The fifth policy anniversary; and
(B) The first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of one per cent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years; and
(2) Shall be such that no percentage after the later of the two policy anniversaries specified in paragraph (1) may apply to fewer than five consecutive policy years.
No basic cash value may be less than the value that
would be obtained if the adjusted premiums for the policy, as defined in [subsection
(e)(1), (2), (3), (4), and (5) or] subsection (e)(8), [whichever is
applicable,] were substituted for the nonforfeiture factors in the
calculation of the basic cash value.
All
adjusted premiums and present values referred to in this subsection shall for a
particular policy be calculated on the same mortality and interest bases as are
used in demonstrating the policy's compliance with [the other subsections of]
this section. The cash surrender values referred to in this subsection shall
include any endowment benefits provided for by the policy.
Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in subsections (b), (c), (d), (e)(8), and (f). The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed as paragraphs (1) through (6) in subsection (f) shall conform with the principles of this subsection.
(h) [Exceptions.]
This section shall not apply to any of the following:
(1) Reinsurance;
(2) Group insurance;
(3) Pure endowment;
(4) Annuity or reversionary annuity contract;
(5) Term policy uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of twenty years or less expiring before age seventy-one, for which uniform premiums are payable during the entire term of the policy;
(6) Term policy of decreasing amount, which
provides no guaranteed nonforfeiture or endowment benefits, [issued at the
same age and for the same initial amount of insurance and for a term of twenty
years or less expiring before age seventy-one, for which uniform premiums are
payable during the entire term of the policy;] on which each adjusted
premium, calculated as specified in subsection (e), is less than the adjusted
premium so calculated, on a term policy of uniform amount, or renewal thereof,
which provides no guaranteed nonforfeiture or endowment benefits, issued at the
same age and for the same initial amount of insurance and for a term of twenty
years or less expiring before age seventy-one, for which uniform premiums are
payable during the entire term of the policy;
(7) Policy, which provides no guaranteed
nonforfeiture or endowment benefits, for which no cash surrender value, if any,
or present value of any paid-up nonforfeiture benefit, at the beginning of any
policy year calculated as specified in subsections (c), (d), and (e), exceeds
two and one-half per cent of the amount [on] of insurance at the
beginning of the policy year; and
(8) Policy [which] that shall
be delivered outside this State through a producer or other representative of
the company issuing the policy.
For purposes of determining the applicability of this section, the age at expiry for a joint term life insurance policy shall be the age at expiry of the oldest life.
(i) [Operative date.] After January 1,
1956, any [insurer] company may file with the commissioner a
written notice of its election to comply with [the provisions of] this
section after a specified date within six months from January 1, 1956. After
the filing of [such] the notice, then upon [such] the
specified date (which shall be the operative date for [such insurer),] the
company), this section shall become operative with respect to the policies
thereafter issued by [such insurer.] the company. If [an
insurer] a company makes no [such] election, the operative
date of this section for [such insurer] the company shall be six
months from January 1, 1956.
(j) As used in this section, "operative date of the valuation manual" means the January 1 of the first calendar year that the valuation manual, as defined in section 431:5-307(t), is effective."
PART IV
SECTION 6. Chapter 431, Hawaii Revised Statutes, is amended by adding to article 11 a new section to be appropriately designated and to read as follows:
"§431:11-_____ Supervisory colleges. (a) With respect to any insurer registered under section 431:11-105, and in accordance with subsection (c), the commissioner may participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations to determine compliance by the insurer with this article. The powers of the commissioner with respect to supervisory colleges shall include, but not be limited to:
(1) Initiating the establishment of a supervisory college;
(2) Clarifying the membership and participation of other supervisors in the supervisory college;
(3) Clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor;
(4) Coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and
(5) Establishing a crisis management plan.
(b) 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 (c), 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 the insurer or its affiliates, and the commissioner may establish a regular assessment to the insurer for the payment of these expenses.
(c) 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 431:11-107, 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 431:11-108 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."
SECTION 7. Section 431:11-102, Hawaii Revised Statutes, is amended as follows:
1. By adding a new definition to be appropriately inserted and to read as follows:
""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 its 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 company action level as set forth in section 431:3-403 or would cause the insurer to be in hazardous financial condition as pursuant to section 431:15-103.5."
2. By amending the definition of "person" to read as follows:
""Person" means an individual, a corporation, a limited liability company, a partnership, an association, a joint stock company, a trust, an unincorporated organization, and any similar entity or any combination of the foregoing acting in concert, but shall not include any joint venture partnership exclusively engaged in owning, managing, leasing, or developing real or tangible personal property, or a securities broker performing only the usual and customary broker's function."
SECTION 8. Section 431:11-104, Hawaii Revised Statutes, is amended as follows:
1. By amending subsections (a) and (b) to read as follows:
"(a) The following are filing requirements for the acquisition of control of or merger with a domestic insurer:
(1) No person other than the issuer shall
make a tender offer or a request or invitation for tenders[,] of,
or enter into any agreement to exchange securities[, or] 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,
directly or indirectly (by conversion or by exercise of any right to acquire),
would be in control of the insurer, and no person shall enter into an agreement
to merge with or otherwise to acquire control of a domestic insurer or any
person controlling a domestic insurer unless, at the time any offer, request,
or invitation is made or [any] 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 sent to the
insurer, and the insurer has sent to its shareholders, a statement containing
the information required by [subsection (b)] this section and the
offer, request, invitation, agreement, or acquisition has been approved by the
commissioner in the manner [hereinafter] prescribed[.] in this
article.
(2) For purposes of this section, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the commissioner, with a copy to the insurer, a confidential notice of its proposed divestiture at least thirty days prior to the cessation of control. The commissioner shall determine those instances in which the party seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the commissioner, in the commissioner's discretion, determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in paragraph (1) is otherwise filed, this paragraph shall not apply.
(3) With respect to a transaction subject to this section, the acquiring person shall also file a preacquisition notification with the commissioner containing the information set forth in section 431:11-104.3(b). Failure to file the notification may subject the acquiring person to penalties specified in section 431:11-104.5(f).
(4) For purposes of this section[, a]:
(A) A domestic insurer includes
any person controlling a domestic insurer unless the commissioner determines
that the person, directly or through its affiliates, is primarily engaged in
business other than the business of insurance[. Such a person shall file a
preacquisition notification with the commissioner containing the information
set forth in section 431:11-104.3(b) thirty days prior to the proposed
effective date of the acquisition. Failure to file is subject to section
431:11-104.5(f). This section does]; and
(B) "Person" shall not
[apply to] include any securities broker holding, in the usual
and customary broker's function, less than twenty per cent of the voting
securities of an insurance company or of any person who controls an insurance
company.
(b) The statement to be filed with the commissioner hereunder 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 (a) is to be effected (hereinafter called "acquiring party"), and
(A) If the person is an individual, the principal occupation and all offices and positions held by the individual during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years; or
(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 thereof 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
[such] the person, or who perform or will perform functions
appropriate to the positions. The list shall include for each individual the
information required by [[]subparagraph[]] (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 wherein funds were or are to be obtained for any purpose (including any 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; provided that where 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 requests confidentiality;
(3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years (or for the lesser period as the acquiring party and any predecessors thereof shall 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] that each acquiring party may have to
liquidate the insurer, to sell its assets or merge or consolidate it with any
person, or to make any other material change in its business or corporate
structure or management;
(5) The
number of shares of any security referred to in subsection (a) [which] that
each acquiring party proposes to acquire, and the terms of the offer, request,
invitation, agreement, or acquisition referred to in subsection (a), 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 (a) [which]
that 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 (a) 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 the contracts, arrangements, or understandings have been entered into;
(8) A
description of the purchase of any security referred to in subsection (a)
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 considerations paid or agreed to be paid therefore;
(9) A
description of any recommendations to purchase any security referred to in
subsection (a) 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 [such] the acquiring party;
(10) Copies
of all tender offers[,] for, requests[,] or invitation for
tenders[, or] of, exchange offers for, and agreements to acquire
or exchange any securities referred to in subsection (a), and (if distributed)
of additional soliciting material relating thereto;
(11) The
term of any agreement, contract, or understanding made with or proposed to be
made with any [broker/dealer] broker-dealer as to solicitation of
securities referred to in subsection (a) for tender, and the amount of any
fees, commissions, or other compensation to be paid to [broker/dealers]
broker-dealers with regard thereto; [and]
(12) An agreement by the person required to file the statement referred to in subsection (a) that the person will provide the annual report, specified in section 431:11-105(l), for so long as control exists;
(13) An acknowledgement by the person required to file the statement referred to in subsection (a) that the person and all subsidiaries within the person's control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer; and
(14) Any
additional information as the commissioner may by rule [or regulation]
prescribe as necessary or appropriate for the protection of policyholders of
the insurer or in the public interest.
If the person required to file the statement
referred to in subsection (a) is a partnership, limited partnership, or other
group, the commissioner may require that the information called for by [items]
paragraphs (1) through [(12)] (14) shall be given with
respect to each partner of the partnership or limited partnership, each member
of the group, and each person who controls such partner or member. If any
partner, member, or person is a corporation or the person required to file the
statement referred to in subsection (a) is a corporation, the commissioner may
require that the information called for by [items] paragraphs (1)
through [(12)] (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 owner of more than ten per cent of the
outstanding voting securities of the corporation.
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. The insurer shall send the amendment to its shareholders."
2. By amending subsection (d) to read as follows:
"(d) (1) The commissioner shall approve any merger or other acquisition of control referred to in subsection (a) unless, after a public hearing thereon, the commissioner finds that:
(A) After the change of control, the domestic insurer referred to in subsection (a) would not 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;
(B) The effect of the merger or other
acquisition of control would be substantially to lessen competition in
insurance in this State or tend to create a monopoly therein[;]. In
applying the competitive standard in this subparagraph:
(i) The informational requirements of section 431:11-104.3(b) and the standards of section 431:11-104.4(b) shall apply;
(ii) The merger or other acquisition shall not be disapproved if the commissioner finds that any of the situations meeting the criteria provided by section 431:11-104.4(c) exist; and
(iii) The commissioner may condition the approval of the merger or other acquisition on the removal of the grounds for disapproval within a specified period of time;
(C) The financial condition of any acquiring
party might jeopardize the financial stability of the insurer[,] or
prejudice the interest of its policyholders;
(D) The plans
or proposals [which] that the acquiring party has to liquidate
the insurer, sell its assets or consolidate or merge it with any person, or to
make any other material change in its business or corporate structure or
management, are unfair and unreasonable to policyholders of the insurer [and]
or not in the public interest;
(E) The
competence, experience, and integrity of those persons who would control the
operation of the insurer would not be in the interest of policyholders of the
insurer [and] or not in the public interest; or
(F) The
acquisition is likely to be hazardous or prejudicial to the [insurance
buying] insurance-buying public.
(2) The public hearing referred to in
paragraph (1) shall commence within [sixty] thirty days after the
statement required by subsection (a) is filed, except that the hearing may
commence within such additional time as agreed to by the commissioner, the
acquiring party, and the person to be acquired, and at least twenty days
notice of the scheduled 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
any other persons as may be designated by the commissioner. The insurer shall
give notice to its security holders. The commissioner shall make a
determination within [thirty days after the conclusion of the hearing.] the
sixty-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 interest may be
affected thereby 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 presently allowed in chapter 91. All discovery proceedings shall be
concluded not later than three days prior to the commencement of the public
hearing.
(3) If the proposed acquisition of control requires the approval of more than one commissioner, the public hearing referred to in paragraph (2) may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (a). The person shall file the statement referred to in subsection (a) with the National Association of Insurance Commissioners within five days of making the request for a public hearing. A commissioner may opt out of a consolidated hearing, and shall provide notice to the applicant of the opt-out within ten days of the receipt of the statement referred to in subsection (a). A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled. The commissioners shall hear and receive evidence. A commissioner may attend such hearing, in person or by telecommunication.
(4) In connection with a change of control of a domestic insurer, any determination by the commissioner that the person acquiring control of the insurer shall be required to maintain or restore the capital of the insurer to the level required by the laws and rules of this State shall be made not later than sixty days after the date of notification of the change in control submitted pursuant to paragraph (1) of subsection (a).
[(3)] (5)
The commissioner may retain at the acquiring person's expense any attorneys,
actuaries, accountants, and other experts not otherwise a part of the
commissioner's staff as may be reasonably necessary to assist the commissioner
in reviewing the proposed acquisition of control."
3. By amending subsection (g) to read as follows:
"(g) The following shall be violations of this article:
(1) The failure to file any statement, amendment, or other material required to be filed pursuant to subsections (a) or (b); or
(2) The effectuation or any attempt to
effectuate an acquisition of[,] control of, divestiture of, or
merger with, a domestic insurer unless [approval is given by] the
commissioner[.] has given approval."
SECTION 9. Section 431:11-104.2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) This section and sections 431:11-104.3 through 431:11-104.6 shall not apply to the following:
(1) [An acquisition subject to approval
by the commissioner pursuant to section 431:11-104;
(2)] A
purchase of securities solely for investment purposes, so long as those
securities are not used by voting or otherwise to cause or attempt to cause the
substantial lessening of competition in any insurance market in this State. If
a purchase of securities results in a presumption of control as defined in
section 431:11-102, it is not solely for investment purposes unless the
commissioner of the insurer's state of domicile accepts a disclaimer of control
or affirmatively finds that control does not exist and the disclaimer action or
affirmative finding is communicated by the domiciliary commissioner to the
commissioner;
[(3)] (2)
The acquisition of a person by another person when both persons are neither
directly nor through affiliates primarily engaged in the business of insurance,
if preacquisition notification is filed with the commissioner in accordance
with section 431:11-104.3 thirty days prior to the proposed effective date of
the acquisition. However, the preacquisition notification is not required
for exclusion from this section and sections 431:11-104.3 through 431:11-104.6
if the acquisition would otherwise be excluded by any other paragraph of this
subsection;
[(4)] (3)
The acquisition of affiliated persons;
[(5)] (4)
An acquisition if, as an immediate result of the acquisition:
(A) In no market would the combined market share of the involved insurers exceed five per cent of the total market;
(B) There would be no increase in any market share; or
(C) In no market would:
(i) The combined market share of the involved insurers exceed twelve per cent of the total market; and
(ii) The market share increase by more than two per cent of the total market.
For the purpose of this paragraph, [a
market] "market" means direct written insurance premiums
in this State for a line of business as contained in the annual statement
required to be filed by insurers licensed to do business in this State;
[(6)] (5) An
acquisition for which a preacquisition notification would be required pursuant
to this section due solely to the resulting effect on the ocean marine
insurance line of business; and
[(7)] (6) An
acquisition of an insurer whose domiciliary commissioner affirmatively finds
that the insurer is in failing condition; there is a lack of feasible
alternative to improving such condition; the public benefits of improving the
insurer's condition through the acquisition exceed the public benefits that would
arise from not lessening competition; and those findings are communicated by
the domiciliary commissioner to the commissioner[.] of this State."
SECTION 10. Section 431:11-105, Hawaii Revised Statutes, is amended to read as follows:
"§431:11-105
Registration of insurers. (a) Every insurer [who] that is
authorized to do business in this State and [who] 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 that are
substantially similar to those contained in this section and section 431:11-106(a)(1),
(b), and (d). The insurer shall file a copy of the summary of its registration
statement as required by subsection (c) in each state in which that insurer is
authorized to do business if requested by the commissioner of that state. Any
insurer [who] that is subject to registration under this section
shall register within fifteen days after it becomes subject to registration,
and annually thereafter by March 15 of each 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 [who] authorized to do business in the state that is
a member of [a] an insurance holding company system [who],
and that is not subject to registration under this section, to
furnish a copy of the registration statement or other information filed by the
insurance company with the insurance regulatory authority of its
domiciliary jurisdiction.
(b) Every insurer subject to registration shall file the registration statement with the commissioner on a form and in a format prescribed by the National Association of Insurance Commissioners, which shall contain the following current information:
(1) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer;
(2) The identity and relationship of every member of the insurance holding company system;
(3) The following agreements in force, and
transactions currently outstanding or [which] that have occurred
during the last calendar year between [such] the insurer and its
affiliates:
(A) Loans, other investments, or purchases, sales, or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;
(B) Purchases, sales, or exchange of assets;
(C) Transactions not in the ordinary course of business;
(D) Guarantees or undertakings for the benefit
of an affiliate [which] that 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;
(E) All management agreements, all service contracts, and all cost-sharing arrangements;
(F) Reinsurance agreements;
(G) Dividends and other distributions to shareholders; and
(H) Consolidated tax allocation agreements;
(4) Any pledge of the insurer's stock,
including stock of any subsidiary or controlling affiliate, for a loan made to
any member of the insurance holding company system; [and]
(5) 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 Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, or the 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 financial statements of the parent corporation that have been filed with the Securities and Exchange Commission;
[(5)] (6)
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[.];
(7) 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; and
(8) Any other information required by the commissioner by rule.
(c) All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.
(d) No information need be disclosed on the registration statement filed pursuant to subsection (b) if the information is not material for the purposes of this section. Unless the commissioner by rule or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one per cent or less of an insurer's admitted assets as of the thirty-first day of December next preceding shall not be deemed material for purposes of this section.
(e) Subject to section 431:11-106(b), each registered insurer shall report to the commissioner all dividends and other distributions to shareholders within fifteen business days following the declaration thereof.
(f) Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, where the information is reasonably necessary to enable the insurer to comply with the provisions of this article.
(g) The
commissioner shall terminate the registration of any insurer [which] that
demonstrates that it no longer is a member of an insurance holding company
system.
(h) The commissioner may require or allow two or more affiliated insurers subject to registration to file a consolidated registration statement.
(i) The
commissioner may allow an insurer [who] that is authorized to do
business in this State and [who] is part of an insurance holding company
system to register on behalf of any affiliated insurer [who] that
is required to register under subsection (a) and to file all information and
material required to be filed under this section.
(j) The provisions of this section shall not apply to any insurer, information, or transaction if and to the extent that the commissioner by rule or order shall exempt the same from the provisions of this section.
(k) Any person
may file with the commissioner a disclaimer of affiliation with any authorized
insurer or a disclaimer may be filed by the insurer or any member of an
insurance holding company system. The disclaimer shall fully disclose all
material relationships and bases for affiliation between the person and the
insurer as well as the basis for disclaiming the affiliation. [After a
disclaimer has been filed, the insurer shall be relieved of any duty to
register or report under this section which may arise out of the insurer's
relationship with the person unless and until the commissioner disallows the
disclaimer. The commissioner shall disallow a disclaimer only after furnishing
all parties in interest with notice and opportunity to be heard and after
making specific findings of fact to support the disallowance.] A
disclaimer of affiliation shall be deemed to have been granted unless the commissioner,
within thirty days following receipt of a complete disclaimer, notifies the
filing party that the disclaimer is disallowed. In the event of disallowance,
the disclaiming party may request an administrative hearing, which shall be
granted. The disclaiming party shall be relieved of its duty to register under
this section if approval of the disclaimer has been granted by the
commissioner, or if the disclaimer is deemed to have been approved.
(l) The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. The report shall, to the best of the ultimate controlling person's knowledge and belief, identify the 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 within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.
[(l)] (m)
The failure to file a registration statement [or], any summary of
the registration statement, or enterprise risk filing, required by this
section within the time specified for [such] the filing shall be
a violation of this section."
SECTION 11. Section 431:11-106, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read as follows:
"(a) (1) Transactions within [a] an
insurance holding company system to which an insurer subject to
registration is a party shall be subject to the following standards:
(A) The terms shall be fair and reasonable;
(B) Agreements for cost sharing services and management shall include provisions as required by rule adopted by the commissioner;
(C) Charges or fees for services performed shall be reasonable;
[(C)] (D) Expenses incurred and
payment received shall be allocated to the insurer in conformity with customary
insurance accounting practices consistently applied;
[(D)] (E) The books, accounts,
and records of each party to all transactions shall be maintained so as to
clearly and accurately disclose the nature and details of the transactions
including the accounting information necessary to support the reasonableness of
the charges or fees to the respective parties; and
[(E)] (F) The insurer's surplus
as regards policyholders following any dividends or distributions to
shareholder affiliates shall be reasonable in relation to the insurer's
outstanding liabilities and adequate to its financial needs;
(2) The following transactions involving a
domestic insurer and any person in its insurance holding company system
[shall], including amendments or modifications of affiliate
agreements previously filed pursuant to this section, which are subject to any
materiality standards found in subparagraphs (A) through (G), shall not be
entered into unless the insurer has notified the commissioner in writing of its
intention to enter into the transaction at least thirty days prior to the
transaction, or a shorter period as the commissioner may permit, and the
commissioner has not disapproved the transaction within that period[:].
The notice for amendments or modifications shall include the reasons for the
change and the financial impact on the domestic insurer. Informal notice shall
be reported within thirty days after a termination of a previously filed
agreement to the commissioner for determination of the type of filing required,
if any.
(A) Sales, purchases, exchanges, loans [or],
extensions of credit, [guarantees,] or investments; provided that the
transactions are equal to or exceed:
(i) With respect to nonlife insurers, the
lesser of three per cent of the insurer's admitted assets or twenty-five per
cent of surplus as regards policyholders [each] as of the thirty-first
day of December next preceding; or
(ii) With respect to life insurers, three per cent of the insurer's admitted assets as of the thirty-first day of December next preceding;
(B) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes the loans or extensions of 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, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit; provided that the transactions are equal to or exceed:
(i) With respect to nonlife insurers, the lesser of three per cent of the insurer's admitted assets or twenty-five per cent of surplus as regards policyholders each as of the thirty-first day of December next preceding; or
(ii) With respect to life insurers, three per cent of the insurer's admitted assets as of the thirty-first day of December next preceding;
(C) Reinsurance agreements or modifications to reinsurance agreements, including:
(i) All reinsurance pooling agreements;
(ii) 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 per cent of the insurer's surplus as regards policyholders, as of the thirty-first day of December next preceding, including those agreements that 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;
(D) All management agreements, service
contracts, tax allocation agreements, guarantees, and all
cost-sharing arrangements; [and]
(E) Guarantees when made by a domestic insurer; provided that a guarantee that is quantifiable as to amount shall not be subject to the notice requirements of this paragraph unless it exceeds the lesser of one-half of one per cent of the insurer's admitted assets or ten per cent of surplus as regards policyholders as of the thirty-first day of December next preceding. All guarantees that are not quantifiable as to amount are subject to the notice requirements of this paragraph;
(F) Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount that, together with its present holdings in such investments, exceeds two and one-half per cent of the insurer's surplus to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to section 431:11-103, or in nonsubsidiary insurance affiliates that are subject to the provisions of this article, are exempt from this requirement; and
[(E)] (G)
Any material transactions, specified by rule, [which] that the
commissioner determines may adversely affect the interests of the insurer's
policyholders.
Nothing in this [section] paragraph
shall be deemed to authorize or permit any transactions [which,] that,
in the case of an insurer not a member of the same insurance holding
company system, would be otherwise contrary to law;
(3) A domestic insurer may not enter into transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would otherwise occur; provided that the commissioner determines that the separate transactions were entered into over any twelve-month period for that purpose, the commissioner may exercise the commissioner's authority under section 431:11-111;
(4) The
commissioner, in reviewing transactions pursuant to [subsection (a)(2),]
paragraph (2), shall consider whether the transactions comply with the
standards set forth in [subsection (a)(1)] paragraph (1) and
whether the transactions may adversely affect the interests of policyholders;
and
(5) The
commissioner shall be notified within thirty days of any investment of the
domestic insurer in any one [person] corporation if the total
investment in the [person] corporation by the insurance holding
company system exceeds ten per cent of the [person's] corporation's
voting securities [or the domestic insurer
possesses control of the person as the term "control" is defined in
section 431:11-102]."
2. By amending subsection (c) to read as follows:
"(c) (1) Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject to by law. The insurer shall be managed so as to assure its separate operating identity consistent with this article.
(2) Nothing [herein] in this
section shall preclude a domestic insurer from having or sharing a common
management or cooperative or joint use of personnel, property, or services with
one or more other persons under arrangements meeting the standards of
subsection (a)(1).
(3) 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 any domestic insurer, shall be persons 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 entity. At least one such person shall be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof.
(4) 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.
(5) Paragraphs (3) and (4) shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of paragraphs (3) and (4) with respect to the controlling entity.
(6) An insurer may make application 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 Federal Flood Program, is less than $300,000,000. An insurer may also make application to the commissioner for a waiver from the requirements of this subsection based upon unique circumstances. The commissioner may consider various factors including, but not limited to, the type of business entity, volume of business written, availability of qualified board members, or the ownership or organizational structure of the entity."
SECTION 12. Section 431:11-107, Hawaii Revised Statutes, is amended to read as follows:
"§431:11-107
Examination. (a) Subject to the limitation contained in this section and
in addition to the powers [which] that the commissioner has under
article 2 relating to the examination of insurers, the commissioner [shall
also have the power to order] may examine any insurer registered
under section 431:11-105 [to produce records, books, or other information
papers in the possession of the insurer or its] and affiliates as
are reasonably necessary to ascertain the financial condition of the insurer or
to determine compliance with this article. In the event the insurer fails to
comply with the order, the commissioner shall have the power to examine the
insurer's affiliates to obtain the information.], 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.
(b) The commissioner may order any insurer registered under section 431:11-105 to:
(1) Produce such records, books, or other information in the possession of the insurer or its affiliates as are reasonably necessary to determine compliance with this article; and
(2) To determine compliance with this article, 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 the 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 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 not less than $100 and not more than $500 for each day's delay, or may suspend or revoke the insurer's license.
[(b)] (c) The commissioner may
retain at the registered insurer's expense 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
(a).] this section. Any persons so retained shall be under the
direction and control of the commissioner and shall act in a purely advisory
capacity.
[(c)] (d)
Each registered insurer producing for examination records, books, and
papers pursuant to [subsection (a)] this section shall be liable
for and shall pay the expense of the examination in accordance with article 2.
(e) In the event the insurer fails to comply with an order, the commissioner may examine the affiliates 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. 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 produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. Every person shall be obliged to attend as a witness at the place specified in the subpoena, when subpoenaed, anywhere within the State. Every person shall be entitled to the same fees and mileage, if claimed, as a witness in a court of record, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses, and their testimony, shall be itemized and charged against, and be paid by, the company being examined."
SECTION 13. Section 431:11-108, Hawaii Revised Statutes, is amended to read as follows:
"§431:11-108
Confidential treatment. [All information, documents, and copies thereof]
(a) Documents, materials, or other information in the possession or control
of the insurance division that are obtained by or disclosed to the
commissioner or any other person in the course of an examination or
investigation made pursuant to section 431:11-107 and all information reported
pursuant to [section] sections 431:11-104(b)(12) and (13),
431:11-105, and [section] 431:11-106, shall be [given]
confidential [treatment,] by law and privileged, shall not be subject
to chapter 92F, shall not be subject to subpoena, and shall not be [made
public by the commissioner, the National Association of Insurance
Commissioners, or any other person, except to insurance departments of other
states, without the prior written consent of the insurer to which it 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
interest of the policyholders, shareholders or the public will be served by the
publication thereof, in which event the commissioner may publish all or any
part thereof in such manner as the commissioner may deem appropriate.] subject
to discovery or admissible in evidence in any private civil action. The
commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the commissioner's
official duties. The commissioner shall not otherwise make the documents,
materials, or other information public as may be deemed appropriate.
(b) Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner or with whom the documents, materials, or other information are shared pursuant to this article shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).
(c) To assist in the performance of the commissioner's duties, the commissioner:
(1) May share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a), with other state, federal, and international regulatory agencies, with the 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 431:11-107.1; provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information, and has verified in writing the legal authority to maintain confidentiality;
(2) Notwithstanding paragraph (1) to the contrary, the commissioner may only share confidential and privileged documents, material, or information reported pursuant to section 431:11-105(l) with commissioners of states having statutes or regulations substantially similar to subsection (a) and who have agreed in writing not to disclose such information;
(3) May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or 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 document, material, 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; and
(4) Shall enter into written agreements with the National Association of Insurance Commissioners governing sharing and use of information provided pursuant to article 11 and consistent with this subsection that shall:
(A) Specify 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 article, including procedures and protocols for sharing by the National Association of Insurance Commissioners with other state, federal, or international regulators;
(B) Specify that ownership of information shared with the National Association of Insurance Commissioners and its affiliates and subsidiaries pursuant to article 11 remains with and for the use by the commissioner and the National Association of Insurance Commissioners' and is subject to the direction of the commissioner;
(C) Require that prompt notice be given to an insurer whose confidential information is in the possession of the National Association of Insurance Commissioners pursuant to article 11 and require that the insurer is subject to a request or subpoena from the National Association of Insurance Commissioners for disclosure or production; and
(D) Require 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 shared pursuant to this article.
(d) The sharing of information by the commissioner pursuant to this article shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner shall be solely responsible for the administration, execution, and enforcement of the provisions of article 11.
(e) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (c).
(f) Documents, materials, or information in the possession or control of the National Association of Insurance Commissioners pursuant to this article shall be confidential by law and privileged, shall not be subject to chapter 92F, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action."
SECTION 14. Section 431:11-111, Hawaii Revised Statutes, is amended to read as follows:
"§431:11-111
Sanctions. (a) Any insurer failing, without just cause, to
file any registration statement as required in this article shall be [liable
for] required, after notice and hearing, to pay a fine in an amount
of not less than $100 and not more than $500 for each [day of delinquency,]
day's delay, to be recovered by the commissioner, and the penalty so
recovered shall be paid into the compliance
resolution fund. The commissioner may reduce the penalty if the insurer
demonstrates to the commissioner that the imposition of the penalty would
constitute a financial hardship to the insurer.
(b) Every
director or officer of an insurance holding company system who knowingly
violates, participates in, or assents to, or who knowingly permits any of the
officers or agents of the insurer to engage in any transactions or make
investments that have not been properly reported or submitted pursuant to [sections]
section 431:11-105(a), 431:11-106(a)(2), or 431:11-106(b), or [who]
that violates this article, shall [be subject to a fine] pay,
in their individual capacity, a civil forfeiture of not less than $100 and
not more than $10,000 per violation[.], after notice and hearing
before the commissioner. In determining the amount of the [fine,] civil
forfeiture, the commissioner shall take into account the appropriateness of
the [fine] civil forfeiture with respect to the gravity of the
violation, the history of previous violations, and [such] other matters
as justice may require.
(c) Whenever it
appears to the commissioner that any insurer subject to this article or any
director, officer, employee, or agent thereof has engaged in any transaction or
entered into a contract [which] that is subject to section
431:11-106 and [which] that would not have been approved had the
approval been requested, the commissioner may order the insurer to cease and
desist immediately any further activity under that transaction or contract. After
notice and hearing, the commissioner may also order the insurer to void any of
the contracts and restore the status quo if that action is in the best interest
of the policyholders, creditors, or the public.
(d) Whenever it
appears to the commissioner that any insurer or any director, officer,
employee, or agent thereof has committed a wilful violation of this article,
the commissioner may cause criminal proceedings to be instituted against the
insurer or the responsible director, officer, employee, or agent thereof. Any
insurer [who] that wilfully violates this article [shall be
subject to a fine of] may be fined not less than $100 and not more than
$10,000 per violation. Any individual who wilfully violates this article [shall
be subject to a fine in the individual's capacity of] may be fined in
the person's individual capacity not less than $100 and not more than
$10,000 per violation[,] or be imprisoned for not more than one year[.],
or both.
(e) Any
officer, director, or employee of an insurance holding company system who
wilfully 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
article, upon conviction thereof, shall be imprisoned for not more than one
year[,] or fined $5,000, or both. Any fines imposed shall be paid by
the officer, director, or employee in the person's individual capacity.
(f) Whenever it appears to the commissioner that any person has committed a violation of section 431:11-104 and that prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding 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 part 2 of article 15."
SECTION 15. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 16. This Act, upon its approval, shall take effect on July 1, 2014; provided that part I of this Act shall take effect on January 1, 2015.
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INTRODUCED BY: |
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BY REQUEST |
Report Title:
Insurance
Description:
Adopts revisions to the National Association of Insurance Commissioners' model laws on Credit for Reinsurance Model Act, Standard Valuation Law, Standard Nonforfeiture for Life Insurance, and Insurance Holding Company System Regulatory Act.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
