TITLE 24.  INSURANCE

 

Chapter

   431 Insurance Code

  431A Readability of Insurance Contracts--Repealed

  431C Life Settlements

  431D Insurance Company Insolvency--Repealed

  431E Life Settlements--Repealed

  431F Hawaii Life and Disability Insurance Guaranty

       Association Act--Repealed

  431H Insurance Information Protection Act--Repealed

  431J Captive Insurance Companies--Repealed

  431K Risk Retention

  431L Medicaid-Related Mandates

  431M Mental Health and Alcohol and Substance Use Disorder

       Treatment Insurance Benefits

  431N State Health Insurance Program Act

  431P Hawaii Hurricane Relief Fund

  431R Prescription Drug Benefits

   432 Benefit Societies

  432C Nonprofit Entities; Conversion of Assets

  432D Health Maintenance Organization Act

  432E Patients' Bill of Rights and Responsibilities Act

  432F Health Care Provider Network Adequacy

  432G Dental Insurers

   433 Mutual and Fraternal Benefit Societies--Repealed

   434 Insurance by Fraternal Benefit Societies--Repealed

   435 Credit Life Insurance and Credit Disability

       Insurance--Repealed

  435C Hawaii Medical Malpractice Underwriting Plan

  435E Physicians and Surgeons Cooperative Indemnity

  435H Hawaii Health Insurance Exchange--Repealed

 

Cross References

 

  For disposition of repealed provisions, see Insurance Law Revision reference table (1987) at end of chapter 435.

  Service contracts, see chapter 481X.

 

CHAPTER 431 [OLD]

THE HAWAII INSURANCE LAW

 

     REPEALED.  L 1987, c 347, §1.

 

Cross References

 

  For disposition of repealed provisions, see Insurance Law Revision reference table (1987) at end of chapter 435.

 

CHAPTER 431

INSURANCE CODE

 

ARTICLE 1.  DEFINITIONS

 

        Part I.  General Provisions

Section

    431:1-100 Short title

  431:1-100.5 Purpose

    431:1-101 Compliance required

    431:1-102 Public interest

    431:1-103 Headings

    431:1-104 Particular provisions prevail

    431:1-105 Records, statements and reports

 

        Part II.  General Definitions

    431:1-201 Insurance defined

    431:1-202 Insurer defined

    431:1-203 Classes of insurance

    431:1-204 Life insurance defined

    431:1-205 Accident and health or sickness insurance defined

    431:1-206 Property insurance defined

    431:1-207 Marine and transportation insurance defined

    431:1-208 Vehicle insurance defined

    431:1-209 General casualty insurance defined

    431:1-210 Surety insurance defined

    431:1-211 Ocean marine insurance defined

    431:1-212 Person defined

    431:1-213 State defined

    431:1-214 United States defined

    431:1-215 Transaction of an insurance business

    431:1-216 General business practice

    431:1-217 Insurance policies issued to construction

              professionals

 

ARTICLE 2.  ADMINISTRATION OF INSURANCE LAWS

 

        Part I.  Insurance Division

     431:2-101 Insurance division

     431:2-102 Insurance commissioner

     431:2-103 Salary

     431:2-104 Seal

     431:2-105 Deputies, employees

   431:2-105.5 Staff

     431:2-106 Ethical requirements for insurance division staff

     431:2-107 Workers' compensation rate analysis

     431:2-108 Commissioner may delegate

     431:2-109 Supplies, convention blanks

     431:2-110 Offices

 

         Part II.  Powers and Duties of Commissioner

     431:2-201 General powers and duties

   431:2-201.2 Standards for commissioner

   431:2-201.3 Criminal convictions; consent to engage

               in business

   431:2-201.5 Conformity to federal law

   431:2-201.8 Sales to members of the armed forces

     431:2-202 Orders and notices

   431:2-202.5 Approval; when deemed effective

     431:2-203 Enforcement

     431:2-204 Commissioner's power to subpoena

     431:2-205 Commissioner to receive service of legal process

               on foreign or alien insurer

     431:2-206 How service on commissioner made

     431:2-207 Contempt proceedings

     431:2-208 Access to records

     431:2-209 Records and reports

     431:2-210 Copies and certificates as evidence

     431:2-211 Annual report

     431:2-212 Interstate cooperation

     431:2-214 The commissioner's education and training fund

     431:2-215 Deposits to compliance resolution fund

     431:2-216 Assessments of health insurers

 

         Part III.  Investigations, Examinations, Hearings

                    and Appeals

     431:2-301 Purpose

   431:2-301.5 Examiner defined

   431:2-301.6 Conflict of interest

   431:2-301.7 Conduct of examinations

   431:2-301.8 Immunity from liability

     431:2-302 Authority, scope, and scheduling of examinations

     431:2-303 Examination of producers, adjusters, promoters,

               and independent bill reviewers

     431:2-304 Examination of guaranty associations

     431:2-305 Examination reports

     431:2-306 Examination expense

     431:2-307 Repealed

   431:2-307.5 Reimbursement and compensation of examiners;

               source of funds; disposition of receipts

     431:2-308 Administrative procedure act applies

 

          Part IV.  Insurance Fraud

     431:2-401 Definitions

     431:2-402 Insurance fraud investigations branch

     431:2-403 Insurance fraud

     431:2-404 Restitution

     431:2-405 Insurance fraud; administrative penalties

     431:2-406 Administrative procedures

     431:2-407 Acceptance of payment

     431:2-408 Civil cause of action for insurance fraud;

               exemption

     431:2-409 Mandatory reporting

     431:2-410 Deposit into the compliance resolution fund

    

ARTICLE 2D.  MARKET CONDUCT

 

    431:2D-101 Legislative intent

    431:2D-102 Definitions

    431:2D-103 Domestic responsibility and deference to other

               states

    431:2D-104 Market analysis procedures

    431:2D-105 Protocols for market conduct actions

    431:2D-106 Protocols for market conduct examinations

    431:2D-107 Confidentiality requirements

    431:2D-108 Market conduct surveillance personnel

    431:2D-109 Immunity for market conduct surveillance

               personnel

    431:2D-110 Fines and penalties

    431:2D-111 Data collection and participation in national

               market conduct databases

    431:2D-112 Coordination with other states through the

               National Association of Insurance Commissioners

    431:2D-113 Additional duties of the commissioner

    431:2D-114 Data calls

 

ARTICLE 3.  INSURERS GENERAL REQUIREMENTS

 

         Part I.  Definitions

     431:3-101 Alien insurer

     431:3-102 Capital funds

     431:3-103 Charter

     431:3-104 Domestic insurer

     431:3-105 Foreign insurer

     431:3-106 Mutual insurer

     431:3-107 Reciprocal insurance

     431:3-108 Reciprocal insurer

     431:3-109 Reinsurance

     431:3-110 Stock insurer

 

         Part II.  Certificate of Authority

     431:3-201 Authority required

     431:3-202 Insurer's name

     431:3-203 Qualifications for authority

   431:3-203.5 Foreign insurer; certification

     431:3-204 Classes of insurance authorized

     431:3-205 Funds required of new insurers

     431:3-206 Additional funds required, new insurers

     431:3-207 Noncompliance as to capital stock and surplus

               permitted certain insurers for five years

     431:3-208 Funds required of existing and new insurers for

               transacting additional classes of insurance

     431:3-209 Deposits of alien and foreign insurers; special

               deposits

     431:3-210 Determination of capital funds of alien insurer

     431:3-211 Repealed

     431:3-212 Application for authority

   431:3-212.5 Redomestication of authorized insurers

     431:3-213 Authority issued or denied

     431:3-214 Extension; amendment

     431:3-215 Withdrawal from State; obligations

     431:3-216 Mandatory refusal, suspension or revocation

               provisions

     431:3-217 Discretionary refusal, suspension or revocation

               provisions

     431:3-218 Procedure upon revocation; suspension of

               certificate of authority

     431:3-219 Suspension period; revocation

     431:3-220 Revival

     431:3-221 Power to fine

 

         Part III.  Annual Requirements and Limiting Provisions

     431:3-301 Annual and quarterly filings with commissioner

     431:3-302 Annual and quarterly filings with the National

               Association of Insurance Commissioners

   431:3-302.5 Annual audit

     431:3-303 Immunity

     431:3-304 Confidentiality

   431:3-304.5 Statement of actuarial opinion; property

               and casualty insurance; confidentiality

     431:3-305 Accounts; records

     431:3-306 Limit of risk

   431:3-306.5 Residential hurricane coverage

     431:3-307 Free insurance

     431:3-308 Alien government owned insurers

     431:3-309 Disclosure of profits by insurers

 

         Part IV.  Risk-Based Capital for Insurers

     431:3-401 Definitions

     431:3-402 Risk-based capital reports

     431:3-403 Company action level event

     431:3-404 Regulatory action level event

     431:3-405 Authorized control level event

     431:3-406 Mandatory control level event

     431:3-407 Hearing

     431:3-408 Confidentiality and prohibition on announcements;

               prohibition on use in ratemaking

     431:3-409 Supplemental provisions; rules; exceptions

     431:3-410 Foreign insurers

     431:3-411 Severability

     431:3-412 Notices

     431:3-413 Phase-in provision

     431:3-414 Immunity

 

ARTICLE 3A.  PRIVACY OF CONSUMER FINANCIAL INFORMATION

 

         Part I.  General Provisions

    431:3A-101 Purpose; scope; applicability

    431:3A-102 Definitions

 

         Part II.  Privacy and Opt Out Notices for Financial

                   Information

    431:3A-201 Initial privacy notice to consumers required

    431:3A-202 Annual privacy notice to customers required

    431:3A-203 Information to be included in privacy notices

    431:3A-204 Form of opt out notice to consumers and opt out

               methods

    431:3A-205 Revised privacy notices

    431:3A-206 Delivery

 

        Part III.  Limits on Disclosures of Financial

                   Information

    431:3A-301 Limits on disclosure of nonpublic personal

               financial information to nonaffiliated third

               parties

    431:3A-302 Limits on redisclosure and reuse of nonpublic

               personal financial information

    431:3A-303 Limits on sharing account number information for

               marketing purposes

 

         Part IV.  Exceptions to Limits on Disclosures of

                   Financial Information

    431:3A-401 Exception to opt out requirements for disclosure

               of nonpublic personal financial information for

               service providers and for joint marketing

    431:3A-402 Exceptions to notice and opt out requirements

               for disclosure of nonpublic personal financial

               information for processing and servicing

               transactions

    431:3A-403 Other exceptions to notice and opt out

               requirements for disclosure of nonpublic

               personal financial information

 

         Part V.  Additional Provisions

    431:3A-501 Protection of Fair Credit Reporting Act

    431:3A-502 Nondiscrimination

    431:3A-503 Violation

    431:3A-504 Rules

 

ARTICLE 3D.  RISK MANAGEMENT AND OWN RISK

AND SOLVENCY ASSESSMENT

 

     431:3D-101 Scope and purpose

     431:3D-102 Definitions

     431:3D-103 Risk management framework

     431:3D-104 Own risk and solvency assessment requirement

     431:3D-105 Own risk and solvency assessment summary report

     431:3D-106 Exemption

     431:3D-107 Contents of own risk and solvency assessment

                summary report

     431:3D-108 Confidentiality

     431:3D-109 Sanctions

     431:3D-110 Severability

 

ARTICLE 4.  DOMESTIC INSURERS

 

         Part I.  Organization, Powers and Sale of Securities

                  of Domestic Insurers

     431:4-101 Definitions

     431:4-102 Types of insurers permitted

     431:4-103 Corporation law applies in general

     431:4-104 Articles of incorporation

     431:4-105 Affidavit

     431:4-106 Board of directors

   431:4-106.5 Membership in mutual or subscriber in

               reciprocal insurers; no personal liability

               of representative

     431:4-107 Solicitation permit required

     431:4-108 Application for a solicitation permit

     431:4-109 Permit issued or denied

     431:4-110 Bond or cash deposit

     431:4-111 Expiration and contents

     431:4-112 Permit not an inducement

     431:4-113 Organization solicitor's license

     431:4-114 Revocation of solicitation permit

     431:4-115 Escrow of funds

     431:4-116 Expense pending completion

     431:4-117 Issuance and forfeiture of securities

     431:4-118 Insurance application

     431:4-119 Refund upon failure to complete or qualify or

               upon revocation of solicitation permit

     431:4-120 Subsequent financing

     431:4-121 False exhibits

     431:4-122 Depositaries

     431:4-123 Corrupt practices

     431:4-124 Prohibited guaranty

     431:4-125 Fees on use of funds

     431:4-126 Comply with foreign laws

     431:4-127 Solicitation in other states

 

         Part II.  Domestic Stock Insurers

     431:4-201 Other laws applicable

     431:4-202 Increase of capital

     431:4-203 Decrease of capital

     431:4-204 Dividends to stockholders

     431:4-205 Illegal dividends; reductions

     431:4-206 Repayment of contributed surplus

     431:4-207 Participating policies

     431:4-208 Statement by beneficial owner, director,

               officer

     431:4-209 Recovery of profits realized

     431:4-210 Unlawful sales of equity security

     431:4-211 Exempt transactions

     431:4-212 Arbitrage transactions not affected

     431:4-213 Exempt equity securities

     431:4-214 Rules and regulations

 

         Part IIA.  Proxies, Consents, and Authorizations

                    of Domestic Stock Insurers

     431:4-231 Applicability

     431:4-232 Schedule A:  information required in a

               proxy statement

     431:4-233 Schedule B:  information to be included in

               statements filed by or on behalf of a

               participant other than an insurer in a

               proxy solicitation in an election contest

     431:4-234 Proxies, consents, and authorizations

     431:4-235 Schedules and exhibits

     431:4-236 Disclosure of equivalent information

     431:4-237 Definitions

     431:4-238 Information to be furnished to stockholders

     431:4-239 Requirements as to proxy

     431:4-240 Material required to be filed

     431:4-241 False or misleading statements

     431:4-242 Prohibition of certain solicitations

     431:4-243 Election contests; applicability

     431:4-244 Filing of information required by schedule B

     431:4-245 Solicitations prior to furnishing required

               written proxy statement

     431:4-246 Solicitation prior to furnishing required

               written proxy statement; filing requirements

     431:4-247 Application of this part to annual report

 

         Part III.  Domestic Mutual Insurers

     431:4-301 Other articles applicable

     431:4-302 Initial qualifications for mutual insurers

     431:4-303 Mutual property insurer

     431:4-304 Mutual casualty insurer

     431:4-305 Mutual vehicle insurer

     431:4-306 Mutual life insurer

     431:4-307 Mutual accident and health or sickness insurer

     431:4-308 Membership

     431:4-309 Rights of members

     431:4-310 Bylaws

     431:4-311 Notice of annual meeting

     431:4-312 Members proxies

     431:4-313 Directors

     431:4-314 Limitation on expenses incurred in writing

               property and casualty

     431:4-315 Violation of expense limitation

     431:4-316 Actions on officers' salaries

     431:4-317 Contingent liability of members

     431:4-318 Accrual of liability

     431:4-319 Contingent liability as asset

     431:4-320 Lien on reserves

     431:4-321 Nonassessable policies

     431:4-322 Applies to all policies

     431:4-323 Revocation of authority

     431:4-324 Dividends

     431:4-325 Nonparticipating policies

     431:4-326 Members' share of assets

 

         Part IV.  Reciprocal Insurers

     431:4-401 Application of other sections

     431:4-402 Scope

     431:4-403 Insuring powers of reciprocals

     431:4-404 Suits

     431:4-405 Attorney

     431:4-406 Power of attorney

     431:4-407 Modifications

     431:4-408 Organization of reciprocal insurers

     431:4-409 Application for authority; declaration required

     431:4-410 Policies effective

     431:4-411 Attorney's bond

     431:4-412 Deposit in lieu

     431:4-413 Actions on bond

     431:4-414 Subscribers

     431:4-415 Subscribers' advisory committee

     431:4-416 Subscriber's liability

     431:4-417 Subscriber's liability on judgments

     431:4-418 Aggregate liability

     431:4-419 Assessment

     431:4-420 Time limit for assessment

     431:4-421 Nonassessable policies

     431:4-422 Contributions of surplus

     431:4-423 Share in savings

     431:4-424 Subscriber's share of assets

     431:4-425 Repealed

 

         Part V.  Reorganization and Conversion of Domestic

                  Insurers

     431:4-501 Reorganization, merger or consolidation

     431:4-502 Mutualization of stock insurers

     431:4-503 Conversion or reinsurance of mutual insurer

     431:4-504 Merger or conversion of reciprocal insurer

 

ARTICLE 4A.  CREDIT FOR REINSURANCE

 

    431:4A-101 Credit allowed a domestic ceding insurer

    431:4A-102 Asset or reduction from liability for

               reinsurance ceded by a domestic insurer to

               an assuming insurer

    431:4A-103 Qualified United States financial institutions

    431:4A-104 Rules

    431:4A-105 Repealed

 

ARTICLE 4F.  STATE OF ENTRY FOR ALIEN INSURERS

 

    431:4F-101 Definitions

    431:4F-102 Scope

    431:4F-103 Authorization of entry

    431:4F-104 Maintenance of trust account

    431:4F-105 Requirements for trust agreement

    431:4F-106 Reporting requirements for United States

               branches of alien insurers

    431:4F-107 Additional requirements for United States

               branch license

    431:4F-108 Authority of commissioner

 

ARTICLE 5.  FINANCIAL CONDITION

 

         Part I.  Standards

     431:5-101 Impairment of capital

     431:5-102 Impairment of surplus

     431:5-103 Impairment of reciprocal's surplus

 

         Part II.  Assets and Liabilities

     431:5-201 Qualified assets

     431:5-202 Assets not allowed

     431:5-203 Liabilities

     431:5-204 Determining financial condition of reciprocal

               insurers

 

         Part III.  Reserves and Valuation

     431:5-301 Unearned premium reserve

     431:5-302 Unearned premium reserve for marine and

               transportation

     431:5-303 Active life reserves and unearned premium

               reserves for noncancellable disability

               insurance

     431:5-304 Loss reserves for liability and workers'

               compensation insurance

     431:5-305 Increased reserves

     431:5-306 Reserve credit for reinsurance

     431:5-307 Standard valuation law; life

     431:5-308 Valuation of bonds

     431:5-309 Valuation of other securities

     431:5-310 Valuation of property

     431:5-311 Valuation of purchase money mortgages

 

         Part IV.  Rules

     431:5-401 Rules

 

ARTICLE 6.  INVESTMENTS

 

         Part I.  General Provisions

     431:6-101 Definitions pertaining to investments

     431:6-102 Merged, reorganized institutions

     431:6-103 Eligible investments; scope

     431:6-104 General qualifications

     431:6-105 General limitations

     431:6-106 Record of investments

 

         Part II.  Mandatory Provisions

     431:6-201 Required investments for capital and reserves

 

         Part III.  Permitted Investments

     431:6-301 Public obligations

     431:6-302 Corporate obligations

     431:6-303 Preferred or guaranteed stocks or shares

     431:6-304 Trustees or receivers obligations

     431:6-305 Equipment trust obligations

     431:6-306 Mortgage loans and contracts

     431:6-307 Mortgage loan limited by property value

     431:6-308 Encumbrance defined

     431:6-309 Appraisal; insurance; limit

     431:6-310 Security agreements

     431:6-311 Real property owned

     431:6-312 Time limit for disposal

     431:6-313 Foreign securities

     431:6-314 Policy loans

     431:6-315 Banks, savings and loan associations, credit

               unions, and financial services loan companies

     431:6-316 Insurance stocks

     431:6-317 Common stocks

     431:6-318 Collateral loans

     431:6-319 Miscellaneous investments

     431:6-320 Special consent investments

     431:6-321 Hedging transactions

     431:6-322 Common trust funds; mutual funds; and exchange

               traded funds

     431:6-323 Separate accounts

     431:6-324 Subsidiaries

 

         Part IV.  Prohibited Investments and Limitations

     431:6-401 Prohibited investments

     431:6-402 Securities underwriting; agreements to

               withhold or to repurchase

     431:6-403 Disposal of ineligible property and securities

     431:6-404 Authorization of investments

 

         Part V.  Investment of Foreign and Alien Insurers

     431:6-501 Investments of foreign, alien insurers

 

         Part VI.  Investment Pools

     431:6-601 Insurer investment pools

     431:6-602 Securities lending, repurchase, reverse

               repurchase, and dollar roll; investment pools

 

ARTICLE 7.  FEES, TAXES AND DEPOSITS

 

         Part I.  Fees

     431:7-101 Fees

 

         Part II.  Taxes

     431:7-201 Annual and monthly tax statements

     431:7-202 Taxation

   431:7-202.5 Additions to taxes for noncompliance or

               evasion; interest on underpayments and

               overpayments

     431:7-203 Administrative refunds

     431:7-204 In lieu provision

   431:7-204.5 Appeals

   431:7-204.6 Limitation period for assessment, levy,

               collection, or refund

     431:7-205 Reports to department of taxation

     431:7-206 Domestic company credit for retaliatory taxes

               paid other states

     431:7-207 Tax credit to facilitate regulatory oversight

     431:7-208 Low-income housing, insurance premium

               tax credit

     431:7-209 High technology business investment tax credit

 

         Part III.  Deposits

     431:7-301 Deposits of insurers

     431:7-302 Purpose of deposit

     431:7-303 Securities eligible for deposit

     431:7-304 Record and receipt

     431:7-305 Transfer of securities

     431:7-306 Director may designate depositary

     431:7-307 Responsibility for deposits

     431:7-308 Dividends and substitutions

     431:7-309 Release of deposit

     431:7-310 Voluntary excess deposit

     431:7-311 Not subject to levy

 

ARTICLE 8.  UNAUTHORIZED INSURERS AND SURPLUS LINES

 

         Part I.  General Provisions

     431:8-101 Scope

     431:8-102 Definitions

 

         Part II.  Unauthorized Insurers

     431:8-201 Transacting insurance business without

               certificate of authority prohibited

     431:8-202 Acting for or aiding unauthorized insurer

               prohibited

     431:8-203 Validity of contracts illegally effectuated

     431:8-204 Liability of person assisting unauthorized

               insurer

     431:8-205 Insurance independently procured; duty to

               report and pay tax

     431:8-206 Commissioner may enjoin unauthorized insurers

     431:8-207 Legal process against unauthorized insurer; how

               service of process made

     431:8-208 Defense of action by unauthorized insurer; bond

     431:8-209 Attorney's fees

     431:8-210 Advertising prohibited

     431:8-211 Penalties

 

         Part III.  Surplus Lines Insurance

     431:8-300 Exemptions from surplus lines law

     431:8-301 Insurance placed with unauthorized insurer

               permitted

     431:8-302 Surplus lines insurers

    431:8-303, 304 Repealed

     431:8-305 Evidence of insurance; changes; penalties

     431:8-306 Signature of broker and special endorsement of

               surplus lines policy

     431:8-307 Broker's duty to notify insured

     431:8-308 Surplus lines insurance valid

     431:8-309 Effect of payment to surplus lines broker

     431:8-310 Surplus lines broker license required;

               application and qualifications for license

     431:8-311 Compensation

     431:8-312 Records of surplus lines broker

     431:8-313 Surplus lines broker's reports to commissioner

     431:8-314 Surplus lines advisory organizations

     431:8-315 Tax on surplus lines

     431:8-316 Penalty for failure to file statement or remit

               tax

     431:8-317 License denial, nonrenewal, suspension, or

               revocation

     431:8-318 Examination of surplus lines broker's

               accounts and records

     431:8-319 Actions against surplus lines insurer;

               service of process

     431:8-320 Penalties

     431:8-321 Nonresident licensing

     431:8-322 Reciprocity

     431:8-323 Exemption from examination

     431:8-324 Surplus lines broker license examination

     431:8-325 Scope of examination

     431:8-326 Time of examinations

     431:8-327 Prerequisites for license renewal

     431:8-328 Continuing education recordkeeping

     431:8-329 Commissioner's authority to grant waiver

 

ARTICLE 9.  LICENSING OF ADJUSTERS AND BILL REVIEWERS

 

         Part I.  General Provisions

     431:9-101 Scope

     431:9-102 to 104 Repealed

     431:9-105 Definitions

 

         Part II.  Licensing Requirements, Procedures and

                   Enforcement

     431:9-201 License required; exception

     431:9-202 Repealed

     431:9-203 General qualifications for license

     431:9-204 Applications for license

     431:9-205 Repealed

     431:9-206 Examinations for license

     431:9-207 Scope of examination

     431:9-208 Time of examinations

     431:9-209 Advisory board

     431:9-210 to 221 Repealed

     431:9-222 Qualification for adjuster's license

   431:9-222.5 Claims adjusters; limited license

     431:9-223 Public adjuster's bond

     431:9-224 Separate licenses

     431:9-225 Form of adjusters' license

     431:9-226 Powers conferred by an adjuster's license

     431:9-227 Adjuster; restrictions

     431:9-228 Place of business

     431:9-229 Records of adjuster or independent bill reviewer

     431:9-230 Reporting and accounting for premiums

     431:9-231 Repealed

     431:9-232 Extension of licenses

    431:9-233, 234 Repealed

   431:9-234.5 Reporting of actions

     431:9-235 Denial, suspension, revocation of licenses

   431:9-235.5 Suspension or denial of license for noncompliance

               with support order

     431:9-236 Repealed

     431:9-237 Duration of suspension

     431:9-238 Power to fine

     431:9-239 Reinstatement or relicensing

     431:9-240 Fine in lieu

     431:9-241 Repealed

     431:9-242 Compensation by contingency fee prohibited

     431:9-243 Qualification for independent bill reviewer's

               License

 

          Part III.  Continuing Education--Repealed

     431:9-301 to 305 Repealed

 

ARTICLE 9A.  [OLD] MANAGING GENERAL AGENTS--REPEALED

 

    431:9A-101 to 108 Repealed

 

ARTICLE 9A.  PRODUCER LICENSING

 

          Part I.  General Provisions

    431:9A-101 Scope

    431:9A-102 Definitions

    431:9A-103 License required

    431:9A-104 Exceptions to licensing

    431:9A-105 Insurance producer license examination

    431:9A-106 Application for license

    431:9A-107 License

  431:9A-107.5 Limited license

    431:9A-108 Nonresident licensing

  431:9A-108.5 Process against nonresident licensees

    431:9A-109 Exemption from examination

    431:9A-110 Legal, trade, and assumed names

    431:9A-111 Temporary licensing

    431:9A-112 License denial, nonrenewal, suspension, or

               revocation

  431:9A-112.3 Suspension or denial of license for noncompliance

               with support order

  431:9A-112.5 Controlled business

    431:9A-113 Commissions

    431:9A-114 Appointments

    431:9A-115 Notification to commissioner of termination

    431:9A-116 Reciprocity

    431:9A-117 Reporting of actions

    431:9A-118 Rules

    431:9A-119 Scope of examination

    431:9A-120 Time of examinations

    431:9A-121 Advisory board

    431:9A-122 Place of business

    431:9A-123 Records of insurance producer

  431:9A-123.5 Reporting and accounting for premiums

    431:9A-124 Prerequisites for license renewal

    431:9A-125 Continuing education recordkeeping

    431:9A-126 Power to fine

    431:9A-127 Fine in lieu

    431:9A-128 Nondiscrimination

    431:9A-129 Penalty

    431:9A-130 Commissioner's authority to grant waiver

 

          Part II.  Limited Lines Motor Vehicle Rental Company

                    Producer

    431:9A-141 Definitions

    431:9A-142 Requirements for license and renewal

 

         Part III.  Continuing Education Course Providers

    431:9A-151 Continuing education course provider certificate

    431:9A-152 Continuing education course provider additional duties

    431:9A-153 Courses

    431:9A-154 Self-study courses

    431:9A-155 Carryover credits

    431:9A-156 Course instructors

    431:9A-157 Tuition

    431:9A-158 Reporting credit hours and recordkeeping

    431:9A-159 Advertising

    431:9A-160 Advisory committee

 

ARTICLE 9B.  REINSURANCE INTERMEDIARY

 

    431:9B-101 Definitions

    431:9B-102 Licensure

    431:9B-103 Required contract provisions; reinsurance

               intermediary-brokers

    431:9B-104 Books and records; reinsurance

               intermediary-brokers

    431:9B-105 Duties of insurers utilizing the services of

               a reinsurance intermediary-broker

    431:9B-106 Required contract provisions; reinsurance

               intermediary-managers

    431:9B-107 Prohibited acts

    431:9B-108 Duties of reinsurers utilizing the services of

               a reinsurance intermediary-manager

    431:9B-109 Examination authority

    431:9B-110 Penalties and liabilities

    431:9B-111 Rules

 

ARTICLE 9C.  MANAGING GENERAL AGENTS

 

    431:9C-101 Definitions

    431:9C-102 Licensure

    431:9C-103 Required contract provisions

    431:9C-104 Duties of insurers

    431:9C-105 Examination authority

    431:9C-106 Penalties and liabilities

    431:9C-107 Rules

 

ARTICLE 9N.  BAIL AGENTS; SURETIES

 

    431:9N-101 Definitions

    431:9N-102 License denial, nonrenewal, suspension, or

               revocation

    431:9N-103 Fiduciary responsibilities

    431:9N-104 Bail agent not to act as attorney

 

ARTICLE 10.  INSURANCE CONTRACTS GENERALLY

 

         Part I.  Readability of Insurance Contracts

    431:10-101 Scope; effective dates

    431:10-102 Definitions

    431:10-103 Exemptions of certain contracts

    431:10-104 General readability requirements

    431:10-105 Required reading test; authorization and

               availability

    431:10-106 Flesch reading ease test; procedures

    431:10-107 Filing of certificate

    431:10-108 Flesch reading ease score; lower score

               authorized; when

    431:10-109 Disclosure of health care coverage and benefits

 

         Part II.  General Rules

    431:10-201 Scope

    431:10-202 Definitions

    431:10-203 Power to contract

    431:10-204 Insurable interest required; personal insurances

    431:10-205 Interest of the insured

    431:10-206 Application for insurance:  consent of insured

               required

    431:10-207 Alteration of application

    431:10-208 Limitations on use of application as evidence

    431:10-209 Warranties, misrepresentations in applications

    431:10-210 Standard form fire insurance policy

    431:10-211 Content of policies in general

  431:10-211.3 Commercial general liability extended reporting

               requirements

  431:10-211.5 Premium waiver provisions; restrictions

    431:10-212 Contract limitations for handicapped children

               and children with intellectual disabilities

    431:10-213 Repealed

    431:10-214 Right to return policy

    431:10-215 Readjustment of premiums; dividends

    431:10-216 Additional contents

    431:10-217 Charter, bylaw provisions

  431:10-217.5 Policies relating to domestic abuse cases

    431:10-218 Stated premium must include all charges

    431:10-219 Multi-peril policies, premiums stated separately

    431:10-220 Policy must contain entire contract

    431:10-221 Prohibited policy provisions:  limiting actions

               and jurisdictions

    431:10-222 Construction industry; indemnity agreements

               invalid

  431:10-222.5 Pooled insurance

    431:10-223 Underwriters and combination policies

    431:10-224 Execution of policies

    431:10-225 Delivery of policy

    431:10-226 Renewal of policy; new policy not required

  431:10-226.5 Notice of cancellation or nonrenewal

    431:10-227 Retroactive annulment of liability policies

               prohibited

    431:10-228 Assignment of policies

    431:10-229 Dividends payable to the real party

    431:10-230 Payment discharges insurer

    431:10-231 Exemption of proceeds; accident and health or

               sickness

    431:10-232 Exemption of proceeds; life, endowment and

               annuity

    431:10-233 Exemption of proceeds; group life

    431:10-234 Spouses' and reciprocal beneficiaries' right in

               life insurance policy

    431:10-235 Forms for proof of loss furnished

    431:10-236 Claim administration not waiver

    431:10-237 Construction of policies

    431:10-238 Validity of noncomplying forms

    431:10-239 Intervening breach

    431:10-240 Insurance contracts; punitive damages

    431:10-241 Venue in certain actions

    431:10-242 Policyholder and other suits against insurer

    431:10-243 Interest upon proceeds of life insurance policies

    431:10-244 Filing procedure for contracts approved by

               commissioner

 

ARTICLE 10A.  ACCIDENT AND HEALTH OR SICKNESS

INSURANCE CONTRACTS

 

         Part I.  Individual Accident and Health or Sickness

                  Policies

   431:10A-101 Applications and exceptions

   431:10A-102 Accident and health or sickness insurance policy

               Defined

 431:10A-102.5 Limited benefit health insurance

   431:10A-103 Family coverage defined

   431:10A-104 Form of policy

   431:10A-105 Required provisions

 431:10A‑105.5 Federal law compliance

 431:10A-105.6 Prohibition on rescissions of coverage

   431:10A-106 Optional provisions

   431:10A-107 Inapplicable or inconsistent provisions

   431:10A-108 Order of certain policy provisions

   431:10A-109 Third party ownership

   431:10A-110 Requirements of other jurisdictions

   431:10A-111 Other policy provisions

   431:10A-112 Policy conflicting with this part

   431:10A-113 Filing procedure

   431:10A-114 Age limit

   431:10A-115 Coverage of newborn children

 431:10A-115.5 Coverage for child health supervision services

   431:10A-116 Coverage for specific services

 431:10A-116.2 Mammograms; referral not required

 431:10A-116.3 Coverage for telehealth

 431:10A-116.5 In vitro fertilization procedure coverage

 431:10A-116.6 Contraceptive services

 431:10A-116.7 Contraceptive services; religious employers

               exemption

 431:10A-118.3 Non-discrimination on the basis of actual gender

               identity or perceived gender identity; coverage

               for services

   431:10A-119 Hospice care coverage

   431:10A-120 Medical foods and low-protein modified food

               products; treatment of inborn error of metabolism;

               notice

   431:10A-121 Coverage for diabetes

   431:10A-122 Colon cancer screening coverage

   431:10A-125 Primary care provider; advanced practice

               registered nurse

   431:10A-126 Cancer treatment

   431:10A-131 Repealed

   431:10A-132 Orthodontic services for orofacial anomalies;

               benefits and coverage; notice

   431:10A-133 Autism benefits and coverage; notice; definitions

   431:10A-134 Human immunodeficiency virus and acquired

               immunodeficiency syndrome screening coverage

   431:10A-140 Formulary; accessibility requirements

 

         Part II.  Group and Blanket Disability Insurance

   431:10A-201 Definitions

   431:10A-202 Health care groups

   431:10A-203 Standard provisions

   431:10A-204 Optional provision, examination and autopsy

   431:10A-205 Payment of benefits

   431:10A-206 Coverage of newborn children

 431:10A-206.5 Coverage for child health supervision services

   431:10A-207 Coverage for specific services

   431:10A-208 Qualified medical child support order

 

         Part III.  Medicare Supplement Policies

   431:10A-301 Definitions

   431:10A-302 Applicability and scope

   431:10A-303 Repealed

   431:10A-304 Standards for policy provisions

   431:10A-305 Rules

   431:10A-306 Loss ratio standards

   431:10A-307 Disclosure standards

   431:10A-308 Notice of free examination

   431:10A-309 Filings; approval of forms

   431:10A-310 Filing requirements for advertising

   431:10A-311 Penalties

   431:10A-312 Severability

 

         Part IV.  Extended Health Insurance

   431:10A-401 Purpose

   431:10A-402 Definitions

   431:10A-403 Association of insurers; policyholder; policy

   431:10A-404 Persons authorized to transact insurance

 431:10A-404.5 Genetic information nondiscrimination in extended

               health insurance coverage

   431:10A-405 Association; powers, process; examination

   431:10A-406 Forms; rates; approval

   431:10A-407 Duplication of benefits; adjustment

   431:10A-408 Annual report filed by association

   431:10A-409 Articles of association; agent, membership list;

               deception

   431:10A-410 Violation of other laws

 

         Part V.  Long-Term Care Insurance--Repealed

   431:10A-521 to 531 Repealed

 

         Part VI.  Miscellaneous Provisions

   431:10A-601 Reciprocal beneficiary family coverage defined;

               policyholder and employer responsibility for

               costs; availability

   431:10A-602 Federally funded programs; exemption

   431:10A-603 Self-employed persons, exemption

   431:10A-604 Bona fide trade associations

 

ARTICLE 10B.  CREDIT LIFE INSURANCE

AND CREDIT DISABILITY INSURANCE

 

   431:10B-101 Purpose

   431:10B-102 Scope

   431:10B-103 Definitions

   431:10B-104 Forms of credit life insurance and credit

               disability insurance

   431:10B-105 Amount of credit life insurance and credit

               disability insurance

   431:10B-106 Term of credit life and credit disability

               insurance

   431:10B-107 Provisions of policies and certificates of

               insurance:  disclosure to debtors

   431:10B-108 Filing, approval, and withdrawal of forms and

               premium rates

   431:10B-109 Premiums and refunds

   431:10B-110 Issuance of policies

   431:10B-111 Claims

   431:10B-112 Existing insurance and choice of insurer

   431:10B-113 Enforcement

   431:10B-114 Penalties

 

ARTICLE 10C.  MOTOR VEHICLE INSURANCE

 

         Part I.  General Provisions

   431:10C-101 Short title

   431:10C-102 Purpose

   431:10C-103 Definitions

 431:10C-103.5 Personal injury protection benefits; defined;

               limits

 431:10C-103.6 Personal injury protection benefits tied to

               prepaid health care plan for description of

               coverage only

   431:10C-104 Conditions of operation and registration of motor

               vehicles

 431:10C-104.5 Repealed

   431:10C-105 Self-insurance

   431:10C-106 Specialty insurers not prohibited

   431:10C-107 Verification of insurance:  motor vehicles

   431:10C-108 Unlawful use of motor vehicle insurance

               identification card

   431:10C-109 Motor vehicle insurance identification card after

               cancellation of policy; return to insurer, civil

               sanctions

   431:10C-110 Rejection of application, joint underwriting plan

               placement

 431:10C‑110.5 Replacing motor vehicle insurance policy through

               an insurer's affiliate or subsidiary

   431:10C-111 Cancellation and nonrenewal of policies:  when

               prohibited, when permitted

 431:10C-111.5 Limit on nonrenewals and conditional renewals

   431:10C-112 Notice of cancellation or nonrenewal; effect on

               term of coverage

 431:10C-112.5 Notice of cancellation for insurer ceasing to

               issue motor vehicle insurance policies

   431:10C-113 Violation of rejection, cancellation and

               nonrenewal provisions

   431:10C-114 Insured's obligations upon termination of

               insurance

   431:10C-115 Drivers education fund underwriters fee

 431:10C-115.5 Repealed

 431:10C-115.6 Disclosure of personal injury protection limits

               and payments

 431:10C-115.7 Plain language billings

   431:10C-116 Challenges to motor vehicle insurance law;

               intervention by attorney general

   431:10C-117 Penalties

 431:10C-117.5 Additional civil liability

   431:10C-118 Fee in lieu of fine; defense

   431:10C-119 Insurer's requirements

   431:10C-120 Prohibitions, penalty

   431:10C-121 Severability

 

         Part II.  Rates and Administration

   431:10C-201 Motor vehicle insurance rates generally

   431:10C-202 Making of motor vehicle insurance rates

 431:10C-202.5 Immediate rate freeze; rate reduction; relief

   431:10C-203 Rate filings

   431:10C-204 Repealed

   431:10C-205 Rate review:  request by aggrieved party

   431:10C-206 Repealed

 431:10C-206.5 Group insurance plans

   431:10C-207 Discriminatory practices prohibited

   431:10C-208 Increase in premiums prohibited

   431:10C-209 Rate administration

 431:10C-209.5 Repealed

   431:10C-210 Publication of premium information

   431:10C-211 Attorney's fees

   431:10C-212 Administrative hearing on insurer's denial of

               claim

   431:10C-213 Arbitration

 431:10C-213.5 Binding arbitration

   431:10C-214 Administration

   431:10C-215 Inspection and audit

   431:10C-216 Annual review

 

         Part III.  Coverages and Rights

   431:10C-301 Required motor vehicle policy coverage

 431:10C-301.5 Covered loss deductible

   431:10C-302 Required optional additional insurance

 431:10C-302.5 Managed care option

   431:10C-303 Right to personal injury protection benefits

 431:10C-303.5 U-drive insurance policy; primary

   431:10C-304 Obligation to pay personal injury protection

               benefits

   431:10C-305 Source of payment

 431:10C-305.5 Right to reimbursement of deductible paid; when

   431:10C-306 Abolition of tort liability

   431:10C-307 Reimbursement of duplicate benefits

431:10C-307.7, 307.8 Repealed

   431:10C-308 Repealed

 431:10C-308.5 Limitation on charges

 431:10C-308.6 Repealed

 431:10C-308.7 Client-patient referrals, health care provider

               practices prohibited

   431:10C-309 Total loss motor vehicle claims

   431:10C-310 Total loss motor vehicle claims:  replacement

   431:10C-311 Total loss motor vehicle claims:  cash settlement

   431:10C-312 Payment of excise tax and certificate of

               ownership fee

   431:10C-313 Insurer practices regarding loss of use, storage

               and towing, and betterment

 431:10C-313.5 Preferred repair provider

 431:10C-313.6 Original equipment manufacturer's and like kind

               and quality parts

   431:10C-314 Jurisdiction

   431:10C-315 Statute of limitations

 

         Part IV.  Joint Underwriting Plan

 

            Subpart A.  Participation and Administration

   431:10C-401 Participation

   431:10C-402 Bureau

   431:10C-403 Bureau's duties

   431:10C-404 Allocation of costs

   431:10C-405 Board of governors

   431:10C-406 Regulations, review, and appellate procedure

 

            Subpart B.  Coverages and Assignment of Claims

   431:10C-407 Classifications

   431:10C-408 Assigned claims

 

            Subpart C.  Rates

   431:10C-409 Establishment and criteria

   431:10C-410 Schedules

   431:10C-411 Optional additional coverages

   431:10C-412 Adjustment and refund

 

         Part V.  Motorcycles and Motor Scooters--Repealed

   431:10C-501 to 504 Repealed

 

         Part VI.  Self-Insurer Requirements

   431:10C-601 Agreement

   431:10C-602 Surety bond or deposit of security; proof

               of financial ability

   431:10C-603 Proof of ability to process and pay claims

               promptly

   431:10C-604 Issuance of certificate of self-insurance

   431:10C-605 Duty to notify commissioner

   431:10C-606 Duration of certification

   431:10C-607 Revocation of certificate of self-insurance

   431:10C-608 Termination of self-insurer status and

               withdrawal of security deposit

 

ARTICLE 10C.  MOTOR VEHICLE INSURANCE

 

         Part I.  General Provisions

   431:10C-107 Verification of insurance:  motor vehicles

 

        Part VII.  Transportation Network Companies

   431:10C-701 Definitions

   431:10C-702 Relation to other laws

   431:10C-703 Transportation network company and transportation

               network company driver; disclosure; limitations;

               insurance requirements

   431:10C-704 Records

   431:10C-705 Disclaimers, waiver of liability, and indemnity

               agreements invalid

 

ARTICLE 10D.  LIFE INSURANCE AND ANNUITIES

 

         Part I.  Individual Life Insurance, Annuities and Pure

                  Endowment Contracts

   431:10D-101 Scope

   431:10D-102 Standard provisions required

   431:10D-103 Policy loan interest rates for policies issued

               after June 22, 1982

   431:10D-104 Standard nonforfeiture law for life insurance

   431:10D-105 Annuities and pure endowment contracts; standard

               provisions required

   431:10D-106 Reversionary annuities; standard provisions

               required

   431:10D-107 Standard nonforfeiture law; individual deferred

               annuities

   431:10D-108 Limitation of liability

   431:10D-109 Scope of incontestable clauses

   431:10D-110 Incontestability after reinstatement

   431:10D-111 Premium deposits

   431:10D-112 Policy settlements

   431:10D-113 Indebtedness deducted from proceeds

   431:10D-114 Miscellaneous proceeds

   431:10D-115 Dealing in dividends

   431:10D-116 Prohibited policy plans

   431:10D-117 Life franchise plan

   431:10D-118 Variable contracts

 

         Part II.  Group Life Insurance

   431:10D-201 Group life insurance requirements

   431:10D-202 Employee groups

   431:10D-203 Debtor groups

   431:10D-204 Labor union groups

   431:10D-205 Trustee groups

   431:10D-206 Agent groups

   431:10D-207 Public employee association groups

   431:10D-208 Mutual benefit society groups

   431:10D-209 Professional association groups

   431:10D-210 Occupation, industry, or trade association groups

   431:10D-211 Credit union groups

 431:10D-211.5 Other groups; limits

   431:10D-212 Spouses and dependents of insured individuals

   431:10D-213 Standard provisions required

   431:10D-214 Notice to insured regarding conversion right

   431:10D-215 Assignment of policies

 

         Part III.  Industrial Life Insurance

   431:10D-301 Scope

   431:10D-302 General life insurance provisions applicable

   431:10D-303 Industrial life insurance defined

   431:10D-304 Compliance required

   431:10D-305 Standard provisions required

   431:10D-306 Title on policy

   431:10D-307 Beneficiary

   431:10D-308 Facility of payment

   431:10D-309 Premiums paid direct

   431:10D-310 Application to term and specified insurance

   431:10D-311 Crediting of dividends

   431:10D-312 Prohibited provisions

   431:10D-313 Limitation of liability

 

         Part IV.  Life Insurance Policy Illustrations

   431:10D-401 Scope

   431:10D-402 Definitions

   431:10D-403 Policies to be illustrated

   431:10D-404 General requirements and prohibitions

   431:10D-405 Standards for basic illustrations

   431:10D-406 Standards for supplemental illustrations

   431:10D-407 Delivery of illustration and record

               retention

   431:10D-408 Annual reports and notice to policy owners

   431:10D-409 Annual certifications

   431:10D-410 Penalties

   431:10D-411 Authority to adopt rules

   431:10D-412 Repealed

 

         Part V.  Replacement of Life Insurance

                  Policies and Annuities

   431:10D-501 Purpose and scope

   431:10D-502 Definitions

   431:10D-503 Duties of producers

   431:10D-504 Duties of insurers that use producers

   431:10D-505 Duties of replacing insurers that use

               producers

   431:10D-506 Duties of the existing insurer

   431:10D-507 Duties of insurers with respect to

               direct-response solicitations

   431:10D-508 Violations and penalties

   431:10D-509 Authority to adopt rules

   431:10D-510 Repealed

 

ARTICLE 10D.  LIFE INSURANCE AND ANNUITIES

 

         Part VI.  Annuity Disclosure

   431:10D-601 Definitions

   431:10D-602 Applicability of standards for disclosure

   431:10D-603 Standards for the disclosure document and buyer's

               guide

   431:10D-604 Report to contract owners

   431:10D-605 Penalties

 

         Part VII.  Suitability in Annuity Transactions

   431:10D-621 Scope

   431:10D-622 Definitions

   431:10D-623 Duties of insurers and insurance producers

   431:10D-624 Compliance mitigation; penalties

   431:10D-625 Recordkeeping

   431:10D-626 Insurance producer training

 

  Part VIII.  Use of Senior-Specific Certifications

 and Professional Designations

   431:10D-641 Purpose

   431:10D-642 Prohibited uses of senior-specific certifications

               and professional designations

 

ARTICLE 10E.  PROPERTY INSURANCE

 

         Part I.  Insurable Interest in Property;

                  Over-Insurance

   431:10E-101 Insurable interest in property required

   431:10E-102 Over-insurance prohibited; exceptions

   431:10E-103 Exceptions

 

         Part II.  Homeowners Insurance Claims History

   431:10E-121 Purpose

   431:10E-122 Scope; effective dates

   431:10E-123 Definitions

   431:10E-124 Use of inquiries and other information

 

         Part III.  Lava Zones

   431:10E-141 Lava zone defined

   431:10E-142 Provisions for properties in lava zones in the

               county of Hawaii

 

ARTICLE 10E.  PROPERTY INSURANCE

 

         Part IV.  Coverages

   431:10E-151 Notice requirement

   431:10E-152 Extended coverage

 

ARTICLE 10F.  SURETY INSURANCE

 

   431:10F-101 Requirements deemed met by surety insurer

   431:10F-102 Fiduciary bonds, expense

   431:10F-103 Court bonds, costs

   431:10F-104 Release from liability

   431:10F-105 Directed suretyship; coercion of contractors

 

ARTICLE 10G.  MOTORCYCLE AND MOTOR SCOOTER INSURANCE

 

         Part I.  General Provisions

   431:10G-101 Definitions

   431:10G-102 Conditions of operation and registration of

               motorcycles and motor scooters

   431:10G-103 Motorcycle or motor scooter self-insurance

   431:10G-104 Prerequisites for obtaining coverage

   431:10G-105 Tort liability

   431:10G-106 Verification of insurance

   431:10G-107 Drivers education fund underwriters fee;

               motorcycle and motor scooter operators education

               fund

   431:10G-108 Penalties

   431:10G-109 Rules

 

         Part II.  Rates and Administration

   431:10G-201 Making of motorcycle and motor scooter insurance

               rates

   431:10G-202 Rate filings

   431:10G-203 Rate review:  request by aggrieved party

   431:10G-204 Rate review:  rate methods in noncompliance with

               article

   431:10G-206 Rate administration

 

         Part III.  Coverages and Rights

   431:10G-301 Required motorcycle and motor scooter policy

               coverage

 

ARTICLE 10H.  LONG-TERM CARE INSURANCE

 

         Part I.  Long-Term Care Insurance Model Act

   431:10H-101 Purpose

   431:10H-102 Scope

   431:10H-103 Short title

   431:10H-104 Definitions

   431:10H-105 Extraterritorial jurisdiction; group policies

   431:10H-106 Rules

 431:10H-106.5 Producer training requirements

   431:10H-107 Basic standards

   431:10H-108 Preexisting conditions--group and individual

               policies

   431:10H-109 Prior hospitalization; prior institutionalization

   431:10H-110 Loss ratio standards; factors; commissioner

               approval

   431:10H-111 Right to return; free look provision

   431:10H-112 Outline of coverage required

   431:10H-113 Group policy certificate requirements

   431:10H-114 Life insurance policies offering long-term care

               benefits

   431:10H-115 Incontestability period--group and individual

               policies

   431:10H-116 Nonforfeiture benefits

 431:10H-116.5 Delivery of the contract or certificate of

               insurance

 431:10H-116.6 Denial of claims; compliance requirements

   431:10H-117 Authority to adopt rules

 

        Part II. Long-Term Care Insurance Model Regulation

   431:10H-201 Policy definitions

   431:10H-202 Renewability

 431:10H-202.5 Licensing

   431:10H-203 Limitations and exclusions

   431:10H-204 Extension of benefits

 431:10H-204.5 Electronic enrollment for group policies

   431:10H-205 Continuation or conversion

   431:10H-206 Discontinuance and replacement

   431:10H-207 Premiums charged--group and individual policies

 431:10H-207.5 Premium rate schedule increases

   431:10H-208 Unintentional lapse

   431:10H-209 Lapse or termination for nonpayment of premium

   431:10H-210 Reinstatement

   431:10H-211 Disclosure; renewability

   431:10H-212 Disclosure; riders and endorsements

   431:10H-213 Disclosure; payment of benefits

   431:10H-214 Disclosure; limitations

   431:10H-215 Disclosure; other limitations and conditions on

               eligibility for benefits

   431:10H-216 Disclosure of tax consequences

   431:10H-217 Disclosure; benefit triggers

 431:10H-217.5 Required disclosure of rating practices to

               consumers

   431:10H-218 Prohibition against post-claims underwriting

   431:10H-219 Minimum standards for home health and community

               care benefits

   431:10H-220 Requirement to offer inflation protection; group

               and individual policies

   431:10H-221 Requirements for application forms and replacement

               coverage

   431:10H-222 Reporting requirements

   431:10H-223 Discretionary powers of the commissioner

   431:10H-224 Reserve standards; life insurance policies or

               riders

   431:10H-225 Reserve standards; insurance other than life

   431:10H-226 Loss ratio

 431:10H-226.5 Initial filing requirements

   431:10H-227 Filing requirements; extraterritorial

   431:10H-228 Filing requirements; advertisements

   431:10H-229 Standards for marketing

   431:10H-230 Standards of marketing--certain group policies

   431:10H-231 Suitability

   431:10H-232 Prohibition against preexisting conditions and

               probationary periods in replacement policies and

               certificates

   431:10H-233 Nonforfeiture benefit requirement

   431:10H-234 Standards for benefit triggers

 431:10H-234.5 Additional standards for benefit triggers for

               qualified long-term care insurance contracts

   431:10H-235 Standard format outline of coverage; group and

               individual policies

   431:10H-236 Delivery of shopper's guide; group and individual

               policies

   431:10H-237 Penalties

 

         Part III.  Federal Conformity

   431:10H-301 Group long-term care insurance policies

               conformance to Health Insurance Portability and

               Accountability Act and Internal Revenue Code

   431:10H-302 Individual long-term care insurance policy

               coverages

   431:10H-303 Conflict with Health Insurance Portability and

               Accountability Act

   431:10H-304 Disclosure of qualification for tax benefits

 

         Part IV.  Universal Availability of Long-Term Care

                   Insurance

   431:10H-401 Publicizing of policies

   431:10H-402 Purchase of policy and payment of premiums on an

               individual's behalf

 

ARTICLE 11.  INSURANCE HOLDING COMPANY SYSTEM

 

    431:11-101 Scope and purpose

    431:11-102 Definitions

    431:11-103 Subsidiaries of insurers

    431:11-104 Acquisition of control or merger with domestic

               insurer

  431:11-104.1 Definitions

  431:11-104.2 Scope

  431:11-104.3 Preacquisition notification; waiting period

  431:11-104.4 Competitive standard

  431:11-104.5 Orders and penalties

  431:11-104.6 Inapplicable provisions

    431:11-105 Registration of insurers

    431:11-106 Standards and management of an insurer within a

               holding company system

    431:11-107 Examination

  431:11-107.5 Supervisory colleges

    431:11-108 Confidential treatment

    431:11-109 Rules and regulations

    431:11-110 Injunctions; prohibitions against voting

               securities; sequestration of voting securities

    431:11-111 Sanctions

    431:11-112 Receivership

    431:11-113 Recovery

    431:11-114 Revocation, suspension, or nonrenewal of

               insurer's license

    431:11-115 Judicial review; mandamus

    431:11-116 Conflict with other laws

    431:11-117 Severability of provisions

 

ARTICLE 11A.  BUSINESS TRANSACTED WITH PRODUCER

CONTROLLED PROPERTY/CASUALTY INSURER

 

   431:11A-101 Definitions

   431:11A-102 Applicability

   431:11A-103 Minimum standards

   431:11A-104 Disclosure

   431:11A-105 Penalties

 

ARTICLE 12.  MASS MERCHANDISING OF INSURANCE

 

    431:12-101 Definitions

    431:12-102 Applicability

    431:12-103 Mass merchandising authorized

    431:12-104 Mass merchandising prohibited; when

    431:12-105 Mass merchandising requirements

    431:12-106 Disclosure

    431:12-107 Payroll deductions and premium collections

    431:12-108 Employer's failure to remit premiums

    431:12-109 Cancellation and nonrenewal

    431:12-110 Premium rates

    431:12-111 Readjustment of premiums; dividends

    431:12-112 Underwriting standards

    431:12-113 Statistics

    431:12-114 Licenses

    431:12-115 Establishment and maintenance of office

    431:12-116 Rules

 

ARTICLE 13.  UNFAIR METHODS OF COMPETITION AND

UNFAIR AND DECEPTIVE ACTS AND PRACTICES IN

THE BUSINESS OF INSURANCE

 

         Part I.  General Provisions

    431:13-101 Purpose

    431:13-102 Unfair methods of competition; unfair or

               deceptive acts or practices prohibited

    431:13-103 Unfair methods of competition and unfair or

               deceptive acts or practices defined

    431:13-104 Favored producer or insurer; coercion of debtors

    431:13-105 Power of commissioner

    431:13-106 Hearings

    431:13-107 Commissioner's right of action

    431:13-108 Reimbursement for accident and health or sickness

               insurance benefits

 

         Part II.  Penalties and Judicial Review

    431:13-201 Cease and desist and penalty orders; judicial

               review

    431:13-202 Penalty for violation of cease and desist orders

    431:13-203 Rules

    431:13-204 Provisions of sections additional to existing

               laws

 

ARTICLE 14.  RATE REGULATION

 

         Part I.  Casualty, Surety, Property, Marine and

                  Transportation Rate Regulation

    431:14-101 Purpose

  431:14-101.5 Definitions

    431:14-102 Scope

    431:14-103 Making of rates

  431:14-103.3 Rate adjustment mandates

  431:14-103.5 Contracting classification premium program

    431:14-104 Rate filings

  431:14-104.5 Loss cost filings

    431:14-105 Policy revisions that alter coverage

  431:14-105.5 Standing to intervene in rate filing and

               ratemaking proceedings

    431:14-106 Disapproval of filings

    431:14-107 Rating organizations

  431:14-107.1 Rating and advisory organizations, permitted

               activity

  431:14-107.2 Insurers and organizations, prohibited activity

  431:14-107.3 Rating or advisory organizations, prohibited

               activity

    431:14-108 Deviations

    431:14-109 Appeal by minority

    431:14-110 Information to be furnished insureds; hearings

               and appeals of insureds

  431:14-110.5 Disclosure of workers' compensation premium

               information

  431:14-110.8 Publication of homeowners insurance premium

               information

    431:14-111 Advisory organizations

    431:14-112 Joint underwriting or joint reinsurance

    431:14-113 Examination

    431:14-114 Rate administration

    431:14-115 False or misleading information

    431:14-116 Assigned risks

  431:14-116.5 Assigned risk pool; experience rating plan

  431:14-116.6 Assigned risk pool; residual market plan

    431:14-117 Penalties

    431:14-118 Hearing procedure and judicial review

    431:14-119 Repealed

    431:14-120 Additional powers for workers' compensation rate

               filing and ratemaking

 

ARTICLE 14A.  HAWAII EMPLOYERS' MUTUAL INSURANCE COMPANY

 

   431:14A-101 Purpose

   431:14A-102 Definitions

   431:14A-103 Hawaii employers' mutual insurance company,

               established

   431:14A-104 Company divisions

   431:14A-105 Board of directors, established

   431:14A-106 Powers; generally

   431:14A-107 Duties and responsibilities

   431:14A-108 Administrator; appointment; duties

   431:14A-109 Financial management

 431:14A-109.5 Oversight council

   431:14A-110 Premium rates, determination

   431:14A-111 Reserves, investment

   431:14A-112 Financial statements and other reports

   431:14A-113 Annual accounting; dividends

   431:14A-114 Audits

   431:14A-115 Denial, cancellation, and termination

   431:14A-116 Wilful misrepresentation and fraud

   431:14A-117 Workplace safety and health programs

   431:14A-118 Discontinuation of residual market plan

   431:14A-119 Discontinuation of assigned risks

 

ARTICLE 14F.  HEALTH INSURANCE RATE REGULATION--REPEALED

 

   431:14F-101 to 113 Repealed

 

ARTICLE 14G.  HEALTH INSURANCE RATE REGULATION

 

   431:14G-101 Scope and purpose

   431:14G-102 Definitions

   431:14G-103 Making of rates

 431:14G-103.5 Rerating

   431:14G-104 Rate adjustment mandates

   431:14G-105 Rate filings

   431:14G-106 Policy revisions that alter coverage

   431:14G-107 Disapproval of filings

   431:14G-108 Managed care plans; prohibited activity

   431:14G-109 Information to be furnished enrollees; hearings

               and appeals of enrollees

 431:14G-109.5 Publication of premium information

   431:14G-110 False or misleading information

   431:14G-111 Penalties

   431:14G-112 Hearing procedure and judicial review

 

ARTICLE 15.  INSURERS SUPERVISION, REHABILITATION

AND LIQUIDATION

 

         Part I.  General Provisions

    431:15-101 Construction and purpose

    431:15-102 Persons covered

    431:15-103 Definitions

  431:15-103.5 Standards and authority

    431:15-104 Jurisdiction and venue

    431:15-105 Injunctions and orders

    431:15-106 Cooperation of officers and employees

    431:15-107 Commissioner's reports

    431:15-108 Continuation of delinquency proceedings

 

         Part II.  Summary Proceedings and Supervisory

                   Proceedings

    431:15-201 Commissioner's summary orders and supervision

               proceedings

    431:15-202 Court's seizure order

    431:15-203 Confidentiality of hearings

 

         Part III.  Formal Proceedings

    431:15-301 Grounds for rehabilitation

    431:15-302 Rehabilitation orders

    431:15-303 Powers and duties of the rehabilitator

    431:15-304 Actions by and against rehabilitator

    431:15-305 Termination of rehabilitation

    431:15-306 Grounds for liquidation

    431:15-307 Liquidation orders

    431:15-308 Continuance of coverage

    431:15-309 Dissolution of insurer

    431:15-310 Powers of liquidator

    431:15-311 Notice to creditors and others

    431:15-312 Duties of producers

    431:15-313 Actions by and against liquidator

    431:15-314 Collection and list of assets

    431:15-315 Fraudulent transfers prior to petition

    431:15-316 Fraudulent transfer after petition

    431:15-317 Voidable preferences and liens

    431:15-318 Claims of holders of void or voidable rights

    431:15-319 Setoffs and counterclaims

    431:15-320 Assessments

    431:15-321 Reinsurer's liability

    431:15-322 Applicability of claims settlement provisions to

               loss claims

    431:15-323 Recovery of premiums owed

    431:15-324 Domiciliary liquidator's proposal to distribute

               assets

    431:15-325 Filing of claims

    431:15-326 Proof of claim

    431:15-327 Special claims

    431:15-328 Provisions for third party claims

    431:15-329 Disputed claims

    431:15-330 Claims of surety

    431:15-331 Secured creditor's claims

    431:15-332 Priority of distribution

    431:15-333 Liquidator's recommendations to the court

    431:15-334 Distribution of assets

    431:15-335 Unclaimed and withheld funds

    431:15-336 Termination of proceedings

    431:15-337 Reopening liquidation

    431:15-338 Disposition of records during and after

               termination of liquidation

 

         Part IV.  Interstate Relations

    431:15-401 Conservation of property of foreign or alien

               insurers found in this State

    431:15-402 Liquidation of property of foreign or alien

               insurers found in this State

    431:15-403 Domiciliary liquidators in other states

    431:15-404 Ancillary formal proceedings

    431:15-405 Ancillary summary proceedings

    431:15-406 Claims of nonresidents against insurers domiciled

               in this State

    431:15-407 Claims of residents against insurers domiciled in

               reciprocal states

    431:15-408 Attachment, garnishment and levy of execution

    431:15-409 Interstate priorities

    431:15-410 Subordination of claims for noncooperation

    431:15-411 Separability

 

ARTICLE 16.  GUARANTY ASSOCIATIONS

 

         Part I.  Property and Liability Insurance Guaranty

                  Association

    431:16-101 Title

    431:16-102 Purpose

    431:16-103 Scope

    431:16-104 Construction

    431:16-105 Definitions

    431:16-106 Creation of association

    431:16-107 Board of directors

    431:16-108 Powers and duties of the association

    431:16-109 Plan of operation

    431:16-110 Duties and powers of the commissioner

    431:16-111 Effect of paid claims

    431:16-112 Exhaustion of other coverage

    431:16-113 Prevention of insolvencies

    431:16-114 Tax exemption

    431:16-115 Recoupment of assessment

    431:16-116 Immunity

    431:16-117 Stay of proceedings

 

         Part II.  Life and Disability Insurance Guaranty

                   Association

    431:16-201 Title

    431:16-202 Purpose

    431:16-203 Coverage and limitations

    431:16-204 Construction

    431:16-205 Definitions

    431:16-206 Creation of the association

    431:16-207 Board of directors

    431:16-208 Powers and duties of the association

    431:16-209 Assessments

    431:16-210 Plan of operation

    431:16-211 Duties and powers of the commissioner

    431:16-212 Prevention of insolvencies

    431:16-213 Credits for assessments paid

    431:16-214 Miscellaneous provisions

    431:16-215 Tax exemptions

    431:16-216 Immunity

    431:16-217 Stay of proceedings; reopening default

               judgments

    431:16-218 Prohibited advertisement of association act in

               insurance sales; notice to policyholders

    431:16-219 Repealed

 

ARTICLE 17.  INSURANCE INFORMATION PROTECTION ACT--REPEALED

 

    431:17-101 to 106 Repealed

 

ARTICLE 18.  [RESERVED]

 

ARTICLE 19.  CAPTIVE INSURANCE COMPANIES

 

        Part I.  General Provisions

    431:19-101 Definitions

  431:19-101.2 Confidential treatment

  431:19-101.3 Repealed

  431:19-101.4 Service providers

  431:19-101.5 Captive insurance administrator

  431:19-101.6 Salary

  431:19-101.7 General powers and duties

  431:19-101.8 Captive insurance administrative fund

    431:19-102 Certificate of authority

  431:19-102.2 Personal lines insurance

  431:19-102.3 Redomestication; approval as a domestic captive

               insurer

  431:19-102.4 Redomestication; conversion to foreign insurer

  431:19-102.5 Repealed

    431:19-103 Names of companies

    431:19-104 Minimum capital and surplus

    431:19-105 Repealed

    431:19-106 Formation of captive insurance companies in

               this State

  431:19-106.3 Repealed

  431:19-106.5 Conversion or merger of captive insurers

    431:19-107 Financial statements and other reports

    431:19-108 Examinations, investigations, and financial

               surveillance

    431:19-109 Grounds and procedures for suspension and

               revocation of certificate of authority; fines

    431:19-110 Investments

    431:19-111 Reinsurance

  431:19-111.5 Class 5 companies

    431:19-112 Rating organizations; memberships

    431:19-113 Exemption from compulsory associations

    431:19-114 Rules

    431:19-115 Laws applicable

  431:19-115.5 Applicability of other laws to captive insurance

               companies writing motor vehicle insurance

               policies in this State

  431:19-115.6 Applicability of other laws to captive insurance

               companies writing credit life or other credit

               disability insurance policies

  431:19-115.7 Applicability of other laws to captive

               insurance companies writing direct workers'

               compensation insurance policies

    431:19-116 Taxation

 

          Part II.  Special Purpose Financial Captive

                    Insurance Companies

    431:19-201 Purpose

    431:19-202 Applicable law

    431:19-203 Definitions

    431:19-204 Certificate of authority

    431:19-205 Changes in plan of operation; voluntary

               dissolution or cessation of business

    431:19-206 Formation

    431:19-207 Minimum capital and surplus

    431:19-208 Issuance of securities

    431:19-209 Authorized contracts and agreements

    431:19-210 Disposition of assets; investments

    431:19-211 Annual reporting; books and records

    431:19-212 Suspension and revocation of certificate of

               authority

    431:19-213 Supervision, rehabilitation, liquidation

    431:19-214 Existing licenses

 

          Part III.  Sponsored Captive Insurance Companies

    431:19-301 Formation

    431:19-302 Supplemental application materials

    431:19-303 Protected cells

    431:19-304 Qualification of sponsors

    431:19-305 Participants in sponsored captive insurance

               companies

    431:19-306 Investments by sponsored captive insurance

               companies

    431:19-307 Delinquency of sponsored captive insurance

               companies

    431:19-308 Applicable laws

    431:19-309 Existing licenses

 

ARTICLE 20.  TITLE INSURANCE AND TITLE INSURERS

 

    431:20-101 Scope

    431:20-102 Definitions

    431:20-103 General insurance law applicable

    431:20-104 Particular provisions prevail

    431:20-105 Authorized business

    431:20-106 Restrictions on business

  431:20-106.5 Escrow depositories

    431:20-107 Capital requirements

    431:20-108 Guarantee fund

    431:20-109 Limitations on compliance with section 431:20-107

               and section 431:20-108

    431:20-110 Purchase of materials and plant; valuation

  431:20-110.5 Dividends

    431:20-111 Loans to officers, etc.

    431:20-112 Limit of risk

    431:20-113 Underwriting standards and record retention

    431:20-114 Reinsurance reserve

    431:20-115 Use of reinsurance reserve on liquidation,

               dissolution or insolvency

    431:20-116 Loss and loss expense reserve

    431:20-117 Reinsurance

    431:20-118 Prohibition on rebates and inducements

    431:20-119 Division of fees

    431:20-120 Schedules of premiums and charges

    431:20-121 Contract forms, filing, disapproval

    431:20-122 Annual statement

    431:20-123 Remedies

    431:20-124 Additional penalty

    431:20-125 Revocation or suspension of title insurer's

               certificate of authority

 

ARTICLE 21.  HAWAII PROPERTY INSURANCE ASSOCIATION

 

    431:21-101 Purpose

    431:21-102 Definitions

    431:21-103 Creation of association

    431:21-104 Board of directors

    431:21-105 Powers and duties of the association

  431:21-105.5 Default in payment of assessments

    431:21-106 Plan of operation

    431:21-107 Designation of area

    431:21-108 Renewals of existing policies

    431:21-109 Insurance coverages available under plan

    431:21-110 Application; inspection

    431:21-111 Duties and powers of the commissioner

    431:21-112 Reports

    431:21-113 Appeals

    431:21-114 Tax exemptions

    431:21-115 Credits for assessments paid

    431:21-116 Examination

    431:21-117 Immunity and limitation on liability

    431:21-118 Status of association policies

    431:21-119 Issuance of new policies; removal of moratorium

 

ARTICLE 22.  LOSS MITIGATION GRANT PROGRAM

 

    431:22-101 Definitions

    431:22-102 Repealed

    431:22-103 Establishment of loss mitigation grant program

    431:22-104 Standards for the award of grants

    431:22-105 Technical advisory committee

 

ARTICLE 30.  INTERSTATE INSURANCE PRODUCT REGULATION COMPACT

 

    431:30-101 Scope

    431:30-102 Definitions

    431:30-103 Establishment of the commission and venue

    431:30-104 Powers of the commission

    431:30-105 Repealed

    431:30-106 Membership; voting; bylaws

    431:30-107 Management committee; officers and personnel

    431:30-108 Legislative and advisory committees

    431:30-109 Corporate records of the commission

    431:30-110 Qualified immunity; defense; indemnification

    431:30-111 Meetings and acts of the commission

    431:30-112 Rules and operating procedures; rulemaking

               functions of the commission and rejection of

               uniform standards

    431:30-113 Commission records and enforcement

    431:30-114 Dispute resolution

    431:30-115 Product filing and approval

    431:30-116 Review of commission decisions regarding product

               filings

    431:30-117 Finance

    431:30-118 Compacting states; effective date; amendment

    431:30-119 Withdrawal

    431:30-120 Default

    431:30-121 Dissolution of compact

    431:30-122 Severability and construction

    431:30-123 Other laws

    431:30-124 Binding effect of the compact

 

ARTICLE 31.  PORTABLE ELECTRONICS INSURANCE

 

    431:31-101 Definitions

    431:31-102 Licensure of vendors

    431:31-103 Requirements for sale of portable electronics

               insurance

    431:31-104 Authority of vendors

    431:31-105 Sanctions for violations

    431:31-106 Termination or modification of portable

               electronics insurance

    431:31-107 Application for license and fees

    431:31-108 Portable electronics insurance claims

 

Cross References

 

  Civil relief for state military forces, see chapter 657D.

  Hawaii health authority, see chapter 322H.

  Health care provider network adequacy, see chapter 432F.

  Medicaid contracts; nonprofit and for-profit reporting requirements, see §103F-107.

 

 

ARTICLE 1

DEFINITIONS

 

PART I.  GENERAL PROVISIONS

 

     §431:1-100  Short title.  This chapter shall be known and may be cited as the Insurance Code. [L 1987, c 347, pt of §2]

 

     §431:1-100.5  Purpose.  The legislature hereby declares that the purpose of this chapter is to recodify, without substantive change, the insurance law in effect immediately prior to July 1, 1988. [L 1987, c 347, pt of §2]

 

Revision Note

 

  "July 1, 1988" substituted for "the effective date of this chapter".

 

     §431:1-101  Compliance required.  No person shall transact a business of insurance in this State without complying with the applicable provisions of this code.  Any person transacting a business of insurance under chapter 432 shall be subject to this code only to the extent provided in chapter 432. [L 1987, c 347, pt of §2]

 

     §431:1-102  Public interest.  The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception and practice honesty and equity in all insurance matters.  Upon the insurer, the insured and their representatives rests the duty of preserving inviolate the integrity of insurance. [L 1987, c 347, pt of §2]

 

     §431:1-103  Headings.  The meaning or scope of any provision is not affected by any heading. [L 1987, c 347, pt of §2]

 

     §431:1-104  Particular provisions prevail.  Provisions of this code relating to a particular class of insurance or a particular type of insurer or to a particular matter prevail over provisions relating to insurance in general or insurers in general or to such matter in general. [L 1987, c 347, pt of §2]

 

Case Notes

 

  Mentioned:  95 F.3d 791; 795 F. Supp. 1036.

 

     §431:1-105  Records, statements and reports.  (a)  All records, statements and reports required or authorized by this code shall be made in writing in the English language.

     (b)  All statements, estimates, percentages, payments, and calculations required or authorized by this code shall be made on the basis of the lawful money of the United States. [L 1987, c 347, pt of §2]

 

PART II.  GENERAL DEFINITIONS

 

     §431:1-201  Insurance defined.  (a)  Insurance is a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies.

     (b)  The following contracts are not considered to be insurance for the purposes of this code:

     (1)  A bond with respect to which no premium is charged or paid;

     (2)  A bond or contract or undertaking in the performance of which the surety has an interest other than that of surety;

     (3)  A plan or agreement between an employer and any employee or the employee's representative, individually or collectively, by the terms of which the employer or the parties to the plan or agreement agree to contribute to the cost of nonoccupational disability benefits, medical attention, treatment or hospitalization for the employee or members of the employee's family unless such plan is underwritten by an insurer as defined in this article;

     (4)  A legal service plan as defined in chapter 488 other than plans in which either the person or entity offering the plan or the person administering the plan is otherwise subject to this code;

     (5)  Any unincorporated interindemnity or reciprocal or interinsurance contract, which qualifies under chapter 435E between members of a cooperative corporation, whose members consist only of physicians and surgeons licensed in Hawaii, which contracts indemnify solely in respect to medical malpractice claims against such members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration. [L 1987, c 347, pt of §2; am L 2012, c 34, §22]

 

Case Notes

 

  Materialman guaranteeing general contractor's performance through surety bond did not have an interest in the performance of the bond other than that of surety.  797 F. Supp. 832.

  When the uncontested requirements of the managed care plan request for proposals were read alongside the text of subsection (a) defining the term "insurance", it was clear that the insurers had agreed to assume a risk based on a relationship with plan members--not the department of human services--and were "undertaking to indemnify another or pay a specified amount upon determinable contingencies"; thus, insurers were not performing their plan contracts under no licensing authority but held licenses pursuant to article 431:10A and were contracted to provide insurance services for plan members.  126 H. 326, 271 P.3d 621 (2012).

  Vehicle theft registration system sold by car dealership did not constitute "insurance" where the system warranted against the "defect" that the system would fail to deter a theft and fail to aid in the recovery of the owner's vehicle, and did not warrant against the fortuitous happening of the theft itself.  122 H. 181 (App.), 223 P.3d 246 (2009).

 

 

     §431:1-202  Insurer defined.  Insurer means every person engaged in the business of making contracts of insurance and includes reciprocal or interinsurance exchanges. [L 1987, c 347, pt of §2]

 

Attorney General Opinions

 

  The State did not meet definition of insurer in this section.  Att. Gen. Op. 95-2.

 

     §431:1-203  Classes of insurance.  For the purposes of this code, the classes of insurance are: life insurance (including industrial and group life insurance) as defined in section 431:1-204; accident and health or sickness insurance, also referred to as disability insurance (including group disability insurance), as defined in section 431:1-205; property insurance as defined in section 431:1-206; marine and transportation insurance as defined in section 431:1-207; vehicle insurance as defined in section 431:1-208; general casualty insurance as defined in section 431:1-209; surety insurance as defined in section 431:1-210; and such other classes as may be authorized by law. [L 1987, c 347, pt of §2; am L 2002, c 155, §4]

 

     §431:1-204  Life insurance defined.  (a)  Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith.

     (b)  For the purposes of this code, the transacting of life insurance includes contracting to provide additional benefits in the event of death or dismemberment by accident or accidental means, or in the case of total and permanent disability of the insured, further includes effecting optional modes of settlement of proceeds.

     (c)  For the purposes of this code, the transacting of life insurance includes the granting of annuities and endowment benefits, except for annuities that are provided under a charitable gift annuity agreement with a donor and issued by a nonprofit educational foundation or a nonprofit organization that has met the requirements of paragraphs (1) to (4).

     A nonprofit educational foundation or nonprofit organization issuing charitable gift annuities shall:

     (1)  Meet the following requirements:

          (A)  The foundation or organization shall have conducted business in the form of program services or fundraising activities in the State continuously for at least ten years;

          (B)  The foundation or organization shall maintain a net worth in the State of not less than $200,000 in cash, cash equivalents, or publicly traded securities, exclusive of the assets funding any annuity; and

          (C)  The foundation or organization shall have filed an annual statement that certifies compliance with this subsection, on forms that may be prescribed by the department of the attorney general.  Each foundation or organization shall file its annual statement with the attorney general on or before March 15 of each year;

     (2)  Maintain segregated assets in a financial institution equal to at least the sum of the reserves on its outstanding charitable gift annuity agreements, calculated in accordance with mortality tables and discount rates to be determined by the commissioner of insurance, and a surplus of ten per cent of the reserves or the amount of $100,000, whichever is higher.  The assets shall be segregated as separate and distinct funds independent of all other funds and shall not be applied toward the payment of the debts and obligations of the foundation or organization, other than with respect to the annuity agreements.  The segregated assets shall not be considered in determining whether the foundation or organization meets the net worth requirement of paragraph (1)(B).  In determining the fund reserves, a deduction shall be made, and no surplus shall be required, for all or any portion of an annuity risk that is lawfully reinsured by an authorized insurer;

     (3)  Invest and manage assets as would a prudent investor, taking into account the purposes, terms, and distribution requirements expressed in its governing instrument.  To satisfy this standard, the fiduciary shall exercise reasonable care, skill, and caution; and

     (4)  Prominently state on the first page of a charitable gift annuity agreement that the agreement is not insurance under the laws of the State, is not subject to regulation by the insurance division, and is not protected by any state guaranty fund.

     Upon the failure of a nonprofit educational foundation or nonprofit organization to comply with any of the requirements of paragraphs (1) to (4), a charitable gift annuity agreement issued by the foundation or organization shall be deemed life insurance and subject to the provisions of this code governing life insurance.

     For the purposes of this subsection:

     "Charitable gift annuity agreement" means a contract under which an individual transfers property to a charity, conditioned upon the right to receive a specific sum of money for life.

     "Nonprofit organization" means an organization that has been granted tax exempt status as a charitable organization by the Internal Revenue Service pursuant to section 501(c)(3) of the Internal Revenue Code of 1986, as amended. [L 1987, c 347, pt of §2; am L 1989, c 91, §1; am L 1994, c 127, §1; am L 2004, c 172, §1; am L 2005, c 136, §1]

 

     §431:1-205  Accident and health or sickness insurance defined.  Accident and health or sickness insurance, also referred to as disability insurance, is insurance against bodily injury, disablement, or death by accident, or accidental means, or the expense thereof; against disablement or expense resulting from sickness; and every insurance appertaining thereto, including health and medical insurance. [L 1987, c 347, pt of §2; am L 2002, c 155, §5]

 

     §431:1-206  Property insurance defined.  Property insurance is insurance against loss of or damage to real or personal property of every kind and any interest therein, from any or all hazard or cause and against loss consequential upon such loss of or damage.  An inclusion within other defined classes of insurance of the right to insure against certain designated perils to real or personal property shall not be deemed a diminution of the definition of property insurance. [L 1987, c 347, pt of §2]

 

Cross References

 

  Hawaii hurricane relief fund, see chapter 431P.

 

     §431:1-207  Marine and transportation insurance defined. Marine and transportation insurance is:

     (1)  Insurance against any and all kinds of loss of or damage to:

          (A)  Vessels, craft, aircraft, cars, automobiles, and vehicles of every kind, as well as all goods, freights, cargoes, merchandise, effects, disbursement, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests, and all other kinds of property and interests therein, in respect to, appertaining to, or in connection with any and all risks or perils of navigation, transit or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed, or similarly prepared for shipment or while awaiting the same or during any delays, storage, transshipment, or reshipment incident thereto, including marine builder's risks and all personal property floater risks;

          (B)  Person or to property in connection with or appertaining to a marine, inland marine, transit, or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance, or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to the person arising out of the ownership, maintenance or use of automobiles);

          (C)  Precious stones, jewels, jewelry, gold, silver, and other precious metals, whether used in business or trade or otherwise and whether the same be in course of transportation or otherwise; and

          (D)  Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot, and civil commotion are the only hazards to be covered; piers, wharves, docks, and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot, and civil commotion; other aids to navigation and transportation, including drydocks and marine railways, against all risks.

     (2)  Marine protection and indemnity insurance, meaning insurance against, or against legal liability of the insured for, loss, damage or expense arising out of, or incident to, the ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person. [L 1987, c 347, pt of §2]

 

     §431:1-208  Vehicle insurance defined.  (a)  Vehicle insurance is insurance against loss of or damage to any land vehicle or aircraft or any draft or riding animal or to property while contained therein or thereon or being loaded or unloaded therein or therefrom, and against any loss, expense or liability for loss or damage to persons or property resulting from or incident to ownership, maintenance, or use of any such vehicle or aircraft or animal.

     (b)  Insurance against accidental death or accidental injury to individuals including the named insured while in, entering, alighting from, adjusting, repairing, cranking, or caused by being struck by a vehicle, aircraft, or draft or riding animal, if such insurance is issued as part of insurance on the vehicle, aircraft, or draft or riding animal, shall be deemed to be vehicle insurance. [L 1987, c 347, pt of §2]

 

     §431:1-209  General casualty insurance defined.  General casualty insurance includes vehicle insurance as defined in section 431:1-208, and accident and health or sickness insurance as defined in section 431:1-205 when issued as an incidental coverage with or supplemental to liability insurance.  In addition, general casualty insurance is insurance:

     (1)  Against legal liability for the death, injury, or disability of any human being, or from damage to property;

     (2)  Of medical, hospital, surgical, and funeral benefits to persons injured, irrespective of legal liability of the insured, when issued with or supplemental to insurance against legal liability for the death, injury, or disability of human beings;

     (3)  Of the obligation accepted by, imposed upon, or assumed by employers under law for death, disablement, or injury to employees;

     (4)  Against loss or damage by burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation, or wrongful conversion, disposal, or concealment, or from any attempt of any of the foregoing; also insurance against loss or damage to moneys, coins, bullion, securities, notes, drafts, acceptances, or any other valuable papers or documents, resulting from any cause, except while in the mail;

     (5)  Upon personal effects of individuals, by an all-risk type of policy commonly known as the personal property floater;

     (6)  Against loss or damage to glass and its appurtenances resulting from any cause;

     (7)  Against any liability and loss or damage to property resulting from accidents to or explosions of boilers, pipes, pressure containers, machinery, or apparatus;

     (8)  Against loss of or damage to any property of the insured resulting from the ownership, maintenance, or use of elevators, except loss or damage by fire;

     (9)  Against loss or damage to any property caused by the breakage or leakage of sprinklers, water pipes, or containers, or by water entering through leaks or openings in buildings;

    (10)  Against loss or damage resulting from failure of debtors to pay their obligations to the insured (credit insurance);

    (11)  Against loss of or damage to any domesticated or wild animal resulting from any cause (livestock insurance);

    (12)  Against loss of or damage to any property of the insured resulting from collision of any other object with such property, but not including collision to or by vessels, craft, piers, or other instrumentalities of ocean or inland navigation (collision insurance);

    (13)  Against legal liability of the insured, and against loss, damage, or expense incident to a claim of such liability, and including any obligation of the insured to pay medical, hospital, surgical, and funeral benefits to injured persons, irrespective of legal liability of the insured, arising out of the death or injury of any person, or arising out of injury to the economic interest of any person as the result of negligence in rendering expert, fiduciary, or professional service (malpractice insurance);

    (14)  Against any contract of warranty or guaranty which promises service maintenance, parts replacement, repair, money, or any other indemnity in the event of loss of or damage to a motor vehicle or any part thereof from any cause, including loss of or damage to or loss of use of the motor vehicle by reason of depreciation, deterioration, wear and tear, use, obsolescence, or breakage if made by a warrantor or guarantor who or which as such is doing an insurance business; provided that service contracts, as defined and meeting the requirements of chapter 481X, shall not be subject to chapter 431.

               The doing or proposing to do any business in substance equivalent to the business described in this section in a manner designed to evade the provisions of this section is the doing of an insurance business; and

    (15)  Against any other kind of loss, damage, or liability properly the subject of insurance and not within any other class or classes or type of insurance as defined in sections 431:1-204 to 431:1-211, if such insurance is not contrary to law or public policy. [L 1987, c 347, pt of §2; am L 2000, c 221, §3; am L 2002, c 155, §6; am L 2003, c 212, §14; am L 2014, c 186, §4]

 

 

     §431:1-210  Surety insurance defined.  Surety insurance includes:

     (1)  Bail bond insurance, which is a guarantee that any person, in or in connection with any proceedings in any court, will:

          (A)  Attend in court when required, or

          (B)  Will obey the orders of judgment of the court, as a condition to the release of the person from confinement, and the execution of bail bonds for any such purpose.  The making of property or cash bail does not constitute the transacting of bail bond insurance.

     (2)  Fidelity insurance, which is insurance guaranteeing the fidelity of persons holding positions of public or private trust.

     (3)  Guaranteeing the performance of contracts and guaranteeing and executing bonds, undertakings and contracts of suretyship.

     (4)  Indemnifying banks, bankers, brokers, financial or moneyed corporations or associations against loss resulting from any cause of bills of exchange, notes, bonds, securities, evidences of debts, deeds, mortgages, warehouse receipts, or other valuable papers, documents, money, precious metals, and articles made therefrom, jewelry, watches, necklaces, bracelets, gems, precious and semiprecious stones, including any loss while the same are being transported in armored motor vehicles, or by messenger, but not including any other risks of transportation or navigation; also against loss or damage to such insured's premises, or to the insured's furnishings, fixtures, equipment, safes, and vaults therein, caused by burglary, robbery, theft, vandalism, or malicious mischief, or any attempted burglary, robbery, theft, vandalism, or malicious mischief.

     (5)  Forgery insurance. [L 1987, c 347, pt of §2]

 

     §431:1-211  Ocean marine insurance defined.  Ocean marine insurance (although not a class of insurance as named in section 431:1-203), whenever the term is used in this code, means insurance:

     (1)  Upon vessels, crafts, hulls, and of interests therein, or with relation thereto;

     (2)  Of marine builders' risks, marine war risks and contracts of marine protection and indemnity insurance;

     (3)  Of freights and disbursements pertaining to a subject of insurance coming within this definition;

     (4)  Of personal property and interests therein, in course of movement into or out of this State or among the islands of this State, or in course of exportation from or importation into any country, or in course of transportation coastwise, including transportation by land, water, or air from point of origin to final destination, in respect to, appertaining to, or in connection with, any risk or peril of navigation, transit or transportation, and while being prepared for and while awaiting shipment, and during any delays, storage, transshipment, or reshipment incident thereto. [L 1987, c 347, pt of §2]

 

     §431:1-212  Person defined.  Person means any individual, company, insurer, association, organization, group, reciprocal or interinsurance exchanges, partnership, business, trust, or corporation. [L 1987, c 347, pt of §2]

 

     §431:1-213  State defined.  State means any state of the United States and the governments of Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, the United States Virgin Islands, and the District of Columbia. [L 1987, c 347, pt of §2; am L 1997, c 233, §2; am L 2011, c 68, §2]

 

 

     §431:1-214  United States defined.  United States, when used to signify a place, means the states of the United States and the governments of Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, the United States Virgin Islands, and the District of Columbia. [L 1987, c 347, pt of §2; am L 1997, c 233, §3; am L 2011, c 68, §3]

 

 

     §431:1-215  Transaction of an insurance business.  Transaction of an insurance business means any of the following acts in this State effected by mail or otherwise by or on behalf of an insurer.  The venue of an act committed by mail is at the point where the matter transmitted by mail is delivered and takes effect.  Unless otherwise indicated, the term insurer as used in this definition includes all corporations, associations, partnerships, and individuals, engaged as principals in the business of insurance and also includes reciprocal insurers.

     (1)  The making of or proposing to make, as an insurer, an insurance contract;

     (2)  The making of or proposing to make, as guarantor or surety, any contract of guaranty or suretyship as a vocation and not merely incidental to any other legitimate business or activity of the guarantor or surety;

     (3)  The taking or receiving of any application for insurance;

     (4)  The receiving or collection of any premium, commission, membership fees, assessments, dues or other consideration for any insurance or any part thereof;

     (5)  The issuance or delivery of contracts of insurance to residents of this State or to persons authorized to do business in this State;

     (6)  The transaction of any kind of insurance business specifically recognized as transacting an insurance business under this code; or

     (7)  The transacting or proposing to transact any insurance business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this code. [L 1987, c 347, pt of §2]

 

     §431:1-216  General business practice.  General business practice means an established measure or model practiced or used at least three times in one calendar year in the general business community. [L 1987, c 349, §1]

 

     [§431:1-217]  Insurance policies issued to construction professionals.  (a)  For purposes of a liability insurance policy that covers occurrences of damage or injury during the policy period and that insures a construction professional for liability arising from construction-related work, the meaning of the term "occurrence" shall be construed in accordance with the law as it existed at the time that the insurance policy was issued.

     (b)  Notwithstanding any other provision to the contrary, this section shall apply to surplus lines insurance as defined by section 431:8-102.

     (c)  Any provision of an insurance policy issued in violation of this section shall be void and unenforceable as against public policy.

     (d)  This section shall apply to all liability insurance policies issued and in effect as of [June 3, 2011].

     (e)  For purposes of this section:

     "Construction professional" means a person, sole proprietorship, partnership, corporation, limited liability corporation, or other entity that engages in an activity intended to assist in the development, construction, or repair of an improvement to real property, including a contractor licensed pursuant to chapter 444, a building owner, or a developer of a project regardless of whether the person or entity maintains a professional license.

     "Liability insurance policy" means a contract of insurance including an owner-controlled, contractor-controlled, or other similar pooled insurance program that covers occurrences of damage or injury during the policy period and that insures a construction professional for liability arising from construction-related work. [L 2011, c 83, §2]

 

Case Notes

 

  Subsection (a) required that commercial general liability umbrella policies in question, issued by plaintiff insurers in 2007, be interpreted under the law as it existed in 2007; even if this statute ostensibly nullified the Hawaii intermediate court of appeals' decision in Group Builders by "restoring" pre-Group Builders law, the statute did not purport to nullify any decision preceding Group Builders; thus, the policies in issue continued to fall under the Ninth Circuit's 2004 analysis in Burlington.  870 F. Supp. 2d 1015 (2012).

  Pursuant to subsection (a), the court could not construe the meaning of the term "occurrence" based on the holding in Group Builders because the case was decided on May 19, 2010, and was not in existence when plaintiff issued the general liability insurance policies, the most recent of which took effect on January 18, 2010.  The operative case law was that which existed at the time plaintiff issued the first policy, which took effect on November 11, 2002.  891 F. Supp. 2d 1179 (2012).

  Cited:  955 F. Supp. 2d 1121 (2013).

  Mentioned:  829 F. Supp. 2d 914 (2011).

 

 

ARTICLE 2

ADMINISTRATION OF INSURANCE LAWS

 

PART I.  INSURANCE DIVISION

 

     §431:2-101  Insurance division.  The insurance division is established within the department of commerce and consumer affairs. [L 1987, c 347, pt of §2]

 

     §431:2-102  Insurance commissioner.  (a)  The insurance division shall be under the supervision and control of an administrator who shall be known as the insurance commissioner.  The director of commerce and consumer affairs shall, with the approval of the governor, appoint the insurance commissioner who shall not be subject to chapter 76.  The insurance commissioner shall hold the insurance commissioner's office at the pleasure of the director of commerce and consumer affairs and shall be responsible for the performance of the duties imposed upon the division.

     (b)  Commissioner, where used in this code, means the insurance commissioner of this State. [L 1987, c 347, pt of §2; am L 2000, c 253, §150]

 

     §431:2-103  Salary.  The salary of the commissioner shall be set by the director of commerce and consumer affairs but shall not be more than the maximum salary of first deputies to department heads. [L 1987 c 347, pt of §2]

 

Cross References

 

  Salary of deputies or assistants, see §26-53.

 

     §431:2-104  Seal.  The official seal of the commissioner shall be a vignette of King Kamehameha I, with the words "Insurance Commissioner, State of Hawaii" surrounding the vignette.  Any certificate or license issued by the commissioner shall bear the commissioner's official seal. [L 1987, c 347, pt of §2]

 

     §431:2-105  Deputies, employees.  (a)  There shall be a chief deputy commissioner, who shall be subject to chapter 76.  The chief deputy commissioner shall have the power to perform any act or duty assigned by the commissioner.  If a commissioner has not been appointed, the chief deputy commissioner shall have the power to perform any act that the commissioner is authorized to perform until an appointment becomes effective.  The certificate of the chief deputy commissioner's appointment shall be filed in the office of the lieutenant governor.

     (b)  There may be additional deputy commissioners and examiners and actuarial, technical, and administrative assistants and clerks for such purposes as the commissioner may designate.  All of the positions shall be subject to chapter 76.

     (c)  The commissioner may appoint a senior rate and policy analyst who shall not be subject to chapter 76.

     (d)  The commissioner shall be responsible for the official acts of the commissioner's deputies and employees.

     (e)  The commissioner may require any employee to be bonded as the commissioner deems proper.  The cost of the bond shall be borne by the State. [L 1987, c 347, pt of §2; am L 1988, c 363, §2(1); am L 1999, c 246, §1; am L 2000, c 253, §150; am L 2006, c 48, §7; am L 2011, c 81, §1]

 

 

     §431:2-105.5  Staff.  There are established within the insurance division of the department of commerce and consumer affairs six positions for technical staff, and three positions for clerical staff, necessary to enable the State to meet and maintain National Association of Insurance Commissioners accreditation standards.  These positions shall not be subject to chapter 76. [L 1993, c 321, §1; am L 1999, c 163, §10; am L 2000, c 253, §150]

 

     §431:2-106  Ethical requirements for insurance division staff.  The commissioner, deputies and employees of the insurance division shall not represent, be employed by, own any securities of, be a creditor of, or be financially interested in any other manner in, any insurer authorized to do business in this State, or in any insurance agency in this State, except that the commissioner, or any deputy or employee, may be a policyholder or obligee of any such insurer. [L 1987, c 347, pt of §2]

 

     §431:2-107  Workers' compensation rate analysis.  There shall be established within the insurance division a unit to assist the commissioner in workers' compensation insurance rate-filing and rate-making proceedings under article 14.  The commissioner may employ or contract actuaries, accountants, investigators, clerks, stenographers, and other assistants who shall not be subject to chapter 76. [L 1987, c 347, pt of §2; am L 2000, c 253, §150]

 

Cross References

 

  Limitation on charges, see §431:10C-308.5.

 

     §431:2-108  Commissioner may delegate.  Any power, duty, or function vested in the commissioner by this code may be exercised, discharged, or performed by any employee of the department of commerce and consumer affairs acting in the name and by the delegated authority of the commissioner, with the approval of the director of the department of commerce and consumer affairs. [L 1987, c 347, pt of §2]

 

     §431:2-109  Supplies, convention blanks.  The commissioner shall purchase at the expense of this State and in the manner provided by law:

     (1)  Printing, books, reports, furniture, equipment, and supplies as the commissioner deems necessary to the proper discharge of the commissioner's duties under this code.

     (2)  Convention form insurers' annual statement blanks, which the commissioner may purchase from any printer manufacturing the forms for the various states. [L 1987, c 347, pt of §2]

 

     §431:2-110  Offices.  The commissioner shall have an office at Honolulu, and may maintain such offices elsewhere in this State as the commissioner may deem necessary. [L 1987, c 347, pt of §2]

 

 

PART II.  POWERS AND DUTIES OF COMMISSIONER

 

Note

 

  Annual study and report to 2017-2021 legislature by insurance commissioner on impact of L 2016, c 236 (regarding transportation network companies) on personal motor vehicle insurance policy rates in the State (repealed September 1, 2021).  L 2016, c 236, §§3, 6.

  State innovation waiver task force; health care reform plan; reports to 2015-2017 legislature (dissolved June 30, 2017).  L 2014, c 158; L 2015, c 184.

 

 

     §431:2-201  General powers and duties.  (a)  The commissioner shall have the authority expressly conferred upon the commissioner by or reasonably implied from the provisions of this code.

     (b)  The commissioner shall execute the commissioner's duties and shall enforce this code.

     (c)  The commissioner may:

     (1)  Make reasonable rules for effectuating any provision of this code, except those relating to the commissioner's appointment, qualifications, or compensation.  The commissioner shall adopt rules to effectuate article 10C of chapter 431, subject to the approval of the governor's office and the requirements of chapter 91;

     (2)  Conduct examinations and investigations to determine whether any person has violated any provision of this code or to secure information useful in the lawful administration of any provision;

     (3)  Require applicants to provide fingerprints and pay a fee to allow the commissioner to make a determination of license eligibility after obtaining state and national criminal history record checks from the Hawaii criminal justice data center and the Federal Bureau of Investigation; and

     (4)  Require, upon reasonable notice, that insurers report any claims information the commissioner may deem necessary to protect the public interest. [L 1987, c 347, pt of §2; am L 1998, c 275, §12; am L 2003, c 212, §15; am L 2009, c 77, §13]

 

Attorney General Opinions

 

  The division will be responsible for enforcement of health insurance provisions of the reciprocal beneficiaries act [L 1997, c 383], because those provisions are placed within the insurance code and, therefore, are within the commissioner's enforcement responsibility under subsection (b); those provisions can only be enforced against insurers, not employers.  Att. Gen. Op. 97-10.

 

Case Notes

 

  Commissioner's rulemaking authority enabled commissioner to adopt procedural mechanism, i.e., peer review process, through which guidelines for service provider fees and frequency of treatment may be exceeded.  927 F. Supp. 1330.

 

 

     [§431:2-201.2]  Standards for commissioner.  When reviewing a uniform standard, the commissioner shall consider the following standards in determining whether to opt out of a uniform standard:

     (1)  Whether the public interest is being served or protected;

     (2)  Whether the reasonable expectations of the consumer will be met;

     (3)  Whether the uniform standard is or will require a reasonably clear, plain English communication to the consumer;

     (4)  Whether the consumer will be protected in a typical transaction where the consumer may have less power, information, or understanding of the meaning or consequences of the transaction, or any part thereof, than the insurer or producer;

     (5)  The long-term effects of the uniform standard;

     (6)  The possible effects of the uniform standard on the financial condition of insurers;

     (7)  Confidentiality requirements in state or federal law;

     (8)  State and federal constitutional issues;

     (9)  The impact of the uniform standard on any provision of the insurance code or any state or federal law;

    (10)  The uniform standard's particular impact in the State and any conditions unique to the State; and

    (11)  The integration of the uniform standard with state or federal law and any possible conflicts with such laws. [L 2004, c 104, §3]

 

     [§431:2-201.3  Criminal convictions; consent to engage in business.]  (a)  Any person who is engaged in the business of insurance or who is about to engage in the business of insurance in this State and who has been convicted of any felony shall request the commissioner's written consent to engage in the business of insurance.

     (b)  After receipt of the request, the commissioner, in writing, may:

     (1)  Consent to the person engaging in the business of insurance;

     (2)  Provide a limited consent; or

     (3)  Deny the individual the privilege of engaging in the business of insurance.

     (c)  Any person who fails to submit the request as required by this section and who engages in the business of insurance without the written consent of the commissioner shall be in violation of this chapter and subject to the fines and penalties provided under this chapter.

     (d)  The commissioner may prescribe the format and content of the form used to request the commissioner's written consent to engage in the business of insurance. [L 2000, c 73, §1]

 

     §431:2-201.5  Conformity to federal law.  (a)  The provisions of title 42 United States Code section 300gg, et seq., as they relate to group and individual health insurance shall apply to title 24, except:

     (1)  Where state law provides greater health benefits or coverage than title 42 United States Code section 300gg, et seq., state law shall be applicable; and

     (2)  This section shall not apply to or affect life insurance, endowment, or annuity contracts, or any supplemental contract thereto, described in section 431:10A-101(4).

     (b)  The following definitions shall be used when applying title 42 United States Code section 300gg, et seq.:

     "Employee" means an employee who works on a full-time basis with a normal workweek of twenty hours or more.

     "Group health issuer" means all persons offering health insurance coverage to any group or association, but shall not include those persons offering benefits exempted from title I of the Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, under sections 732(c) and 733(c) of title I of the Employee Retirement Income Security Act of 1974 and sections 2747 and 2791(c) of the Public Health Service Act.

     "Small employer" means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least one but no more than fifty employees on business days during the preceding calendar year and who employs at least one employee on the first day of the plan year.

     (c)  All group health issuers shall offer all small group health plans to all small employers whose employees live, work, or reside in the group health issuer's service areas; provided that the commissioner may exempt a group health issuer if the commissioner determines that the group health issuer does not have the capacity to deliver services adequately to enrollees of additional groups given its obligation to existing employer groups; and provided further that the commissioner shall exempt from this subsection group health plans offered to small employers that employ only one employee, if the group health issuer offers the small employer groups at least one small group health plan that meets the requirements of chapter 393, and upon the determination by the commissioner that the group health issuer has the capacity to adequately deliver services to enrollees of the additional groups, subject to its obligations to existing employer groups.

     (d)  A group health issuer shall be prohibited from imposing any preexisting condition exclusion.

     (e)  The commissioner may adopt rules to implement, clarify, or conform title 24 to title 42 United States Code section 300gg, et seq.

     (f)  The adoption of the Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, for the purposes of title 24 is not an adoption for any purposes for income taxes under chapter 235.

     (g)  The State shall have jurisdiction over any matter that title 42 United States Code section 300gg, et seq., permits, including jurisdiction over enforcement.

     (h)  As used in this section, "small group health plans" means the medical plans currently offered, advertised, or marketed by a group health issuer for small employers. [L 1997, c 291, §2; am L 1999, c 93, §5; am L 2000, c 151, §1; am L 2001, c 55, §19; am L 2004, c 122, §2; am L 2007, c 247, §1; am L 2008, c 120, §§1, 3; am L 2009, c 11, §14; am L 2013, c 192, §4]

 

 

     [§431:2-201.8]  Sales to members of the armed forces.  Pursuant to the Military Personnel Financial Services Protection Act, Pub. L. No. 109-290, the commissioner shall have the authority to adopt rules to protect service members of the United States armed forces from dishonest and predatory life insurance sales practices by declaring certain life insurance practices, identified in the rules, to be false, misleading, deceptive, or unfair. [L 2007, c 233, §2]

 

     §431:2-202  Orders and notices.  (a)  Orders and notices of the commissioner shall not be effective unless in writing and signed by the commissioner or by a person acting under authority delegated by the commissioner pursuant to section 431:2-108.

     (b)  Every such order or notice shall:

     (1)  Contain a concise statement of the grounds upon which it is based.

     (2)  Designate the provisions of this code pursuant to which action is so taken or proposed to be taken.

     (3)  State the effective date of the order or notice.

     (4)  Contain other matters as may be required by section 91-12.

     (c)  An order or a notice may be given by delivery to the person to be ordered or notified or by mailing it, postage prepaid, and registered with return receipt requested addressed to the person at the person's residence or principal place of business as last of record in the department of commerce and consumer affairs. [L 1987, c 347, pt of §2; am L 2004, c 122, §3]

 

     §431:2-202.5  Approval; when deemed effective.  Except as provided otherwise, any approval required by law shall be deemed granted on the sixtieth calendar day following the filing of the request for approval if the commissioner does not take any affirmative action to grant or deny the approval within sixty calendar days of the request. [L 2000, c 264, §1; am L 2001, c 121, §1; am L 2011, c 81, §2]

 

 

     §431:2-203  Enforcement.  (a)  The commissioner may prosecute an action in any court of competent jurisdiction to enforce any order or fine made by the commissioner pursuant to any provision of this code.

 (b)(1)  A person who intentionally or knowingly violates, intentionally or knowingly permits any person over whom the person has authority to violate, or intentionally or knowingly aids any person in violating any insurance rule or statute of this State or any effective order issued by the commissioner, shall be subject to any penalty or fine as provided by this code or by the Penal Code of the Hawaii Revised Statutes.

     (2)  If the commissioner has cause to believe that any person has violated any penal provision of this code or of other laws relating to insurance, the commissioner shall proceed against that person or certify the facts of the violation to the public prosecutor of the jurisdiction in which the offense was committed.

     (3)  Violation of any provision of this code is punishable by a fine of not less than $100 nor more than $10,000 per violation, or by imprisonment for not more than one year, or both, in addition to any other penalty or forfeiture provided herein or otherwise by law.

     (4)  The terms "intentionally" and "knowingly" shall have the same meanings as defined in section 702-206(1) and (2).

     (c)  If any licensee doing business in this State, persistently or substantially violates this code or an order of the commissioner, and there are grounds for delinquency proceedings against such licensee, or the licensee's methods and practices in the conduct of the licensee's business endanger, or the licensee's financial resources are inadequate to safeguard, the legitimate interest of the licensee's customers or the public, the commissioner may, after a hearing, in whole or in part, suspend, place on probation, limit, or refuse to renew the license or certificate of authority pursuant to section 431:3-217 to section 431:3-221.

     (d)  If the commissioner has cause to believe that any person is violating or is about to violate any provision of this code or any order of the commissioner, the commissioner may issue a cease and desist order to enforce compliance with this code or any order of the commissioner, or bring an action in any court of competent jurisdiction to enjoin the person from continuing the violation or doing any act in furtherance thereof.  The commissioner shall have the discretion to include in a cease and desist order or request in an action brought in any court an assessment of a monetary penalty and restitution against any person who violates this code or who has violated an order of the commissioner.

     (e)  If, upon examination or at any other time, the commissioner has reasonable cause to believe that any domestic insurer requires supervision because it is in such condition as to render the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if the domestic insurer gave its consent, then the commissioner may summarily proceed pursuant to section 431:15-201.

     (f)  The attorney general, corporation counsels, and county prosecuting attorneys, on behalf of the commissioner, shall bring an action in forfeiture against an insurer who violates any order or notice of such order issued by the commissioner.  The notice shall be given to the insurer of the commissioner's intention to proceed under such order against the person who does not comply with the order issued.  The order may contain this notice of intention to seek a forfeiture if the order is disobeyed.  The forfeiture shall be in an amount that the court considers just, but may not exceed an amount of $10,000 for each day that the violation continues after the commencement of the action until judgment is rendered.  No forfeiture may be imposed under this subsection if at the time the forfeiture action is commenced, the insurer was in compliance with the order, or if the violation of the order occurred during the order suspension period.  If, after a judgment is rendered, the insurer still does not comply with the order, the commissioner may commence a new action of forfeiture, and may continue commencing actions in forfeiture until the insurer complies.  All proceeds from actions of forfeiture shall be paid to the director of finance and paid into the compliance resolution fund.

     (g)  A monetary penalty and restitution may be imposed in addition to any applicable suspension, revocation, or denial of a license or certificate of authority. [L 1987, c 347, pt of §2; am L 1995, c 232, §6; am L 1999, c 163, §15(1) and c 246, §2; am L 2000, c 4, §6; am L 2002, c 39, §4; am L 2009, c 149, §3; am L 2012, c 66, §2]

 

 

     §431:2-204  Commissioner's power to subpoena.  (a)  The commissioner, either on the commissioner's own behalf or on behalf of any interested party, may take depositions, and subpoena witnesses or documentary evidence.  The commissioner may administer oaths, and examine under oath any individual relative to the affairs of any person being examined, or relative to the subject of any hearing or investigation.

     (b)  The subpoena shall have the same force and effect and shall be served in the same manner as if issued from a court of record.

     (c)  Witness fees and mileage, if claimed, shall be allowed the same as for testimony in a court of record.  Witness fees, mileage, and the actual expense necessarily incurred in securing attendance of witnesses and their testimony shall be itemized, and shall be paid by the person as to whom the examination is being made, or by the person if other than the commissioner, at whose request the hearing is held.

     (d)  When the commissioner, through the insurance fraud investigations branch, is conducting an investigation of possible violations of part IV, the commissioner shall pay to a financial institution that is served a subpoena issued under this section a fee for reimbursement of the costs that are necessary and which have been directly incurred in searching for, reproducing, or transporting books, papers, documents, or other objects designated by the subpoena.  Reimbursement shall be paid at a rate not to exceed the rate set forth in section 28-2.5(d). [L 1987, c 347, pt of §2; am L 1998, c 155, §1; am L 2009, c 149, §4]

 

Cross References

 

  Witness fees, mileage, see §607-12.

 

     §431:2-205  Commissioner to receive service of legal process on foreign or alien insurer.  (a)  Each authorized foreign or alien insurer shall appoint the commissioner as its attorney to receive service of, and upon whom may be served, all legal process issued against it in this State upon causes of action arising within this State.  Service upon the commissioner as attorney shall constitute service upon the insurer.

     (b)  With the appointment, the insurer shall designate by a name and address the person to whom the commissioner shall forward legal process so served upon the commissioner.  The insurer may change such person by filing a new designation.  However, the insurer's last known principal office may be used by the commissioner in lieu of the designated person.

     (c)  The insurer shall file with the commissioner a resolution adopted by its board of directors or other governing board consenting that service of process upon the commissioner in any action or proceeding against the insurer brought or pending in this State upon any cause of action arising in or growing out of business transacted in this State, shall be valid service upon the insurer, and the consent shall be irrevocable, so long as a policy of insurance of such insurer shall remain in force in this State, or any loss remains unpaid therein.

     (d)  The insurer shall also file the name and business address of its authorized resident agent upon whom process may be served in all cases.  Until such time as the agent's authority is revoked by a notice in writing filed in the office of the commissioner, service may be had upon the insurer by personal service upon the agent.  In case a corporation is designated as an agent, service of process may be had by serving the same upon the president, vice-president, secretary, treasurer, or any director thereof; and in case a partnership is designated as an agent, service of process may be had by serving the same upon any member thereof.  Service may be had on either the authorized agent or the commissioner. [L 1987, c 347, pt of §2]

 

     §431:2-206  How service on commissioner made.  (a)  A person competent to serve a summons shall serve upon the commissioner triplicate copies of legal process against an insurer for whom the commissioner is attorney.  In the absence of the commissioner, the process may be served upon the chief deputy or the deputy in charge of the insurance function.  At the time of service the plaintiff shall pay to the commissioner $25, taxable as costs in the action.

     (b)  In lieu of service on the commissioner, legal process may be served upon a domestic reciprocal insurer by serving the insurer's attorney-in-fact at the attorney-in-fact's principal offices.

     (c)  The commissioner shall forthwith send one of the copies of the process to the person designated for the purpose by the insurer in its most recent designation filed with the commissioner, or to the insurer at its last known principal office if no such designation is on file, and return one copy to the plaintiff with the commissioner's acknowledgment of service.

     (d)  The commissioner shall keep a record of the day and hour of service upon the commissioner of all such legal process.  No proceedings shall be had against the insurer, and the insurer shall not be required to appear, plead, or answer until the expiration of forty days after the date of service upon the commissioner. [L 1987, c 347, pt of §2; am L 1997, c 368, §1; am L 2011, c 81, §3]

 

 

     §431:2-207  Contempt proceedings.  If any individual fails to obey the subpoena, or obeys the subpoena but refuses to testify when required concerning any matter under examination, investigation or the subject of the hearing, the commissioner shall file a written report thereof and proof of service of the commissioner's subpoena in the circuit court of the county where the examination, investigation or hearing is being conducted.  Thereupon the court shall forthwith cause the individual to be brought before it to show cause why the individual should not be held in contempt, and if so held, may punish the individual as if the failure or refusal related to a subpoena from or testimony in that court. [L 1987, c 347, pt of §2]

 

     §431:2-208  Access to records.  (a)  Every person and its officers, employees, and representatives subject to investigation or examination by the commissioner, shall produce and make freely accessible to the commissioner the accounts, records, documents, and files in the person's possession or control relating to the subject of the investigation or examination, and shall otherwise facilitate the investigation or examination.

     (b)  If the commissioner finds the accounts to be inadequate, improperly kept, or improperly posted, the commissioner may employ experts to rewrite, post, or balance the accounts at the expense of the person being examined, if the person has failed to correct the accounting records after the commissioner has given the person written notice and a reasonable opportunity to do so.

     (c)  An insurer or licensee shall issue a written response with reasonable promptness, in no case more than fifteen working days, to any written inquiry made by the commissioner regarding a claim, consumer complaint, or sales or marketing practice.  The response shall be more than an acknowledgment that the commissioner's communication has been received, and shall adequately address the concerns stated in the communication. [L 1987, c 347, pt of §2; am L 1997, c 83, §1; am L 2004, c 122, §4; am L 2010, c 116, §1(3)]

 

 

     §431:2-209  Records and reports.  (a)  The commissioner shall preserve in permanent form records and reports of the commissioner's proceedings, hearings, investigations, and examinations, and shall file the records in the commissioner's office.

     (b)  The records of the commissioner and insurance filings in the commissioner's office shall be open to public inspection, except as otherwise provided in this code.

     (c)  One year after conclusion of the transactions to which they relate, the commissioner may destroy any correspondence, void or obsolete filings relating to rates, certificate of authority applications, self-insurance applications, registrations, foreign or alien insurers' annual statements, valuation reports, certificates of compliance and deposits, cards, and expired bonds.  Three years after the conclusion of the transactions to which they relate, the commissioner may destroy any claim files, working papers of examinations, reports of examination by insurance supervisory officials of other states, void or obsolete filings relating to license applications, records of hearings and investigations, and any similar records, documents, or memoranda now or hereafter in the commissioner's possession.

     (d)  Three years after the date filed or within three years of the due date prescribed for the filing of the tax report, whichever is later, the commissioner may destroy the tax reports of any foreign or alien insurers, surplus lines brokers, or independently procured insureds, or similar records or reports now or hereafter in the commissioner's possession.

     (e)  The following records and reports on file with the commissioner shall be confidential and protected from discovery, production, and disclosure for so long as the commissioner deems prudent:

     (1)  Complaints and investigation reports;

     (2)  Working papers of examinations, complaints, and investigation reports;

     (3)  Proprietary information, including trade secrets, commercial information, and business plans, which, if disclosed may result in competitive harm to the person providing the information; and

     (4)  Any documents or information received from the National Association of Insurance Commissioners, the federal government, insurance regulatory agencies of foreign countries, or insurance departments of other states, territories, and commonwealths that are confidential in other jurisdictions.  The commissioner may share information, including otherwise confidential information, with the National Association of Insurance Commissioners, the federal government, insurance regulatory agencies of foreign countries, or insurance departments of other states, territories, and commonwealths so long as the statutes or regulations of the other jurisdictions permit them to maintain the same level of confidentiality as required under Hawaii law.

     (f)  The commissioner shall:

     (1)  Treat and maintain an applicant's fingerprints and any criminal history record information obtained under this code as confidential;

     (2)  Apply security measures consistent with the Federal Bureau of Investigation Criminal Justice Information Services Division's standards for the electronic storage of fingerprints and necessary identifying information; and

     (3)  Limit the use of the records solely to purposes authorized by law.

Fingerprints and criminal history record information shall not be subject to subpoena, other than subpoenas issued in criminal actions or investigations, and shall be confidential by law and privileged and not subject to discovery or admissible in evidence in any private civil action.

     (g)  The commissioner shall not disclose any information that is exempt from disclosure by federal or Hawaii statutes. [L 1987, c 347, pt of §2; am L 1989, c 195, §10; am L 1991, c 248, §1; am L 1993, c 205, §2; am L 1995, c 232, §7; am L 2000, c 182, §4; am L 2004, c 122, §5; am L 2007, c 233, §26; am L 2009, c 77, §14; am L 2014, c 186, §5]

 

Cross References

 

  Uniform Information Practices Act (Modified), see chapter 92F.

 

 

     §431:2-210  Copies and certificates as evidence.  (a)  Copies of records or documents in the commissioner's office certified to by the commissioner shall be received as evidence in all courts in the same manner and to the same effect as if they were the originals.

     (b)  When required for evidence in court, the commissioner shall furnish the commissioner's certificate as to the authority of an insurer or other licensee in this State on any particular date, and the court shall receive the certificate in lieu of the commissioner's testimony. [L 1987, c 347, pt of §2]

 

Cross References

 

  Requirement of original, see §626-1, rule 1002.

 

     §431:2-211  Annual report.  The commissioner, as early each year as accurate preparation enables, shall prepare and submit to the legislature a report which shall contain:

     (1)  The condition of all insurers authorized to do business in this State during the preceding year.

     (2)  A summary of abuses and deficiencies in benefit payments, the complaints made to the commissioner and their disposition, and the extent of compliance and noncompliance by each insurer with the provisions of this code.

     (3)  Such additional information and comments relative to insurance activities in this State as the commissioner deems proper. [L 1987, c 347, pt of §2]

 

     §431:2-212  Interstate cooperation.  (a)  The commissioner shall to the extent the commissioner deems useful for the proper discharge of the commissioner's responsibilities under this code:

     (1)  Consult and cooperate with the public officials having supervision over insurance in the other states.

     (2)  Share jointly with any one or more of the other states in the employment of actuaries, statisticians, and other insurance technicians, whose services or the products thereof are made available and are useful to the participating states and to the commissioner.

     (3)  Share jointly with any one or more of the other states in establishing and maintaining offices and clerical facilities for purposes useful to the participating states and to the commissioner.

     (b)  All arrangements made jointly with any one or more of the other states under subsection (a) shall be in writing executed on behalf of this State by the commissioner.  Any such arrangement, as to participation of this State therein, shall be subject to termination by the commissioner at any time upon reasonable notice.

     (c)  For the purposes of this code the National Association of Insurance Commissioners means that voluntary organization of the public officials having supervision of insurance in the respective states, districts, and territories of the United States, whatever other name the organization may hereafter adopt, and in the affairs of which each of the public officials are entitled to participate subject to the constitution and bylaws of the organization. [L 1987, c 347, pt of §2; am L 2004, c 122, §6]

 

     §431:2-214  The commissioner's education and training fund.  (a)  The commissioner may establish a separate fund designated as the commissioner's education and training fund.

     (b)  This fund may be used to compensate or reimburse staff and personnel of the insurance division for education and training.  Upon approval by the commissioner, staff and personnel may be compensated or reimbursed for:

     (1)  Actual travel expenses in amounts customary for these expenses;

     (2)  A reasonable living expense allowance at a rate customary for these expenses;

     (3)  Per diem compensation at a customary rate; and

     (4)  Any fees or charges necessary to attend educational and training conferences, workshops, seminars, and any other event of this nature.

     (c)  Any person receiving reimbursement or compensation from the commissioner's education and training fund shall submit to the commissioner, for approval, a detailed account of all expenses and compensation necessarily incurred on account of any education and training for the insurance division.

     (d)  The commissioner's education and training fund may be used to pay the cost of consumer education and information, including publication of information, brochures, and consumer guides and costs related to conferences, workshops, seminars, and any other event of this nature which the commissioner sponsors or in which the commissioner or insurance division staff participates. [L 1987, c 348, §1; am L 1989, c 195, §11; am L 1993, c 205, §3]

 

     §431:2-215  Deposits to compliance resolution fund.  (a)  All assessments, fees, fines, penalties, and reimbursements collected by or on behalf of the insurance division under title 24, except for the commissioner's education and training fund (section 431:2-214), the patients' compensation fund (Act 232, Session Laws of Hawaii 1984), the drivers education fund underwriters fee (sections 431:10C-115 and 431:10G-107), and the captive insurance administrative fund (section 431:19-101.8) to the extent provided by section 431:19-101.8(b), shall be deposited into the compliance resolution fund under section 26-9(o).  All sums transferred from the insurance division into the compliance resolution fund may be expended by the commissioner to carry out the commissioner's duties and obligations under title 24.

     (b)  Sums from the compliance resolution fund expended by the commissioner shall be used to defray any administrative costs, including personnel costs, associated with the programs of the division, and costs incurred by supporting offices and divisions.  Any law to the contrary notwithstanding, the commissioner may use the moneys in the fund to employ or retain, by contract or otherwise, without regard to chapter 76, hearings officers, attorneys, investigators, accountants, examiners, and other necessary professional, technical, administrative, and support personnel to implement and carry out the purposes of title 24; provided that any position, except any attorney position, that was subject to chapter 76 prior to July 1, 1999, shall remain subject to chapter 76.

     (c)  Moneys deposited by the commissioner in the fund shall not revert to the general fund.

     (d)  The amount or amounts to be assessed for each line or type of insurance or entity regulated under title 24 shall be determined and assessed as provided below:

     (1)  The insurers or entities regulated under title 24 shall be provided at least sixty days notice of when their respective assessments are due;

     (2)  The total amount or amounts to be assessed of insurers or entities regulated under title 24 in all lines or types of insurance shall be calculated based on the commissioner's proposed fiscal year budget, less funds in the insurance regulation sub-account of the compliance resolution fund on June 30 of the fiscal year immediately preceding the fiscal year of the proposed budget and less the commissioner's anticipated revenues;

     (3)  The assessments by line or type shall bear a reasonable relationship to the costs of regulating the line or type of insurance, including any administrative costs of the division; and

     (4)  The sum total of all assessments made and collected shall not exceed the special fund ceiling or ceilings related to the fund that are established by the legislature; provided that the total assessments for all lines or types of insurance in any one fiscal year shall not exceed $5,000,000.

     (e)  The commissioner may suspend an assessment of any insurer if the commissioner determines that an insurer or entity may reach insolvency or other financial difficulty if the assessment is made against that insurer or entity. [L 1999, c 163, §7; am L 2000, c 182, §5 and c 253, §150; am L 2002, c 39, §5; am L Sp 2005, c 1, §1; am L 2006, c 154, §1; am L 2009, c 77, §2]

 

Case Notes

 

  Amounts assessed against insurers for payment into the insurance regulation fund under this section was a regulatory fee and not an unconstitutional tax where (1) the charges were assessed by the commissioner; (2) the assessments were placed into a special fund intended to reimburse the division for insurance industry regulating costs; and (3) moneys from the fund to pay for services provided by the departments of commerce and consumer affairs and budget and finance, and to buttress the division's reserve fund were "used for the regulation or benefit of the parties upon whom the assessment was imposed".  120 H. 51, 201 P.3d 564 (2008).

  Where insurance commissioner imposed a substantial portion of the administrative cost of operating the insurance division and its supporting offices and divisions upon insurers pursuant to this section, and the insurance division's regulatory costs were necessitated by the business of insurers, this section did not violate the equal protection clauses of the Hawaii or U.S. Constitutions.  120 H. 51, 201 P.3d 564 (2008).

  Where regulatory fees assessed against insurers by the insurance commissioner, an officer of the executive branch, for payment into the insurance regulation fund under this section were transferred by the legislature via transfer bills from the insurance division into the general fund, and the regulatory fees became available for general purposes as if derived from general tax revenues, the transfers violated the separation of powers doctrine under the Hawaii constitution, article VIII, §3, and §26-10(b).  120 H. 51, 201 P.3d 564 (2008).

  Amounts assessed by the state insurance division against insurers for payment into the insurance regulation fund under this section did not violate the equal protection clauses of the state and federal constitutions where the regulatory fees were rationally related to the statutory objective of defraying any administrative costs and costs incurred by supporting offices and divisions.  117 H. 454 (App.), 184 P.3d 769 (2008).

 

 

     §431:2-216  Assessments of health insurers.  (a)  Each mutual benefit society under article 1 of chapter 432, health maintenance organization under chapter 432D, and any other entity offering or providing health benefits or services under the regulation of the commissioner, except an insurer licensed to offer accident and health or sickness insurance under article 10A, shall deposit with the commissioner by July 1 of each year an assessment of $10,000 for the first seventy thousand private, nongovernment members the entity covers and an additional assessment on a pro rata basis to be determined and imposed by the commissioner for covered members exceeding seventy thousand; provided that in the third year and each year thereafter, assessments shall be borne on a pro rata basis.  The aggregate annual assessment shall not exceed $1,000,000.  This assessment shall be credited to the compliance resolution fund.  If assessments are increased, the commissioner shall provide to any organization or entity subject to the increased assessment, justification for the increase.

     (b)  The assessments shall be used to defray any administrative costs, including personnel costs, associated with the programs of the division, and costs incurred by supporting offices and divisions.  Any law to the contrary notwithstanding, the commissioner may use the moneys from assessments to employ or retain, by contract or otherwise, without regard to chapter 76, hearings officers, attorneys, investigators, accountants, examiners, and other necessary professional, technical, administrative, and support personnel to implement and carry out the purposes of title 24 as it relates to accident and health or sickness insurance; provided that any position, except any attorney position, that was subject to chapter 76 prior to July 1, 1999, shall remain subject to chapter 76.

     (c)  Moneys credited to the compliance resolution fund that are not used for insurance regulation, general administration purposes, or as otherwise allowed pursuant to section 26-9(o) shall not revert to the general fund nor shall be used for other purposes.

     (d)  The commissioner may suspend any assessment made against any mutual benefit society under article 1 of chapter 432, health maintenance organization under chapter 432D, and any other entity offering or providing health benefits or services under the regulation of the commissioner if the commissioner determines that the entity may reach insolvency or other financial difficulty if the assessment is made against the entity. [L 1999, c 127, §1; am L 2000, c 243, §§6, 11(2) and c 253, §150; am L 2002, c 39, §§6, 7; am L 2003, c 3, §20, c 197, §4, and c 212, §§16, 131; am L 2006, c 154, §2]

 

PART III.  INVESTIGATIONS, EXAMINATIONS, HEARINGS AND APPEALS

 

     §431:2-301  Purpose.  The purpose of this part is to provide an effective and efficient system for examining the activities, operations, financial condition, and affairs of all persons transacting the business of insurance in this State and all persons otherwise subject to the jurisdiction of the commissioner.  The provisions of this part are intended to enable the commissioner to adopt a flexible system of examinations that directs resources as may be deemed appropriate and necessary for the administration of the insurance and insurance-related laws of this State. [L 1987, c 347, pt of §2; am L 1993, c 321, §5]

 

     [§431:2-301.5]  Examiner defined.  For purposes of this part, "examiner" means any individual or firm authorized by the commissioner to conduct an examination under the insurance code. [L 1993, c 321, pt of §2]

 

     [§431:2-301.6]  Conflict of interest.  (a)  No examiner may be appointed by the commissioner if the examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this part.  This section shall not be construed to automatically preclude an examiner from being:

     (1)  A policyholder or claimant under an insurance policy;

     (2)  A grantor of a mortgage or similar instrument on the examiner's residence to a regulated entity if done under customary terms and in the ordinary course of business;

     (3)  An investment owner in shares of regulated diversified investment companies; or

     (4)  A settlor or beneficiary of a "blind trust" into which any otherwise impermissible holdings have been placed.

     (b)  Notwithstanding the requirements of this section, the commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though those persons from time to time may be similarly employed or retained by persons subject to examination under the insurance code. [L 1993, c 321, pt of §2]

 

     [§431:2-301.7]  Conduct of examinations.  (a)  Upon determining that an examination should be conducted, the commissioner or the commissioner's designee shall issue an examination warrant appointing one or more examiners to perform the examination and instructing them as to the scope of the examination.  In conducting the examination, the examiners shall observe those guidelines and procedures set forth in the examiners' handbook adopted by the National Association of Insurance Commissioners.  The commissioner may also employ such other guidelines or procedures as the commissioner may deem appropriate.

     (b)  Every company or person from whom information is sought, including its officers, directors, and agents, shall provide to the examiners appointed under subsection (a) timely, convenient, and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, and any or all computer or other recordings relating to the property, assets, business, and affairs of the company being examined.  The officers, directors, employees, and agents of the company or person shall facilitate the examination and aid in the examination insofar as it is in their power to do so.  The refusal of any company, by its officers, directors, employees, or agents, to submit to examination or to comply with any reasonable written request of the examiners shall be grounds for suspension or refusal of, or nonrenewal of, any license or authority held by the company to engage in an insurance or other business subject to the commissioner's jurisdiction.  Any such proceedings for suspension, revocation, or refusal of any license or authority shall be conducted pursuant to section 431:3-217.

     (c)  The commissioner or any authorized examiner shall have the power to issue subpoenas, administer oaths, and examine under oath any person as to any matter pertinent to the examination.  Upon the failure or refusal of any person to obey a subpoena, the subpoena may be enforced pursuant to section 431:2-207.

     (d)  When conducting an examination, the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners, the cost of which shall be borne by the company that is the subject of the examination.

     (e)  Nothing contained in this part shall be construed to limit the commissioner's authority to terminate or suspend any examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this State.  Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

     (f)  Nothing contained in this part shall be construed to limit the commissioner's authority to use and, if appropriate, to make public any final or preliminary examination report, any examiner or company workpapers, or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action that the commissioner may, in the commissioner's sole discretion, deem appropriate. [L 1993, c 321, pt of §2]

 

     §431:2-301.8  Immunity from liability.  (a)  No cause of action shall arise nor shall any liability be imposed against any examiner appointed or otherwise designated as an examiner by the commissioner for any statements made or conduct performed in good faith while carrying out the provisions of the insurance code.

     (b)  No cause of action shall arise, nor shall any liability be imposed against any person, for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative or examiner pursuant to an examination made under the insurance code, if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.

     (c)  This section does not abrogate nor modify in any way common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection (a).

     (d)  A person identified in subsection (a) shall be entitled to an award of attorneys' fees and costs if the person is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the insurance code, and the party bringing action is not substantially justified to do so.  For the purposes of this section, a proceeding is substantially justified if it has a reasonable basis in law or fact at the time that it is initiated. [L 1993, c 321, pt of §2; am L 2006, c 189, §2]

 

     §431:2-302  Authority, scope, and scheduling of examinations.  (a)  The commissioner or any authorized examiner may conduct an examination of any company as often as the commissioner deems appropriate, but, at a minimum, shall conduct an examination of each domestic insurer at least once every five years.  In scheduling and determining the nature, scope, and frequency of the examinations, the commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and other criteria as set forth in the examiners' handbook adopted by the National Association of Insurance Commissioners and in effect, when the commissioner exercises discretion under this section.

     (b)  For purposes of completing an examination of any insurer, the commissioner may examine or investigate any person, or the business of any person, insofar as such examination or investigation is, in the sole discretion of the commissioner, necessary or material to the examination of the insurer.

     (c)  In lieu of an examination of any foreign or alien insurer licensed in this State, the commissioner may accept an examination report on the insurer as prepared by the state regulatory agency for insurance for the insurer's state of domicile or port-of-entry state until January 1, 1994.  Thereafter, such reports may only be accepted under the following conditions:

     (1)  The state's regulatory agency for insurance was, at the time of the examination, accredited under the National Association of Insurance Commissioners' Financial Regulation Standards and Accreditation Program; or

     (2)  The examination was performed:

          (A)  Under the supervision of an accredited state regulatory agency for insurance; or

          (B)  With the participation of one or more examiners who are employed by an accredited state regulatory agency for insurance and who, after a review of the examination workpapers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their state regulatory agency for insurance. [L 1987, c 347, pt of §2; am L 1989, c 195, §12; am L 1993, c 321, §6; am L 2005, c 132, §1]

 

     §431:2-303  Examination of producers, adjusters, promoters, and independent bill reviewers.  For the purpose of ascertaining its condition, or compliance with this code, the commissioner may as often as the commissioner deems advisable examine the insurance accounts, records, documents, and transactions of:

     (1)  Any insurance producer, adjuster, or independent bill reviewer, including insurance agencies and surplus lines agencies; or

     (2)  Any person engaged in, proposing to be engaged in, or assisting in the promotion or formation of a domestic insurer, a stock corporation to finance a domestic mutual insurer or the production of its business, or a corporation to be attorney-in-fact for a domestic reciprocal insurer. [L 1987, c 347, pt of §2; am L 2000, c 288, §3; am L 2001, c 216, §3]

 

     §431:2-304  Examination of guaranty associations.  (a)  The Hawaii Insurance Guaranty Association shall be subject to examination and regulation by the commissioner.  The board of directors shall submit, not later than March 30 of each year, a financial report for the preceding calendar year in a form approved by the commissioner.

     (b)  The Hawaii Life and Disability Insurance Guaranty Association shall be subject to examination and regulation by the commissioner.  The board of directors shall submit to the commissioner each year not later than one hundred twenty days after the association's fiscal year, a financial report in a form approved by the commissioner and a report of its activities during the preceding fiscal year. [L 1987, c 347, pt of §2; am L 2003, c 212, §17]

 

     §431:2-305  Examination reports.  (a)  All examination reports shall be comprised of only facts appearing upon the books, records, or other documents of the insurer, its producers, or other persons examined, or as ascertained from the testimony of its officers, producers, or other persons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonably warranted from the facts.

     (b)  No later than sixty days following completion of the examination, the examiner in charge shall file with the insurance division a verified written report of examination under oath. Upon receipt of the verified report, the insurance division shall transmit the report to the insurer or person examined, together with a notice that shall afford the insurer or person examined a reasonable opportunity for not more than thirty days to make a written submission or rebuttal with respect to any matters contained in the examination report.

     (c)  Within thirty days of the end of the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's workpapers, and enter an order to:

     (1)  Adopt the examination report as filed, or with modifications or corrections.  If the examination report reveals that the insurer or person is operating in violation of any law, rule, or prior order of the commissioner, the commissioner may order the insurer or person to take any action the commissioner considers necessary and appropriate to cure the violation;

     (2)  Reject the examination report with directions to the examiner to reopen the examination for the purpose of obtaining additional data, documentation, or information, and refiling pursuant to subsection (b); or

     (3)  Call for an investigatory hearing with no fewer than twenty days notice to the insurer or person for purposes of obtaining additional documentation, data, information, or testimony.

     (d)  Orders shall be issued and hearings conducted as follows:

     (1)  All orders entered pursuant to subsection (c)(1) shall be accompanied by findings and conclusions resulting from the commissioner's consideration and review of the examination report, relevant examiner workpapers, and any written submissions or rebuttals.  Any order shall be considered a final administrative decision and may be appealed pursuant to chapter 91, and shall be served upon the insurer or person by certified mail, together with a copy of the adopted examination report.  Within thirty days of the issuance of the adopted report, the insurer or person shall file affidavits executed by each of its directors stating under oath that they have received a copy of the adopted report and related orders, except that for examinations of producers, adjusters, independent bill reviewers, or surplus lines brokers, serving the copy of the adopted report and related orders by certified mail, return receipt requested, shall satisfy the service requirement and no affidavits shall be required; and

     (2)  Any hearing conducted under subsection (c)(3) by the commissioner or authorized representative shall be conducted as a nonadversarial confidential investigatory proceeding as may be necessary for the resolution of any inconsistencies, discrepancies, or disputed issues apparent upon the face of the filed examination report or raised by or as a result of the commissioner's review of relevant workpapers or raised by the written submission or rebuttal of the insurer or person.  Within twenty days of the conclusion of any hearing, the commissioner shall enter an order pursuant to subsection (c)(1):

          (A)  The commissioner shall not appoint an examiner as an authorized representative to conduct the hearing.  The hearing shall proceed expeditiously with discovery by the insurer or person limited to the examiner's workpapers that tend to substantiate any assertions set forth in any written submission or rebuttal.  The commissioner or the commissioner's representative may issue subpoenas for the attendance of any witnesses or the production of any documents deemed relevant to the investigation, whether under the control of the division, the insurer, or other persons.  The documents produced shall be included in the record and testimony taken by the commissioner or the commissioner's representative shall be under oath and preserved for the record;

          (B)  The hearing shall proceed in accordance with departmental rules adopted under chapter 91; and

          (C)  Nothing contained in this section shall require the insurance division to disclose any information or records that would indicate or show the existence or content of any investigation or activity of a criminal justice agency.

     (e)  The examination report shall be disseminated as follows:

     (1)  Upon the adoption of the examination report under subsection (c)(1), the commissioner shall continue to hold the content of the examination report as private and confidential information for a period of fifteen days, except to the extent provided in subsection (b).  Thereafter, the commissioner may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication; and

     (2)  Nothing contained in this code shall prevent or be construed as prohibiting the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the regulatory agency for insurance of any state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, so long as such agency or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this part.

     (f)  All working papers, recorded information, documents, and copies thereof produced by, obtained by, or disclosed to the commissioner or any other person in the course of an examination, shall be confidential and not subject to subpoena and shall not be made public by the commissioner or any other person, except to the extent provided in subsection (e).  Access may be granted to the National Association of Insurance Commissioners.  Any person shall agree in writing, prior to receiving the information, to provide to it the same confidential treatment as required by this part, unless the prior written consent of the insurer to which the information pertains has been obtained. [L 1987, c 347, pt of §2; am L 1993, c 205, §4 as superseded by c 321, §7; am L 1995, c 232, §8; am L 2000, c 288, §4; am L 2001, c 216, §4; am L 2004, c 122, §7]

 

     §431:2-306  Examination expense.  (a)  Examinations of:

     (1)  Any insurer;

     (2)  Any person subject to examination under section 431:2-303(2); or

     (3)  Any insurance guaranty fund established pursuant to article 16;

shall be at the expense of the insurer, person, or guaranty fund examined.  Examination expenses shall include fees, mileage, and expenses incurred as to witnesses or any other person, as defined in article 1, subject to an examination by the commissioner.

     (b)  The insurer, person, or guaranty fund examined and liable therefor shall pay to the commissioner's examiners upon presentation of an itemized statement, their actual travel expenses, their reasonable living expense allowance, and their per diem compensation at a reasonable rate approved by the commissioner, incurred on account of the examination.  All payments collected by the commissioner shall be remitted to:

     (1)  The compliance resolution fund; or

     (2)  The captive insurance administrative fund if independent contractor examiners or captive staff examiners were employed for a captive insurer's examination.

The commissioner or the commissioner's examiners shall not receive or accept any additional emolument on account of any examination.

     (c)  The commissioner may assess all examination costs of any person subject to examination under section 431:2-303(1) and article 16 when there is a premium trust fund shortage due to substantial noncompliance with section 431:9A-123.5. [L 1987, c 347, pt of §2; am L 1995, c 232, §9; am L 1997, c 261, §3; am L 1998, c 71, §1; am L 1999, c 163, §11; am L 2002, c 39, §8; am L 2006, c 189, §3]

 

     §431:2-307  REPEALED.  L 1999, c 163, §20.

 

Note

 

  L 1999, c 128, §§1 and 2 purport to amend this section.

 

     §431:2-307.5  Reimbursement and compensation of examiners; source of funds; disposition of receipts.  (a)  All moneys necessary for the compensation and reimbursement of independent contractor examiners and insurance division staff examiners for actual travel expenses, reasonable living expenses, and per diem expenses, at customary rates approved by the commissioner shall be allocated by the legislature through appropriations out of the state compliance resolution fund.  The department shall include in its budgetary request for each upcoming fiscal period, the amounts necessary to effectuate the purposes of this section.

     (b)  All moneys, fees, and other payments received by the commissioner under this part shall be deposited to the credit of the state compliance resolution fund. [L 1995, c 61, §1 as superseded by c 232, §1; am L 1999, c 163, §15(1); am L 2002, c 39, §9]

 

     §431:2-308  Administrative procedure act applies.  (a)  The rules, notices, hearings, orders, and appeals provided for in this code are in all applicable respects subject to chapter 91, unless it is expressly provided otherwise.

     (b)  The commissioner shall hold a hearing if required by this code.  The commissioner may hold other hearings as the commissioner deems necessary for such purposes as are within the scope of this code.

     (c)  The hearings shall be held at a place designated by the commissioner and, at the commissioner's discretion, may be open to the public.

     (d)  Application for a hearing made to the commissioner pursuant to this code shall be in writing and shall specify in what respects the person so applying was aggrieved and the grounds to be relied upon as a basis for the relief to be demanded at the hearing.  Where the commissioner has used the authority contained in section 431:9-235 or section 431:9A-112 to suspend, revoke, or refuse to extend a license subject to the right of the licensee to have a hearing and has suspended the license pending the hearing, the commissioner shall hold the hearing within thirty days after the commissioner's receipt of the application unless postponed by mutual consent.

     (e)  Any appeal made from a decision by the commissioner shall be made pursuant to chapter 91. [L 1987, c 347, pt of §2; am L 1994, c 128, §1; am L 2003, c 212, §18; am L 2006, c 154, §3]

 

[PART IV.]  INSURANCE FRAUD

 

     [§431:2-401]  Definitions.  As used in this part:

     "Branch" means the insurance fraud investigations branch of the insurance division of the department of commerce and consumer affairs.

     "Insurance policy" means a contract issued by an insurer or other licensee.

     "Intentionally" shall have the same meaning as under section 702-206.

     "Knowingly" shall have the same meaning as under section 702-206.

     "Licensee" means an entity licensed under and governed by title 24, including an insurer governed by chapter 431, a mutual benefit society governed by article 1 of chapter 432, a fraternal benefit society governed by article 2 of chapter 432, or a health maintenance organization governed by chapter 432D, and their respective agents and employees engaged in the business of the licensee.

     "Person" means any individual, company, association, organization, group, partnership, business, trust, or corporation; but shall exclude:

     (1)  Insurers, as defined in section 431:1-202, and other licensees, as defined in this part; and

     (2)  Licensed attorneys acting in their capacity as attorneys for a claimant other than the licensed attorney. [L 2009, c 149, pt of §2]

 

 

     §431:2-402  Insurance fraud investigations branch.  (a)  There is established in the insurance division the insurance fraud investigations branch for the purposes set forth in this part.

     (b)  The branch shall:

     (1)  Conduct a statewide program for the prevention of insurance fraud under title 24, including chapters 431, 432, and 432D; provided that the branch shall not have jurisdiction over workers' compensation under chapter 386;

     (2)  Notwithstanding any other law to the contrary, investigate and prosecute in administrative hearings and courts of competent jurisdiction all persons involved in insurance fraud violations; and

     (3)  Promote public and industry-wide education about insurance fraud.

     (c)  The branch may review and take appropriate action on complaints of fraud relating to insurance under title 24, including chapters 431, 432, and 432D, but excluding workers' compensation insurance under chapter 386.

     (d)  The commissioner shall employ or retain, by contract or otherwise, attorneys, investigators, investigator assistants, auditors, accountants, physicians, health care professionals, paralegals, consultants, experts, and other professional, technical, and support staff as necessary to promote the effective and efficient conduct of the branch's activities.  The commissioner may hire these employees without regard to chapters 76 or 89.

     (e)  Notwithstanding any other law to the contrary, an attorney employed or retained by the branch may represent the State in any criminal, civil, or administrative proceeding to enforce all applicable state laws relating to insurance fraud, including criminal prosecutions, disciplinary actions, and actions for declaratory and injunctive relief.  The attorney general may designate an attorney as a special deputy attorney general for purposes of this subsection.

     (f)  Investigators appointed and commissioned under this part shall have and may exercise all of the powers and authority of a police officer or of a deputy sheriff.

     (g)  Funding for the branch shall come from the compliance resolution fund established by section 26-9(o). [L 2009, c 149, pt of §2; am L 2014, c 186, §6]

 

 

     [§431:2-403]  Insurance fraud.  (a)  A person commits the offense of insurance fraud if the person:

     (1)  Intentionally or knowingly misrepresents or conceals material facts, opinions, intention, or law to obtain or attempt to obtain coverage, benefits, recovery, or compensation:

          (A)  When presenting, or causing or permitting to be presented, an application, whether written, typed, or transmitted through electronic media, for the issuance or renewal of an insurance policy or reinsurance contract;

          (B)  When presenting, or causing or permitting to be presented, false information on a claim for payment;

          (C)  When presenting, or causing or permitting to be presented, a claim for the payment of a loss;

          (D)  When presenting, or causing or permitting to be presented, multiple claims for the same loss or injury, including knowingly presenting such multiple and duplicative claims to more than one insurer;

          (E)  When presenting, or causing or permitting to be presented, any claim for payment of a health care benefit;

          (F)  When presenting, or causing or permitting to be presented, a claim for a health care benefit that was not used by, or provided on behalf of, the claimant;

          (G)  When presenting, or causing or permitting to be presented, improper multiple and duplicative claims for payment of the same health care benefit;

          (H)  When presenting, or causing or permitting to be presented, for payment any undercharges for benefits on behalf of a specific claimant unless any known overcharges for benefits under this article for that claimant are presented for reconciliation at the same time;

          (I)  When fabricating, altering, concealing, making an entry in, or destroying a document whether typed, written, or through an audio or video tape or electronic media;

          (J)  When presenting, or causing or permitting to be presented, to a person, insurer, or other licensee false, incomplete, or misleading information to obtain coverage or payment otherwise available under an insurance policy;

          (K)  When presenting, or causing or permitting to be presented, to a person or producer, information about a person's status as a licensee that induces a person or insurer to purchase an insurance policy or reinsurance contract; and

          (L)  When making, or causing or permitting to be made, any statement, either typed, written, or through audio or video tape or electronic media, or claims by the person or on behalf of a person with regard to obtaining legal recovery or benefits;

     (2)  Intentionally or knowingly aids, agrees, or attempts to aid, solicit, or conspire with any person who engages in an unlawful act as defined under this section; or

     (3)  Intentionally or knowingly makes, causes, or permits to be presented, any false statements or claims by any person or on behalf of any person during an official proceeding as defined by section 710-1000.

     (b)  Violation of subsection (a) is a criminal offense and shall constitute:

     (1)  A class B felony if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is more than $20,000;

     (2)  A class C felony if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is more than $300; or

     (3)  A misdemeanor if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is $300 or less.

     (c)  This section shall not supersede any other law relating to theft, fraud, or deception.  Insurance fraud may be prosecuted under this part, or any other applicable statute or common law, and all such remedies shall be cumulative. [L 2009, c 149, pt of §2]

 

 

     [§431:2-404]  Restitution.  Any person convicted under this part shall be ordered by a court to make restitution to any insurer, person, or licensee for any financial loss sustained by that insurer, person, or licensee that was caused by the act or acts for which the person was convicted. [L 2009, c 149, pt of §2]

 

 

     [§431:2-405]  Insurance fraud; administrative penalties.  (a)  In addition to or in lieu of criminal penalties under section 431:2-403(b), any person who commits insurance fraud as defined under section 431:2-403, may be subject to the administrative penalties in this section.

     (b)  If a person is found to have knowingly committed insurance fraud under this part, the commissioner may assess any or all of the following penalties:

     (1)  Restitution to any insurer or any other person of benefits or payments fraudulently received or other damages or costs incurred;

     (2)  A fine of not more than $10,000 for each violation; and

     (3)  Reimbursement of attorneys' fees and costs of the party sustaining a loss under this part; provided that the State shall be exempt from paying attorneys' fees and costs to other parties.

     (c)  Administrative actions brought for insurance fraud under this part shall be brought within six years after the insurance fraud is discovered or by exercise of reasonable diligence should have been discovered and, in any event, no more than ten years after the date on which a violation of this part is committed. [L 2009, c 149, pt of §2]

 

 

     [§431:2-406]  Administrative procedures.  (a)  An administrative penalty may be imposed upon a judgment by a court of competent jurisdiction or upon an order by the commissioner.

     (b)  The commissioner shall hold a hearing in accordance with chapter 91, prior to imposing any administrative remedy. [L 2009, c 149, pt of §2]

 

 

     [§431:2-407]  Acceptance of payment.  A provider's failure to dispute a reduced payment by an insurer shall not constitute an implied admission that a fraudulent billing was submitted. [L 2009, c 149, pt of §2]

 

 

     [§431:2-408]  Civil cause of action for insurance fraud; exemption.  (a)  An insurer or other licensee shall have a civil cause of action to recover payments or benefits from any person who has violated section 431:2-403; provided that no recovery shall be allowed if the person has made restitution pursuant to section 431:2-404 or 431:2-405(b)(1).

     (b)  A person, insurer, or other licensee, including an insurer's or other licensee's adjusters, bill reviewers, producers, representatives, or common-law agents shall not be subject to civil liability for providing information, including filing a report, furnishing oral, written, audiotaped, videotaped, or electronic media evidence, providing documents, or giving testimony concerning suspected, anticipated, or completed insurance fraud to:

     (1)  A court;

     (2)  The commissioner;

     (3)  The branch;

     (4)  The National Association of Insurance Commissioners;

     (5)  The National Insurance Crime Bureau;

     (6)  Any federal, state, or county law enforcement or regulatory agency; or

     (7)  Another insurer or other licensee,

if acting without actual malice and if the information is provided for the purpose of preventing, investigating, or prosecuting insurance fraud, except if the person commits perjury.

     (c)  Civil actions for insurance fraud under this part shall be filed within six years after the insurance fraud is discovered or should have been discovered by exercise of reasonable diligence; provided that no civil action shall be filed more than ten years after the date on which a violation of this part is committed. [L 2009, c 149, pt of §2]

 

 

     [§431:2-409]  Mandatory reporting.  (a)  Within sixty days of an insurer or other licensee's employee or agent discovering credible information indicating a violation of section 431:2-403, or as soon thereafter as practicable, the insurer or licensee shall provide to the branch information, including documents and other evidence, regarding the alleged violation of section 431:2-403.  The insurance fraud investigations branch shall work with the insurer or licensee to determine what information shall be provided.

     (b)  Information provided pursuant to this section shall be protected from public disclosure to the extent authorized by chapter 92F and section 431:2-209; provided that the branch may release the information in an administrative or judicial proceeding to enforce this part to federal, state, or local law enforcement or regulatory authorities, the National Association of Insurance Commissioners, the National Insurance Crime Bureau, or an insurer or other licensee aggrieved by the alleged violation of section 431:2-403. [L 2009, c 149, pt of §2]

 

 

     [§431:2-410]  Deposit into the compliance resolution fund.  All moneys that have been recovered by the department of commerce and consumer affairs as a result of prosecuting insurance fraud violations pursuant to this part, including civil fines, criminal fines, administrative fines, and settlements, but not including restitution made pursuant to section 431:2-404, 431:2-405(b)(1), or 431:2-408, shall be deposited into the compliance resolution fund established pursuant to section 26-9(o). [L 2009, c 149, pt of §2]

 

 

[ARTICLE 2D]

MARKET CONDUCT

 

     [§431:2D-101]  Legislative intent.  The purpose of this article is to establish a framework for insurance division market conduct actions, including:

     (1)  Processes and systems for identifying, assessing, and prioritizing market conduct problems that have a substantial adverse impact on consumers, policyholders, and claimants;

     (2)  Market conduct actions by the commissioner to substantiate those market conduct problems and a means to remedy significant market conduct problems; and

     (3)  Procedures to communicate and coordinate market conduct actions among states to foster the most efficient and effective use of resources. [L 2007, c 227, pt of §1]

 

     §431:2D-102  Definitions.  As used in this article, unless the context indicates otherwise:

     "Commissioner" means the insurance commissioner of the State of Hawaii.

     "Complaint" means a written or documented oral communication to the insurance division primarily expressing a grievance, meaning an expression of dissatisfaction.  For health companies, a grievance is a written complaint submitted by or on behalf of a covered person.

     "Comprehensive market conduct examination" means a review of one or more lines of business of an insurer domiciled in this State that is not conducted for cause.  The term includes a review of rating, tier classification, underwriting, policyholder service, claims, marketing and sales, producer licensing, complaint handling practices, and compliance procedures and policies.

     "Insurance compliance audit" means a voluntary, internal evaluation, review, assessment, audit, or investigation for the purpose of identifying or preventing noncompliance with, or promoting compliance with laws, regulations, orders, or industry or professional standards, which is conducted by or on behalf of an insurer, or which involves an insurer activity regulated by the commissioner.

     "Insurance compliance self-evaluative audit document" means documents prepared as a result of or in connection with an insurance compliance audit.  An insurance compliance self-evaluative audit document may include a written response to the findings of an insurance compliance audit.  An insurance compliance self-evaluative audit document may include, but is not limited to, as applicable, field notes and records of observations, findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, photographs, exhibits, computer generated or electronically recorded information, telephone records, maps, charts, graphs, and surveys; provided that this supporting information is collected or developed for the primary purpose and in the course of an insurance compliance audit.

     "Market analysis" means a process whereby market conduct surveillance personnel collect and analyze information from filed schedules, surveys, required reports, and other sources to develop a baseline and to identify patterns or practices of insurers licensed to do business in this State that deviate significantly from the norm or that may pose a potential risk to the insurance consumer.

     "Market conduct action" means any of the full range of activities that the commissioner may initiate to assess the market and practices of individual insurers, beginning with market analyses and extending to targeted examinations.  The commissioner's activities to resolve an individual consumer complaint or other reports of a specific instance of misconduct are not market conduct actions for purposes of this article.

     "Market conduct examination" means the examination of the insurance operations of an insurer licensed to do business in this State to evaluate compliance with the applicable laws and rules of this State.  A market conduct examination may be either a comprehensive examination or a targeted examination.  A market conduct examination is separate and distinct from a financial examination of an insurer performed pursuant to article 2, but may be conducted at the same time.

     "Market conduct surveillance personnel" means those individuals employed or contracted by the commissioner to collect, analyze, review, or act on information about the insurance marketplace, which identifies patterns or practices of insurers.

     "National Association of Insurance Commissioners" means the organization of insurance regulators from the fifty states, the District of Columbia, and the four United States territories.

     "Qualified contract examiner" means a person under contract to the commissioner, who is qualified by education, experience and, where applicable, professional designations, to perform market conduct actions.

     "Targeted examination" means a focused examination conducted for cause, based on the results of market analysis indicating the need to review either a specific line of business or specific business practices, including but not limited to underwriting and rating, marketing and sales, complaint handling operations, advertising materials, licensing, policyholder services, non-forfeitures, claims handling, or policy forms and filings.  A targeted examination may be conducted by desk examination or by an on-site examination.

     "Third party model or product" means a model or product provided by an entity separate from and not under direct or indirect corporate control of the insurer using the model or product. [L 2007, c 227, pt of §1; am L 2015, c 63, §3]

 

 

     [§431:2D-103]  Domestic responsibility and deference to other states.  (a)  The commissioner shall be responsible for conducting market conduct examinations for policyholder protection, which shall be accomplished by comprehensive or targeted examinations of domestic insurers or the affiliates of domestic insurers and targeted examinations of foreign insurers or the affiliates of foreign insurers as deemed necessary by the commissioner, based on the results of market analysis.  The commissioner may delegate responsibility for conducting an examination of a domestic insurer, foreign insurer, or an affiliate of an insurer to the insurance commissioner of another state if that state's insurance commissioner agrees to accept the delegated responsibility for the examination.

     (b)  The commissioner may delegate responsibility to an insurance commissioner of a state in which the domestic insurer, foreign insurer, or affiliate has a significant number of policies or significant premium volume, as determined by the commissioner by rule.

     (c)  If the commissioner elects to delegate responsibility for examining an insurer, the commissioner shall accept a report of the examination prepared by the commissioner to whom the responsibility has been delegated.

     (d)  In lieu of conducting a market conduct examination of an insurer, the commissioner shall accept a report of a market conduct examination on the insurer prepared by the insurance commissioner of the insurer's state of domicile or another state; provided:

     (1)  The laws of that state applicable to the subject of the examination are deemed by the commissioner to be substantially similar to those of this State;

     (2)  The examining state has a market conduct surveillance system that the commissioner deems comparable to the market conduct surveillance system required under this article; and

     (3)  The examination from the other state's insurance commissioner has been conducted within the past three years.

     (e)  If the insurance commissioner to whom the examination responsibility was delegated pursuant to subsection (a) or the report of a market conduct examination prepared by the insurance commissioner of another state pursuant to subsection (d), did not evaluate the specific area or issue of concern to the commissioner, the commissioner may pursue a targeted examination or market analysis of the unexamined area pursuant to this article.

     (f)  The commissioner's determination under subsection (d) is discretionary and is not subject to appeal.

     (g)  Subject to a determination under subsection (d), if a market conduct examination conducted by another state results in a finding that an insurer should modify a specific practice or procedure, the commissioner shall accept documentation that the insurer has made a similar modification in this State, in lieu of initiating a market conduct action or examination related to that practice or procedure.  The commissioner may require other or additional practice or procedure modifications as are necessary to achieve compliance with specific state laws or regulations, which differ substantially from those of the state that conducted the examination. [L 2007, c 227, pt of §1]

 

     [§431:2D-104]  Market analysis procedures.  (a)  The commissioner shall gather information from data currently available to the insurance division, as well as surveys and required reporting requirements, information collected by the National Association of Insurance Commissioners and a variety of other sources in both the public and private sectors, information from within and outside the insurance industry from objective sources, information from websites for insurers, agents, and other organizations, and information from other sources; provided that prior to use, the sources are published at least annually in a bulletin or circular.

     The information shall be analyzed to develop a baseline understanding of the marketplace and to identify for further review insurers or practices that deviate significantly from the norm or that may pose a potential risk to the insurance consumer.  The commissioner shall use procedures that are substantially similar to the National Association of Insurance Commissioners' guidelines on market analysis as one resource in performing this analysis.

     The commissioner shall use the following policies and procedures in performing the analysis required under this section:

     (1)  Identify key lines of business for systematic review; and

     (2)  Identify companies for further analysis based on available information.

     (b)  If the analysis compels the commissioner to inquire further into a particular insurer or practice, the following continuum of market conduct actions may be considered prior to conducting a targeted, on-site market conduct examination.  The action selected shall be made known to the insurer in writing.  These actions may include but are not limited to:

     (1)  Correspondence with the insurer;

     (2)  Insurer interviews;

     (3)  Information gathering;

     (4)  Policy and procedure reviews;

     (5)  Interrogatories; and

     (6)  Review of insurer self-evaluation and compliance programs, including membership in an organization such as a best-practice organization that has as its central mission the promotion of high ethical standards in the marketplace.

     (c)  The commissioner shall select a market conduct action that is cost-effective for the insurance division and the insurer, while still protecting the insurance consumer.

     (d)  The commissioner shall take those steps reasonably necessary to:

     (1)  Eliminate requests for information that duplicate:

          (A)  Information provided as part of an insurer's annual financial statement, the annual market conduct statement of the National Association of Insurance Commissioners, or other required schedules, surveys, or reports that are regularly submitted to the commissioner; or

          (B)  Data requests made by other states if that information is available to the commissioner, unless the information is state-specific; and

     (2)  Coordinate market conduct actions and findings with other states. [L 2007, c 227, pt of §1]

 

     [§431:2D-105]  Protocols for market conduct actions.  (a)  Market conduct actions taken as a result of a market analysis shall focus on the general business practices and compliance activities of insurers, rather than identifying infrequent or unintentional random errors that do not cause consumer harm.

     (b)  The commissioner may determine the frequency and timing of such market conduct actions.  The timing shall depend upon the specific market conduct action to be initiated, unless extraordinary circumstances indicating a risk to consumers require immediate action.

     If the commissioner has information that more than one insurer is engaged in common practices that may violate the law, the commissioner may schedule and coordinate multiple examinations simultaneously.

     (c)  The insurer shall be notified of any practice or procedure which is to be the subject of a market conduct action and shall be given an opportunity to resolve such matters that arise as a result of a market analysis to the satisfaction of the commissioner before any additional market conduct actions are taken against the insurer.  If the insurer has modified the practice or procedure as a result of a market conduct action taken by the insurance commissioner of another state, the commissioner shall accept appropriate documentation that the insurer has satisfactorily modified the practice or procedure and made similar modification to such practice or procedure in this State. [L 2007, c 227, pt of §1]

 

     [§431:2D-106]  Protocols for market conduct examinations.  (a)  When market analysis identifies a pattern of conduct or practice by an insurer which requires further investigation, and less intrusive market conduct actions identified in section 431:2D‑104(b) are not appropriate, the commissioner has the discretion to conduct targeted market conduct examinations in accordance with procedures that are substantially similar to the National Association of Insurance Commissioners' guidelines on market conduct examination procedures.

     (b)  Causes or conditions, if identified through market analysis, that may trigger a targeted examination, are:

     (1)  Information obtained from a market conduct annual statement, market survey, or report of financial examination indicating potential fraud, that the insurer is conducting the business of insurance without a license or is engaged in a potential pattern of unfair trade practice in violation of article 13;

     (2)  A number of complaints against the insurer or a complaint ratio sufficient to indicate potential fraud, conducting the business of insurance without a license, or a potential pattern of unfair trade practice in violation of article 13.  For the purposes of this section, a complaint ratio shall be determined for each line of business;

     (3)  Information obtained from other objective sources, such as published advertising materials indicating potential fraud, conducting the business of insurance without a license, or evidencing a potential pattern of unfair trade practice in violation of article 13; or

     (4)  Patterns of violations of this chapter and the rules adopted thereunder regarding rate filings, form filings, and termination requirements.

     (c)  If the insurer to be examined is not a domestic insurer, the commissioner shall communicate with and may coordinate the examination with the insurance commissioner of the state in which the insurer is organized.

     (d)  Concomitant with the notification requirements established in subsection (f), the commissioner shall post notification on the National Association of Insurance Commissioners' examination tracking system, or comparable product as determined by the commissioner, that a market conduct examination has been scheduled.

     (e)  Prior to commencement of a targeted on-site market conduct examination, market conduct surveillance personnel shall prepare a work plan and proposed budget.  The proposed budget, which shall be reasonable for the scope of the examination, and work plan, shall be provided to the insurer under examination.  Market conduct examinations, to the extent feasible, shall use desk examinations and data requests prior to a targeted on-site examination.

     Market conduct examinations shall be conducted in accordance with procedures that are substantially similar to the National Association of Insurance Commissioners' guidelines on market conduct examination procedures.

     Prior to the conclusion of a market conduct examination, the individual among the market conduct surveillance personnel who is designated as the examiner-in-charge shall schedule an exit conference with the insurer.

     (f)  Announcement of the examination shall be sent to the insurer and posted on the National Association of Insurance Commissioners' examination tracking system or comparable product, as determined by the commissioner, as soon as possible but not later than sixty days before the estimated commencement of the examination.  The announcement shall contain:

     (1)  The name and address of the insurer being examined;

     (2)  The name and contact information of the examiner-in-charge;

     (3)  The reason for and the scope of the targeted examination;

     (4)  The date the examination is scheduled to begin;

     (5)  Identification of any non-insurance department personnel who will assist in the examination, if known at the time the notice is prepared;

     (6)  A time estimate for the examination;

     (7)  A budget and work plan for the examination and identification of reasonable and necessary costs and fees that will be included in the bill, if the cost of the examination is billed to the insurer; and

     (8)  A request for the insurer to name its examination coordinator.

     (g)  If a targeted examination is expanded beyond the reasons provided to the insurer in the notice of the examination required under this section, the commissioner shall provide written notice to the insurer, explaining the extent of the expansion and the reasons for the expansion.  The commissioner shall provide a revised work plan to the insurer before the beginning of any significantly expanded examination, unless extraordinary circumstances indicating a risk to consumers require immediate action.

     (h)  The commissioner shall conduct a pre-examination conference with the insurer examination coordinator and key personnel to clarify expectations thirty days prior to commencement of the examination.

     (i)  In requesting the information, the commissioner shall use the National Association of Insurance Commissioners' standard data request or comparable product.

     An insurer responding to a commissioner's request to produce information shall produce it as it is kept in the usual course of business or shall organize and label it to correspond with the categories in the request.

     If a commissioner's request does not specify the form or forms for producing electronically stored information, an insurer responding to the request shall produce the information in a form or forms in which the insurer ordinarily maintains it or in a form or forms that are reasonably usable.

     An insurer responding to an information request need not produce the same electronically stored information in more than one form.

     An insurer responding to an information request need not provide the electronically stored information from sources that the company identifies as not reasonably accessible because of undue burden or cost.

     (j)  The commissioner shall adhere to the following timeline, unless a mutual agreement is reached with the insurer to modify the timeline:

     (1)  The commissioner shall deliver the draft report to the insurer within sixty days of the completion of the examination.  Completion of the examination shall be defined as the date the commissioner confirms in writing that the examination is completed;

     (2)  The insurer shall respond with written comments within thirty days of receipt of the draft report;

     (3)  The commissioner shall make a good faith effort to resolve issues and prepare a final report within thirty days of receipt of the insurer's written comments, unless a mutual agreement is reached to extend the deadline.  The commissioner may make corrections and other changes, as appropriate; and

     (4)  The insurer, within thirty days, shall accept the final report, accept the findings of the report, file written comments, or request a hearing.  An additional thirty days shall be allowed if agreed to by the commissioner and the insurer.  Any such hearing request shall be made in writing and shall follow chapter 91.

     The final written and electronic market conduct report shall include the insurer's written response and any agreed-to corrections or changes.  The response may be included either as an appendix or in the text of the examination report.  The insurer shall not be obligated to submit a response.  References to specific individuals by name shall be limited to an acknowledgment of their involvement in the conduct of the examination.

     (k)  Upon adoption of the examination report pursuant to subsection (j), the commissioner shall continue to hold the content of the examination report as private and confidential for a period of thirty days, except as provided in this subsection.  During this time, the report shall not be subject to subpoena and shall not be subject to discovery or admissible as evidence in any private action; provided that no court of competent jurisdiction has ordered production.  Thereafter, the commissioner shall open the report for public inspection; provided no court of competent jurisdiction has stayed its publication.  This section shall not be construed to limit the commissioner's authority to use any final or preliminary market conduct examination report, and examiner or insurer work papers or other documents, or any other information discovered or developed during the course of an examination in the furtherance of any legal or regulatory action that the commissioner, in the commissioner's sole discretion, may deem appropriate.

     Nothing contained in this article shall prevent or be construed as preventing the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the insurance division of this or any other state or agency of the federal government at any time; provided that the agency or office receiving the report or matters relating thereto agrees to hold it confidential and in a manner consistent with this article.

     (l)  Where the reasonable and necessary cost and fees of a market conduct examination are to be assessed against the insurer under examination, the costs and fees shall be consistent with that otherwise authorized by law.  Costs and fees shall be itemized and bills shall be provided to the insurer on a monthly basis for review prior to submission for payment.

     The commissioner shall maintain active management and oversight of examination costs and fees, including costs and fees associated with the use of insurance division personnel and examiners and with retaining qualified contract examiners necessary to perform an examination.  To the extent the commissioner retains outside assistance, the commissioner shall have written protocols that:

     (1)  Clearly identify the types of functions subject to outsourcing;

     (2)  Provide specific timelines for completion of the outsourced review;

     (3)  Require disclosure of contract examiners' recommendations;

     (4)  Establish and use a dispute resolution or arbitration mechanism to resolve conflicts with insurers regarding examination costs and fees; and

     (5)  Require disclosure of the terms of the contracts with the outside consultants that will be used, specifically the costs and fees or hourly rates, or both, that can be charged.

     The commissioner shall review and affirmatively endorse detailed billings from the qualified contract examiner before the detailed billings are sent to the insurer.

     The commissioner may contract in accordance with applicable state contracting procedures, for qualified contract actuaries and examiners as the commissioner deems necessary; provided that the compensation and per diem allowances paid to the contract persons shall not exceed one hundred twenty-five per cent of the compensation and per diem allowances for examiners set forth in the guidelines adopted by the National Association of Insurance Commissioners, unless the commissioner demonstrates that one hundred twenty-five per cent is inadequate under the circumstances of the examination.

     (m)  The commissioner may not conduct a comprehensive market conduct examination more frequently than once every three years.  The commissioner may waive conducting a comprehensive market conduct examination based on market analysis. [L 2007, c 227, pt of §1]

 

     §431:2D-107  Confidentiality requirements.  (a)  Except as otherwise provided by law, market conduct surveillance personnel shall have free and full access to all books and records, employees, officers, and directors, as practicable, of the insurer during regular business hours.  An insurer using a third-party model or product for any of the activities under examination shall provide, upon the request of market conduct surveillance personnel, the details of those models or products to those personnel.  All documents, whether from a third party or an insurer, including but not limited to working papers, third-party models or products, complaint logs, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in the course of any market conduct actions made pursuant to this article, or in the course of market analysis by the commissioner of the market conditions of an insurer, or obtained by the National Association of Insurance Commissioners as a result of any of the provisions of this article, shall be confidential by law and privileged, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.

     (b)  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.

     (c)  Market conduct surveillance personnel shall be vested with the power to issue subpoenas and examine insurer personnel under oath when such action is ordered by the commissioner.

     (d)  Notwithstanding any other law to the contrary, the commissioner may:

     (1)  Share documents, materials, or other information, including confidential and privileged documents, materials, or information subject to subsection (a), with other state, federal, and international regulatory agencies, law enforcement authorities, and the National Association of Insurance Commissioners and its affiliates and subsidiaries; provided that the recipient agrees to and has the legal authority to maintain the confidentiality and privileged status of the documents, materials, communications, or other information;

     (2)  Receive documents, materials, communications, or information, including otherwise confidential and privileged documents, materials, or information, from the National Association of Insurance Commissioners and its affiliates or 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

     (3)  Enter into agreements governing the sharing and use of information consistent with this subsection.

     (e)  No insurer shall be compelled to disclose an insurance compliance self-evaluative audit document or waive any statutory or common law privilege, but may voluntarily disclose such document to the commissioner in response to any market analysis, market conduct action, or examination as provided in this article.

     (f)  To encourage insurance companies and persons conducting activities regulated under this code, both to conduct voluntary internal audits of their compliance programs and management systems and to access and improve compliance with state and federal statutes, rules, and orders, an insurance compliance self-evaluative privilege is recognized to protect the confidentiality of communication relating to voluntary internal compliance with this State's insurance and other laws and that the public will benefit from incentives to identify and remedy insurance and other compliance problems.  It is further declared that limited expansion of the protection against disclosure will encourage voluntary compliance and improve insurance market conduct quality and that the voluntary provisions of this section will not inhibit the exercise of the regulatory authority by those entrusted with protecting insurance consumers.

  (g)(1)  Except as provided in subsections (h) and (i), an insurance compliance self-evaluative audit is privileged information and is not discoverable or admissible as evidence in any legal action in any civil, criminal, or administrative proceeding.  The privilege created herein is a matter of substantive law of this State and is not merely a procedural matter governing civil or criminal procedures in the courts of this State;

     (2)  If any company, person, or entity performs or directs the performance of an insurance compliance audit, an officer, employee, or agent involved with the insurance audit, or any consultant who is hired for the purpose of performing the insurance compliance audit may not be examined in any civil, criminal, or administrative proceeding as to the insurance compliance audit or any insurance compliance self-evaluative audit document, as defined in this section.  This subsection does not apply if the privilege set forth in paragraph (1) is determined under subsection (h) or (i) not to apply;

     (3)  A company may voluntarily submit, in connection with examinations conducted under this article, an insurance compliance self-evaluative audit document to the commissioner or the commissioner's designee, as a confidential document under this section without waiving the privilege set forth in this section to which the company would otherwise be entitled; provided that the provisions in this section permitting the commissioner to make confidential documents public pursuant to this section and access to the National Association of Insurance Commissioners shall not apply to the insurance compliance self-evaluative audit document under other provisions of applicable law, any such report furnished to the commissioner shall not be provided to any other persons or entities and shall be accorded the same confidentiality and other protections as provided above for voluntarily submitted documents.  Any use of an insurance compliance self-evaluative audit document shall be limited to determining whether or not any disclosed defects in an insurer's policies and procedures or inappropriate treatment of customers has been remedied or that an appropriate remedy is in place.

               A company's insurance compliance self-evaluative audit document submitted to the commissioner shall remain subject to all applicable statutory or common law privileges including, but not limited to, the work product doctrine, attorney-client privilege, or the subsequent remedial measures exclusion.

               Any compliance self-evaluative audit document so submitted and in the possession of the commissioner shall remain the property of the company and shall not be subject to any disclosure or production under chapter 92F;

     (4)  Disclosure of an insurance compliance self-evaluative audit document to a governmental agency, whether voluntary or pursuant to compulsion of law, shall not constitute a waiver of the privilege set forth in paragraph (1) with respect to any other persons or any other governmental agencies.

  (h)(1)  The privilege set forth in subsection (g) does not apply to the extent that it is expressly waived by the company that prepared or caused to be prepared the insurance compliance self-evaluative audit document;

     (2)  In a civil or administrative proceeding, a court of record, after an in camera review, may require disclosure of material for which the privilege set forth in subsection (g) is asserted, if the court determines one of the following:

          (A)  The privilege is asserted for a fraudulent purpose; or

          (B)  The material is not subject to the privilege;

     (3)  In a criminal proceeding, a court of record, after an in camera review, may require disclosure of material for which the privilege described in subsection (g) is asserted, if the court determines one of the following:

          (A)  The privilege is asserted for a fraudulent purpose;

          (B)  The material is not subject to the privilege; or

          (C)  The material contains evidence relevant to commission of a criminal offense under this code, and all three of the following factors are present:

               (i)  The commissioner or attorney general has a compelling need for the information; and

              (ii)  The information is not otherwise available; and

             (iii)  The commissioner or attorney general is unable to obtain the substantial equivalent of the information by any other means without incurring unreasonable cost and delay.

  (i)(1)  Within thirty days after the commissioner or attorney general serves on an insurer a written request by certified mail for disclosure of an insurance compliance self-evaluative audit document under this subsection, the company that prepared or caused the document to be prepared may file with the appropriate court a petition requesting an in camera hearing on whether the insurance compliance self-evaluative audit document or portions of the document are privileged or subject to disclosure.  Failure by the company to file a petition waives the privilege for this request only;

     (2)  A company asserting the insurance compliance self-evaluative privilege in response to a request for disclosure under this subsection shall include in its request for an in camera hearing all of the information set forth in subsection (i)(5);

     (3)  Upon the filing of a petition under this subsection, the court shall issue an order scheduling, within forty-five days after the filing of the petition, an in camera hearing to determine whether the insurance compliance self-evaluative audit document or portions of the document are privileged under this section or subject to disclosure;

     (4)  The court, after an in camera review, may require disclosure of material for which the privilege in subsection (g) is asserted if the court determines, based upon its in camera review, that any one of the conditions set forth in subsection (h)(2)(A) and (B) is applicable as to a civil or administrative proceeding or that any one of the conditions set forth in subsection (h)(3)(A) through (C) is applicable as to a criminal proceeding.  Upon making such a determination, the court may only compel the disclosure of those portions of an insurance compliance self-evaluative audit document relevant to issues in dispute in the underlying proceeding.  Any compelled disclosure will not be considered to be a public document or be deemed to be a waiver of the privilege for any other civil, criminal, or administrative proceeding.  A party unsuccessfully opposing disclosure may apply to the court for an appropriate order protecting the document from further disclosure;

     (5)  A company asserting the insurance compliance self-evaluative privilege in response to a request for disclosure under this subsection shall provide to the commissioner or attorney general, as the case may be, at the time of filing any objection to the disclosure, all of the following information:

          (A)  The date of the insurance compliance self-evaluative audit document;

          (B)  The identity of the entity conducting the audit;

          (C)  The general nature of the activities covered by the insurance compliance audit; or

          (D)  An identification of the portions of the insurance compliance self-evaluative audit document for which the privilege is being asserted.

  (j)(1)  A company asserting the insurance compliance self-evaluative privilege set forth in subsection (g) has the burden of demonstrating the applicability of the privilege.  Once a company has established the applicability of the privilege, the party seeking disclosure under subsection (h)(2)(A) has the burden of proving that the privilege is asserted for a fraudulent purpose.   The commissioner or attorney general seeking disclosure under subsection (h)(3) has the burden of proving the elements set forth in subsection (h)(3);

     (2)  The parties may at any time stipulate in proceedings under subsection (h) or (i) to entry of an order directing that specific information contained in an insurance compliance self-evaluative audit document is or is not subject to the privilege provided under subsection (g).  Any such stipulation may be limited to the instant proceeding and, absent specific language to the contrary, shall not be applicable to any other proceeding.

     (k)  The privilege set forth in subsection (g) shall not extend to any of the following:

     (1)  Documents, communications, data, reports, or other information expressly required to be collected, developed, maintained, or reported to a regulatory agency pursuant to this code, or other federal or state law;

     (2)  Information obtained by observation or monitoring by any regulatory agency; or

     (3)  Information contained from a source independent of the insurance compliance audit.

     (l)  As used in this section:

     "Insurance compliance audit" means a voluntary, internal evaluation, review, assessment, audit, or investigation for the purpose of identifying or preventing non-compliance with, or promoting compliance with laws, regulations, orders, or industry or professional standards, which is conducted by or on behalf of a company licensed or regulated under this code, or which involves an activity regulated under this code.

     "Insurance compliance self-evaluative audit document" means documents prepared as a result of or in connection with an insurance compliance audit.  An insurance compliance self-evaluative audit document may include, but is not limited to, as applicable, field notes and records of observations, findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, photographs, exhibits, computer-generated or electronically recorded information, phone records, maps, charts, graphs, and surveys, provided this supporting information is collected or developed for the primary purpose and in the course of an insurance compliance audit.  An insurance compliance self-evaluative audit document also includes, but is not limited to, any of the following:

     (1)  An insurance compliance audit report prepared by an auditor, who may be an employee of the company or an independent contractor, which may include the scope of the audit, the information gained in the audit, and conclusions and recommendations, with exhibits and appendices;

     (2)  Memoranda and documents analyzing portions or all of the insurance compliance audit report and discussing potential implementation issues;

     (3)  An implementation plan that addresses correcting past non-compliance, improving current compliance, and preventing future non-compliance; or

     (4)  Analytic data generated in the course of conducting the insurance compliance audit.

     (m)  The insurance compliance self-evaluative privilege created by this legislation shall apply to all litigation or administrative proceedings pending [on July 1, 2007].

     (n)  Nothing in this section nor the release of any self-evaluative audit document hereunder shall limit, waive, or abrogate the scope or nature of any statutory or common law privilege including, but not limited to, the work product doctrine, the attorney-client privilege, or the subsequent remedial measures exclusion. [L 2007, c 227, pt of §1; am L 2016, c 141, §2]

 

 

     [§431:2D-108]  Market conduct surveillance personnel.  (a)  Market conduct surveillance personnel shall be qualified by education, experience, and, where applicable, professional designations.  The commissioner may supplement the in-house market conduct surveillance staff with qualified outside professional assistance if the commissioner determines that assistance is necessary.

     (b)  Market conduct surveillance personnel have a conflict of interest, either directly or indirectly, if they are affiliated with the management, have been employed by, or own a pecuniary interest in the insurer subject to any examination under this article within the most recent five years prior to the use of the personnel.  This section shall not be construed to automatically preclude an individual from being:

     (1)  A policyholder or claimant under an insurance policy;

     (2)  A grantee of a mortgage or similar instrument on the individual's residence from a regulated entity if done under customary terms and in the ordinary course of business;

     (3)  An investment owner in shares of regulated diversified investment companies; or

     (4)  A settlor or beneficiary of a "blind trust" into which any otherwise permissible holdings have been placed. [L 2007, c 227, pt of §1]

 

     [§431:2D-109]  Immunity for market conduct surveillance personnel.  (a)  No cause of action shall arise nor shall any liability be imposed against the commissioner, the commissioner's authorized representatives, or an examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out this article.

     (b)  No cause of action shall arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the commissioner, the commissioner's authorized representative, or the examiner pursuant to an examination made under this article, if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.

     (c)  A person identified in subsection (a) shall be entitled to an award of attorney's fees and costs if the person is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out this article and the party bringing the action was not substantially justified in doing so.  For the purposes of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

     (d)  This section shall not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection (a). [L 2007, c 227, pt of §1]

 

     [§431:2D-110]  Fines and penalties.  (a)  Fines and penalties levied pursuant to this article or other provisions of this chapter shall be consistent, reasonable, and justified.

     (b)  The commissioner shall take into consideration actions taken by insurers that maintain membership in best-practice organizations that exist to promote high ethical standards of conduct in the marketplace, and insurers that self-assess, self-report, and remediate problems detected to mitigate fines levied pursuant to this article. [L 2007, c 227, pt of §1]

 

     [§431:2D-111]  Data collection and participation in national market conduct databases.  (a)  The commissioner shall collect and report market data to the market information systems of the National Association of Insurance Commissioners, including the complaint database system, the examination tracking system, and the regulatory information retrieval system, or other comparable successor products as determined by the commissioner.  In addition to complaint data, the accuracy of insurer-specific information reported to the National Association of Insurance Commissioners to be used for market analysis purposes or as the basis for market conduct actions shall be reviewed by appropriate personnel in the insurance division and by the insurer.

     (b)  Information collected and maintained by the insurance division shall be compiled in a manner that meets the requirements of the National Association of Insurance Commissioners.

     (c)  After completion of any level of market analysis, prior to further market conduct action, the commissioner shall contact the insurer to review the analysis.

     (d)  An insurer responding to a commissioner's request to produce information shall produce it as it is kept in the usual course of business or shall organize and label it to correspond with the categories in the demand.

     If a commissioner's request does not specify the form or forms for producing electronically stored information, an insurer responding to the request shall produce the information in a form or forms in which the insurer ordinarily maintains it or in a form or forms that are reasonably usable.

     An insurer responding to an information request need not produce the same electronically stored information in more than one form.

     An insurer responding to an information request need not provide the electronically stored information from sources that the insurer identifies as not reasonably accessible because of undue burden or cost. [L 2007, c 227, pt of §1]

 

     [§431:2D-112]  Coordination with other states through the National Association of Insurance Commissioners.  The commissioner shall share information and coordinate the insurance division's market analysis and examination efforts with other states through the National Association of Insurance Commissioners. [L 2007, c 227, pt of §1]

 

     [§431:2D-113]  Additional duties of the commissioner.  (a)  At least once per year, or more frequently if deemed necessary, the commissioner shall make available in an appropriate manner to insurers and other entities subject to the scope of this chapter, information on new laws and rules, enforcement actions, and other information the commissioner deems pertinent to ensure compliance with market conduct requirements.

     (b)  The commissioner shall designate a specific person or persons within the insurance division whose responsibilities shall include the receipt of information from employees of insurers and licensed entities concerning violations of laws, as defined in this section.  The person or persons shall be provided with proper training on the handling of the information, which shall be deemed a confidential communication for the purposes of this section.

     (c)  For any change made to a work product referenced in this article, which materially changes the way in which market analysis, market conduct actions, or market conduct examinations are conducted, the commissioner shall give notice and provide parties with an opportunity for a public hearing pursuant to chapter 91. [L 2007, c 227, pt of §1]

 

     [§431:2D-114]  Data calls.  Whether through market analysis, market conduct action, or in response to another regulatory request, any information provided in response to a data call from the commissioner or the commissioner's designee, shall be treated as confidential and privileged.  It shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any private civil action.  No waiver of privilege or confidentiality shall occur as a result of responding to a data call. [L 2007, c 227, pt of §1]

 

ARTICLE 3

INSURERS GENERAL REQUIREMENTS

 

PART I.  DEFINITIONS

 

     §431:3-101  Alien insurer.  An alien insurer is one formed under the laws of a nation other than the United States. [L 1987, c 347, pt of §2]

 

     §431:3-102  Capital funds.  Capital funds means the excess of the assets of an insurer over its liabilities.  Capital stock, if any, shall not be deemed to be a liability for the purposes of this section. [L 1987, c 347, pt of §2]

 

     §431:3-103  Charter.  Charter means articles of incorporation, of agreement, of association, or other basic constituent document of a corporation, or subscribers' agreement and power of attorney for attorney of a reciprocal insurer. [L 1987, c 347, pt of §2]

 

     §431:3-104  Domestic insurer.  A domestic insurer is one formed under the laws of this State. [L 1987, c 347, pt of §2]

 

     §431:3-105  Foreign insurer.  A foreign insurer is one formed under the laws of any state, as defined in section 431:1-213, other than this State. [L 1987, c 347, pt of §2]

 

     §431:3-106  Mutual insurer.  A mutual insurer means an incorporated insurer without capital stock, the governing body of which is elected by its policyholders.  The policyholders, who are the insurer's owners, are known as members. [L 1987, c 347, pt of §2]

 

     §431:3-107  Reciprocal insurance.  Reciprocal insurance means that insurance resulting from the exchange of insurance contracts among subscribers of an unincorporated association, the interexchange being effectuated through an attorney-in-fact common to all such subscribers, thereby providing insurance coverage on each other. [L 1987, c 347, pt of §2]

 

     §431:3-108  Reciprocal insurer.  A reciprocal insurer means an unincorporated aggregation of subscribers operating individually and collectively through an attorney-in-fact common to all such persons to provide reciprocal insurance among themselves. [L 1987, c 347, pt of §2]

 

     §431:3-109  Reinsurance.  Reinsurance means an insurance transaction where an insurer, for consideration, transfers any portion of the risk it has assumed to another insurer.  In referring to reinsurance transactions, this code sometimes refers to the insurer transferring the risk as the ceding or withdrawing insurer, while the insurer assuming the risk is sometimes termed the assuming reinsurer or the reinsurer. [L 1987, c 347, pt of §2]

 

Attorney General Opinions

 

  Third party liability coverage provided to the State is insurance, not reinsurance.  Att. Gen. Op. 95-2.

 

     [§431:3-110]  Stock insurer.  A stock insurer is an incorporated insurer with capital stock divided into shares and owned by its stockholders to whom the earnings are distributed as dividends on their shares. [L 2000, c 182, §1]

 

PART II.  CERTIFICATE OF AUTHORITY

 

     §431:3-201  Authority required.  (a)  No person shall act as an insurer and no insurer shall transact insurance business in this State other than as authorized by a certificate of authority granted to it by the commissioner; except as to such transactions as are expressly otherwise provided in this code.

     (b)  The investigation and adjustment of claims in this State arising under insurance contracts issued by an unauthorized insurer, except surplus line insurance issued pursuant to section 431:8-301, shall be deemed to constitute the transaction of insurance in this State, unless the same are isolated or nonrecurring transactions.

     (c)  Every certificate of authority shall include but not be limited to:

     (1)  The name of the insurer and the classes of insurance it is authorized to transact in this State; or

     (2)  The name of and location of the principal office of its attorney-in-fact if a reciprocal insurer. [L 1987, c 347, pt of §2; am L 1993, c 205, §5; am L 2006, c 189, §4]

 

     §431:3-202  Insurer's name.  (a)  Every insurer shall conduct its business in its own legal name.

     (b)  No insurer shall assume or use a name deceptively similar to that of any other authorized insurer, nor which tends to deceive or mislead as to the type of organization of the insurer.

     (c)  When a foreign or alien insurer authorized to do business in this State wants to change the name under which its certificate of authority is issued, the insurer shall file a request for name change with the commissioner at least thirty days prior to the effective date of the name change.  If within the thirty-day period the commissioner finds the name change request does not meet the requirements of this chapter or of the corporation laws of this State, the commissioner shall send to the insurer written notice of disapproval of the request specifying in what respect the proposed name change fails to meet the requirements of this chapter or the corporation laws of this State and stating that the name change shall not become effective. [L 1987, c 347, pt of §2; am L 1988, c 363, §2(2)]

 

     §431:3-203  Qualifications for authority.  (a)  To qualify for and hold a certificate of authority, an insurer must:

     (1)  Be a stock, mutual, or reciprocal insurer of the same general type as may be formed as a domestic insurer under article 4;

     (2)  Have capital funds as required by this code based upon the type and domicile of the insurer and the classes of insurance which the insurer is authorized to transact in its domicile;

     (3)  Transact or propose to transact in this State insurances which are among those authorized by its charter, and only such insurance as meets the standards and requirements of this code; and

     (4)  Fully comply with and qualify according to the provisions of this code.

     (b)  In addition to the requirements in subsection (a), to qualify for and hold a certificate of authority, foreign and alien insurers must have continuously, actively, and successfully transacted the business of insurance for at least five years immediately prior thereto; provided that in the case of a reorganization (including a merger, corporate acquisition, or formation of a subsidiary) of a capital stock or mutual insurer, the five-year period shall be computed from the date of the organization of the original or parent insurer or insurers if substantially the same management continues. [L 1987, c 347, pt of §2; am L 1997, c 13, §1; am L 2001, c 216, §5]

 

     §431:3-203.5  Foreign insurer; certification.  (a)  Notwithstanding section 431:3-203 or any other law to the contrary in this code, the commissioner shall grant a certificate of authority to any applicant, regardless of the number of previous years experience in the business of insurance, that is an insurer licensed under the insurance laws of one of not fewer than three states annually designated, or redesignated, by the commissioner from among the states that are accredited by the National Association of Insurance Commissioners.  The loss of accreditation by a state designated by the commissioner shall not in itself affect the validity of a previously issued certificate of authority by the commissioner to a foreign insurer licensed under the insurance laws of the previously accredited state.  Nor shall the commissioner's de-selection of a state affect the validity of a previously issued certificate of authority to a foreign insurer licensed by that state.

     (b)  The commissioner may waive the filing of any document required to be submitted under section 431:3-212.

     (c)  Nothing in this section shall limit the commissioner's authority to require a foreign insurer to proceed with the certification process under this article if the commissioner, at the commissioner's discretion, determines that it would be in the public interest. [L 1995, c 129, §1; am L 1997, c 36, §1; am L 1998, c 2, §100; am L 2004, c 122, §8]

 

     §431:3-204  Classes of insurance authorized.  An insurer which otherwise qualifies therefor may be authorized to transact any one or more classes of insurance as defined in sections 431:1-204 to 431:1-211; provided that:

     (1)  A life insurer shall not transact any insurance in addition to life insurance except accident and health or sickness insurance; provided that nothing herein shall limit a life insurer existing and authorized on July 1, 1988, from writing any authorized insurance stated in its charter; and

     (2)  A reciprocal insurer shall not transact life or accident and health or sickness insurance. [L 1987, c 347, pt of §2; am L 2003, c 212, §19]

 

     §431:3-205  Funds required of new insurers.  Subject to section 431:3-203(a)(2), to qualify to transact any one class of insurance, an insurer, not existing and authorized in this State on July 1, 1988, shall:

     (1)  Deposit in a federally insured financial institution within the State, paid-up capital stock in the case of a stock insurer, or unimpaired surplus if (A) a reciprocal insurer, or (B) a mutual insurer which does not seek to qualify upon the basis of applications and premiums collected as provided in sections 431:4-303 to 431:4-307, in an amount not less than shown in the applicable Schedule "A";

     (2)  Maintain this deposit at all times while the insurer is licensed and transacting insurance in this State; and

     (3)  Secure the approval of the commissioner before making withdrawals from the depository.

 

Schedule "A"

               Class of Insurance      Amount Required

               Life        $  600,000

               Accident and Health or Sickness    450,000

               Property       750,000

               Marine and Transportation 1,000,000

               Vehicle      1,000,000

               General Casualty       1,500,000

               Surety       1,000,000

               Title          400,000

[L 1987, c 347, pt of §2 as superseded by c 348, §2; am L 1989, c 195, §13; am L 2003, c 212, §20]

 

     §431:3-206  Additional funds required, new insurers.  In addition to the paid-up capital stock or unimpaired surplus as required under section 431:3-205 and section 431:3-208, the following insurers shall possess when first authorized:

     (1)  In the case of domestic stock or reciprocal insurers not existing and authorized in this State on July 1, 1988, or domestic mutual insurers not existing and authorized in this State on July 1, 1988, which qualify upon the basis of possession of surplus in lieu of applications and premiums collected as provided in section 431:4-303 to section 431:4-307, bona fide additional surplus equaling in amount not less than fifty per cent of the capital stock or surplus otherwise required for the class or classes of insurance proposed to be transacted; or

     (2)  In the case of foreign and alien insurers which have been insurers for less than five years except if as a result of a reorganization (including a merger, corporate acquisition, or formation of a subsidiary), bona fide additional surplus in an amount not less than fifty per cent of the capital stock or surplus otherwise required for the class or classes of insurance which the insurer is authorized to transact in its domicile. [L 1987, c 347, pt of §2; am L 1989, c 207, §2]

 

     §431:3-207  Noncompliance as to capital stock and surplus permitted certain insurers for five years.  (a)  A domestic or foreign insurer holding a valid certificate of authority to transact insurance in this State as of July 1, 1988, for a period of five years after that date, may continue to transact the kinds of insurance permitted by the certificate of authority by complying with this code and by maintaining unimpaired not less than the same amount of paid-in capital stock or surplus, if a mutual or reciprocal insurer, as required under the laws of this State immediately prior to July 1, 1988, and as if the laws had continued in force.  After the five-year period, the insurer shall have and maintain not less than the same amount of paid-in capital stock and surplus as is then required of domestic stock insurers newly formed.

     (b)  An insurer specified in subsection (a) shall not be granted authority to transact any other or additional kinds of insurance after the five-year period specified unless it then fully complies with the capital and surplus requirements applied to all the kinds of insurance it then proposes to transact, as provided under section 431:3-205 as to new domestic insurers. [L 1987, c 347, pt of §2]

 

     §431:3-208  Funds required of existing and new insurers for transacting additional classes of insurance.  (a)  An insurer otherwise qualified may be authorized to transact combinations of classes of insurance while having on deposit in a federally insured financial institution within the State, additional paid- up capital stock in the case of a stock insurer, or additional unimpaired surplus in the case of a mutual or reciprocal insurer, subject to subsection (c) as to domestic mutual or reciprocal insurers, and subject to section 431:3-203(a)(2).  An insurer wanting to transact additional classes of insurance must:

     (1)  Maintain at all times, in a federally insured financial institution within the State, capital if a stock insurer, or surplus, if a mutual or reciprocal insurer, equal to the sum required of each individual class of insurance it desires to transact, as listed in Schedule "A" of section 431:3-205;

     (2)  Maintain a sum total not to exceed $2,500,000; and

     (3)  Obtain first the approval by the commissioner for any withdrawals from this deposit.

     (b)  An insurer while possessing in a federally insured financial institution within the State, $2,500,000 of capital in the case of a stock insurer, or of unimpaired surplus in the case of a reciprocal or mutual insurer, may be authorized to transact all classes of insurance, subject to sections 431:3-204 to 431:3-206.

     (c)  To qualify for authority to transact a combination of classes of insurance, a domestic mutual or reciprocal insurer shall deposit in a federally insured financial institution within the State, surplus in an amount equal to the paid-up capital stock required of stock insurers for authority to transact a like combination of classes of insurance. [L 1987, c 347, pt of §2 as superseded by c 348, §3]

 

     §431:3-209  Deposits of alien and foreign insurers; special deposits.  (a)  To qualify for and hold a certificate of authority, an alien or foreign insurer must deposit and maintain on deposit assets equal in amount to either the amount of paid-up capital stock in the case of a stock insurer, or surplus, in the case of a mutual or reciprocal insurer, required of a domestic insurer to transact a business of insurance in like class or classes of insurance, or the amount of $500,000, whichever amount is the greater.

     (b)  The deposit shall be for the security of all policyholders and obligees of the insurer in the United States.  It shall not be subject to diminution below the amount currently determined in accordance with subsection (a) so long as the insurer has outstanding any liabilities arising out of its business transacted in the United States.

     (c)  The deposit shall be maintained with the commissioner.  In lieu of the deposit or part thereof, the commissioner shall accept the certificate of the public official having supervision over insurance in another state showing that deposits by the insurer, or like part thereof, maintained by the insurer in that state for the benefit of all of the insurer's policyholders in the United States or all of its policyholders and obligees in the United States, if the total deposit in this State and those evidenced by the certificate or certificates is in an amount not less than the amount required pursuant to subsection (a).

     (d)  The commissioner may require the foreign or alien insurer to place in a special deposit an amount determined by the commissioner in a federally insured financial institution within the State. [L 1987, c 347, pt of §2 as superseded by c 348, §4]

 

     §431:3-210  Determination of capital funds of alien insurer.  (a)  The capital funds of an alien insurer shall be deemed to be the amount by which its assets exceed its liabilities with respect to its business transacted in the United States.

     (b)  Assets of such insurer held in any state for the special protection of policyholders and obligees in such state shall not constitute assets of the insurer for the purpose of this code.  Liabilities of the insurer so secured by such assets but not exceeding the amount of such assets, may be deducted in computing the insurer's liabilities for the purpose of this section. [L 1987, c 347, pt of §2]

 

     §431:3-211  REPEALED.  L 1997, c 12, §1 and c 233, §6.

 

     §431:3-212  Application for authority.  To apply for an original certificate of authority, an insurer shall:

     (1)  File with the commissioner its request showing:

          (A)  Its name, home office location, type of insurer, organization date, and state or country of its domicile, and name and location of principal office of its attorney-in-fact if a reciprocal insurer;

          (B)  The classes of insurance it proposes to transact; and

          (C)  Additional information as the commissioner may reasonably require;

     (2)  File with the commissioner:

          (A)  A copy of its charter as amended or such copy certified by the proper public officer of the state or country of domicile if a foreign or alien insurer;

          (B)  A copy of its bylaws as amended, certified by its proper officer;

          (C)  A copy of its annual statement as of December 31 last preceding;

          (D)  An appointment of the commissioner as its attorney to receive service of legal process, if a foreign or alien insurer, or a domestic reciprocal insurer;

          (E)  The name and business address of its authorized resident agent upon whom process may be served in all cases, if a foreign or alien insurer;

          (F)  A copy of the appointment and authority of its United States manager, certified by its proper officer, if an alien insurer;

          (G)  A certificate from the proper public official of its state or country of domicile showing that it is duly organized and is authorized to transact the classes of insurance proposed to be transacted, if a foreign or alien insurer;

          (H)  The declaration required by section 431:4-409 if a domestic reciprocal insurer;

          (I)  Certificate of the proper public official as to any deposit made or held in compliance with this code;

          (J)  Copy of report of the last examination made of the insurer certified by the insurance supervisory official of its state of domicile or entry into the United States, if a foreign or alien insurer; and

          (K)  Other documents or stipulations as the commissioner may reasonably require to evidence compliance with this code; and

     (3)  Deposit with the commissioner the appropriate fees required by this code. [L 1987, c 347, pt of §2; am L 2002, c 155, §7; am L 2003, c 212, §21]

 

     §431:3-212.5  Redomestication of authorized insurers.  (a)  The certificate of authority, producer appointments and licenses, rates, and other items allowed by the commissioner, which are in existence at the time an insurer authorized to transact insurance business in this State transfers its corporate domicile to this or any other state by merger, consolidation, or any other lawful method shall continue in full force and effect upon such transfer if the insurer remains qualified to transact insurance business in this State.  For purposes of this section, an insurer transferring its corporate domicile to this State remains qualified to transact insurance business in this State if it meets the organization and licensing requirements applicable to the same type of domestic insurer.  All outstanding policies of a transferring insurer shall remain in full force and effect and need not be endorsed as to the new name of the company or its new location unless so ordered by the commissioner.

     (b)  Each transferring insurer shall file new policy forms on or before the effective date of the transfer if such forms are required to be approved by the commissioner.  The insurer may use existing policy forms with appropriate endorsements if permitted by, and under such conditions as approved by, the commissioner.  Every such transferring insurer shall notify the commissioner of the details of the proposed transfer and shall file promptly any resulting amendments to corporate documents filed or required to be filed with the commissioner.

     (c)  The commissioner may apply this section to any domestication occurring in another state by an authorized United States branch of an alien insurer. [L 1991, c 181, §1; am L 2002, c 155, §8; am L 2004, c 122, §9]

 

Cross References

 

  Redomestication--captive insurers, see §§431:19-102.3 and 431:19-102.4.

 

     §431:3-213  Authority issued or denied.  (a)  If the commissioner finds that an insurer has met the requirements for and is fully entitled thereto under this code, the commissioner shall issue to it a proper certificate of authority.

     (b)  If the commissioner does not so find, the commissioner shall deny the insurer certificate of authority within a reasonable length of time following filing of the application by the insurer.

     (c)  The certificate of authority of a reciprocal insurer shall be issued to its attorney in the name of the insurer. [L 1987, c 347, pt of §2]

 

     §431:3-214  Extension; amendment.  (a)  No certificate of authority shall contain an expiration date, but all certificates of authority shall be extended by the commissioner from time to time in order to continue to be valid.  When the commissioner issues or extends a certificate of authority, the commissioner shall determine the date prior to which the certificate of authority must be extended and shall so notify the insurer in writing.  This date is called the extension date.  The extension date shall be any date not less than one year and not more than three years after date of issue or extension of the certificate of authority.  If the insurer qualifies, its certificate of authority shall be extended.  The commissioner shall provide each holder of a certificate of authority at least thirty days' advance written notice of the applicable extension date.

     (b)  The commissioner shall amend a certificate of authority at any time in accordance with changes in the insurer's charter or insuring powers. [L 1987, c 347, pt of §2; am L 2015, c 63, §4]

 

 

     §431:3-215  Withdrawal from State; obligations.  (a)  No insurer other than a life insurer shall withdraw from this State until its direct liability to its policyholders and obligees under all its insurance contracts then in force in this State has been assumed by another authorized insurer under an agreement approved by the commissioner.

     (b)  The assuming insurer shall, within a reasonable time, replace the assumed insurance contracts with its own, or by endorsement thereon acknowledge its liability under the assumed contracts.

     (c)  Six months prior to withdrawing from this State, an insurer shall file an affidavit with the commissioner showing that:

     (1)  It desires to withdraw from this State and to discontinue business in this State; and

     (2)  All of its outstanding policies have been either reinsured or have expired.  If the outstanding policies are reinsured, the withdrawing insurer shall also submit the reinsurer's affidavit stating that it has reinsured all the outstanding policies of the withdrawing insurer upon risks in this State or upon business originating in this State.  The reinsurer shall be an insurer authorized to carry on the business of insurance in this State.

     (d)  The insurer shall return for cancellation its current certificate of authority and licenses for producers issued by the commissioner.

     (e)  Six months prior to withdrawing from this State, an insurer shall, in addition to other requirements, publish in this State a notice of withdrawal once each week for the first eight successive weeks, and again in the last four successive weeks in the sixth month in a newspaper of daily circulation; provided that the commissioner shall have the discretion to waive the notice requirement.  The notice of withdrawal as published shall have the prior approval of the commissioner. [L 1987, c 347, pt of §2; am L 1993, c 199, §1; am L 2002, c 155, §9; am L 2004, c 122, §10]

 

     §431:3-216  Mandatory refusal, suspension or revocation provisions.  The commissioner shall suspend, revoke, or refuse to extend an insurer's certificate of authority in addition to other grounds in this code, if the insurer:

     (1)  Is a domestic stock insurer and has assets less in amount than its liabilities, including its capital stock less amounts required for the class of insurance or combination of classes of insurance as a liability, and has failed to make good such deficiency as required by the commissioner.

     (2)  Is a domestic mutual or domestic reciprocal insurer, and fails to make good a deficiency of assets as required by the commissioner.

     (3)  Is a foreign or alien insurer and no longer qualifies or meets the requirements for the authority.

     (4)  Knowingly exceeds its charter powers or its certificate of authority. [L 1987, c 347, pt of §2]

 

     §431:3-217  Discretionary refusal, suspension or revocation provisions.  After a hearing the commissioner may suspend, revoke, or refuse to extend an insurer's certificate of authority, in addition to other grounds in this code, if the insurer:

     (1)  Knowingly fails to comply with or, in the case of a reciprocal insurer, if the attorney fails to comply with, or violates any provision of this code other than those for violation of which refusal, suspension or revocation is mandatory;

     (2)  Knowingly fails to comply with any proper order of the commissioner;

     (3)  Is found by the commissioner upon examination, or other evidence, to be in unsound condition or in a condition as to render its further proceedings in this State hazardous to the public or to its policyholders in this State;

     (4)  Refuses to remove or discharge a director or officer who has been convicted of any crime involving fraud or dishonesty;

     (5)  Commits or performs with a frequency as to indicate a general business practice any act which compels claimants under policies either to accept less than the amount due them or to bring suit against it to secure full payment of the amount due;

     (6)  Is affiliated with and under the same general management, interlocking directorate, or ownership as another insurer which transacts insurance other than reinsurance in this State without having a certificate of authority therefor, except as is permitted by this code;

     (7)  Refuses to be examined, or if its directors, officers, employees, or representatives refuse to submit to examination or give testimony concerning its affairs, or to produce its accounts, records, and files for examination by the commissioner when required by this code, or refuses to perform any legal obligation relative to the examination;

     (8)  Fails to pay any final judgment rendered against it upon any policy, bond, recognizance, or undertaking issued or guaranteed by it, within sixty days after the judgment became final or within sixty days after time for taking an appeal has expired or within sixty days after dismissal of an appeal before final determination, whichever date is the later; or

     (9)  Fails to file its annual statement when due or within any extension of time which the commissioner may for good cause have granted. [L 1987, c 347, pt of §2 as superseded by c 349, §2]

 

     §431:3-218  Procedure upon revocation; suspension of certificate of authority.  Upon revoking, suspending, or refusing to extend an insurer's authority to transact insurance, the commissioner shall forthwith:

     (1)  Give notice thereof to the insurer not fewer than ten days in advance of the effective date of the revocation or suspension;

     (2)  Likewise revoke or suspend all producers' authority to represent the insurer in this State and give notice thereof to the producers; and

     (3)  Give notice thereof to the insurance supervisory official of each other state in which the insurer is authorized to transact insurance; provided that notice to the National Association of Insurance Commissioners shall satisfy this requirement. [L 1987, c 347, pt of §2; am L 2001, c 216, §6; am L 2004, c 122, §11]

 

     §431:3-219  Suspension period; revocation.  (a)  Except as otherwise expressly provided in this code, the commissioner may suspend an insurer's certificate of authority for a period not to exceed one year.  The commissioner shall state in the commissioner's order of suspension the period during which it shall be effective.

     (b)  After the completion of the original suspension period, the commissioner may order additional extensions of the suspension or revoke an insurer's certificate of authority pursuant to section 431:3-218, provided there is a basis for the extended suspension or revocation and the insurer has an opportunity for a hearing prior to the imposition of the extended suspension or revocation. [L 1987, c 347, pt of §2; am L 2005, c 132, §2]

 

     §431:3-220  Revival.  An insurer whose certificate of authority has been suspended, revoked, or refused may subsequently be authorized if:

     (1)  The grounds for the suspension, revocation, or refusal no longer exist and the insurer is otherwise fully qualified; and

     (2)  The insurer has reimbursed the commissioner for all reasonable and necessary expenses incurred by virtue of the suspension, revocation, or reinstatement of the certificate of authority. [L 1987, c 347, pt of §2]

 

     §431:3-221  Power to fine.  In addition to or in lieu of the suspension, revocation, or refusal to extend any certificate of authority, the commissioner, after hearing, may levy a fine upon the insurer in an amount not less than $500 and not more than $50,000.  The order levying the fine shall specify the period within which the fine shall be fully paid, which shall not be less than thirty nor more than forty-five days from the date of the order.  Upon failure to pay the fine when due, the commissioner shall revoke the insurer's certificate of authority if not already revoked, and the fine shall be recovered in a civil action brought on behalf of the commissioner by the attorney general.  Any fine so collected shall be paid by the commissioner to the director of finance for the account of the compliance resolution fund. [L 1987, c 347, pt of §2; am L 1999, c 163, §15(1); am L 2002, c 39, §10]

 

PART III.  ANNUAL REQUIREMENTS AND LIMITING PROVISIONS

 

     §431:3-301  Annual and quarterly filings with commissioner.  (a)  Each domestic, foreign, and alien insurer that is authorized to transact insurance in this State shall file annually with the commissioner, on or before March 1 of each year, a copy of its annual statement convention blank, statement of actuarial opinion by a qualified actuary or specialist, and additional filings as prescribed by the commissioner for the preceding year.  Each insurer shall file quarterly, on or before the forty-fifth day after each quarter, a copy of its quarterly statement.  The statements shall be prepared in accordance with the National Association of Insurance Commissioners' annual statement instructions, following the practices and procedures prescribed by the National Association of Insurance Commissioners' accounting practices and procedures manuals.  The annual and quarterly statements shall be verified by oaths of at least two of the insurer's principal officers, or the attorney-in-fact in the case of a reciprocal insurer, or the United States manager in the case of an alien insurer.  The statement of an alien insurer shall relate only to its transactions and affairs in the United States.  Foreign and alien insurers that are in compliance with section 431:3-302 are not required to file annual and quarterly statements with this State.

     (b)  Each insurer shall file the tax statement provided for by section 431:7-201.

     (c)  Any insurer failing or refusing to submit the annual or quarterly filing or any of the documents in accordance with this section shall be liable for a fine in an amount not less than $100 and not more than $500 for each day of delinquency.  The commissioner may suspend or revoke the certificate of authority of any insurer that fails to file any of the documents required pursuant to this section. [L 1987, c 347, pt of §2; am L 1992, c 176, §9; am L 1993, c 205, §6 as superseded by c 321, §9; am L 1994, c 128, §2; am L 1995, c 232, §11; am L 1997, c 36, §2; am L 2003, c 212, §22]

 

     §431:3-302  Annual and quarterly filings with the National Association of Insurance Commissioners.  (a)  Each domestic, foreign, and alien insurer that is authorized to transact insurance in this State shall file annually with the National Association of Insurance Commissioners, on or before March 1 of each year, a copy of its annual statement convention blank, statement of actuarial opinion by a qualified actuary or specialist, and additional filings as prescribed by the commissioner for the preceding year.  Each insurer shall file quarterly, on or before the forty-fifth day after each quarter, a copy of its quarterly statement with the National Association of Insurance Commissioners.  The information filed with the National Association of Insurance Commissioners shall be in the same format and scope as that required by the commissioner and shall include the signed jurat page and the actuarial certification.  Any amendments and addenda to the statement filing subsequently filed with the commissioner shall also be filed with the National Association of Insurance Commissioners.  In addition to the printed annual and quarterly filings addressed in this section, the annual and quarterly filings shall also be filed electronically in the format prescribed by the National Association of Insurance Commissioners' annual statement instructions.  The annual and quarterly electronic filings shall be due on the same dates as the corresponding printed information.

     (b)  Any insurer failing or refusing to submit the annual or quarterly filings in accordance with this section shall be liable for a penalty in an amount not less than $100 and not more than $500 for each day of delinquency. [L 1987, c 347, pt of §2; am L 1993, c 205, §7; am L 1994, c 190, §§2, 10; am L 1995, c 61, §2 as superseded by c 232, §§4, 12; am L 1997, c 368, §2; am L 1999, c 302, §9 as superseded by c 128, §2; am L 2003, c 212, §23]

 

     §431:3-302.5  Annual audit.  (a)  Annually on or before June 1, or such later date as the commissioner upon request or for cause may specify, each domestic insurer shall file an audit by a designated independent certified public accountant or accounting firm of the financial statements reporting the financial condition and the results of operations of the insurer.  The insurer shall notify the commissioner in writing of the name and address of the person or firm retained to conduct the annual audit within sixty days of retention.  The commissioner may disapprove the insurer's designation within fifteen days of receipt of the insurer's notice, and the insurer shall be required to designate another independent certified public accountant or accounting firm.

     (b)  An insurer may make written application to the commissioner for approval to file audited consolidated or combined financial statements in lieu of separate annual audited financial statements if the insurer is part of a group of insurance companies that utilizes a pooling or one hundred per cent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer cedes all of its direct and assumed business to the pool.

     (c)  The audit required in subsection (a) and the audited consolidated or combined financial statements as may be approved under subsection (b) shall be prepared in accordance with the National Association of Insurance Commissioners accounting practices and procedures manual and rules adopted by the commissioner following the practices and procedures prescribed by the National Association of Insurance Commissioners.

     (d)  Any insurer failing or refusing to submit the annual audit or any of the documents required under subsection (a) or as may be approved under subsection (b), on or before June 1, or a later date as the commissioner upon request or for cause may specify, shall be liable for a penalty in an amount not less than $100 and not more than $500 for each day of delinquency.  The commissioner may suspend or revoke the certificate of authority of any insurer who fails to file any of the documents required in subsection (a). [L 1991, c 103, §1; am L 1994, c 128, §3; am L 1997, c 368, §3; am L 2004, c 122, §12; am L 2009, c 77, §3]

 

 

     §431:3-303  Immunity.  In the absence of actual malice, members of the National Association of Insurance Commissioners, their duly authorized committees, subcommittees, and task forces, their delegates, National Association of Insurance Commissioners employees, and all others charged with the responsibility of collecting, reviewing, analyzing and disseminating information from the filing of the annual statement convention blanks shall be acting as agents of the commissioner under the authority of this code and will not be subject to civil liability for libel, slander or any other cause of action by virtue of their collection, review, and analysis or dissemination of the data and information from the filings required hereunder. [L 1987, c 347, pt of §2]

 

     §431:3-304  Confidentiality.  All financial analysis ratios and examination synopses concerning insurance companies that are submitted to the insurance division by the National Association of Insurance Commissioners' Insurance Regulatory Information System are confidential and may not be disclosed by the insurance division. [L 1987, c 347, pt of §2]

 

     §431:3-304.5  Statement of actuarial opinion; property and casualty insurance; confidentiality.  (a)  The statement of actuarial opinion shall be provided with the annual statement in accordance with the property and casualty annual statement instruction as adopted by the National Association of Insurance Commissioners and shall be treated as a public document.

     (b)  Documents, materials, or other information related to or provided in connection with an actuarial report, working papers, or actuarial opinion summary that are in possession or control of the commissioner shall be confidential by law and privileged, shall not be made public, shall not be subject to subpoena or discovery, and shall not be admissible as evidence in any private civil action; provided that:

     (1)  The commissioner may release the documents to the Actuarial Board for Counseling and Discipline or its successor to the extent that the material is required for the purpose of professional disciplinary proceedings and that the Actuarial Board for Counseling and Discipline or its successor establishes procedures satisfactory to the commissioner for preserving the confidentiality of the documents;

     (2)  This section shall not be construed to limit the commissioner's authority to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the commissioner's official duties; and

     (3)  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 this subsection.

     (c)  The commissioner may share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsections (a) and (b), 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 information and has the legal authority to do so.

     (d)  The commissioner may receive documents, materials, or other 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.  The commissioner shall maintain as confidential or privileged, subject to subsection (b)(3), 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.

     (e)  The commissioner may enter into agreements governing sharing and use of information consistent with subsections (b), (c), and (d).

     (f)  No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information subject to this section shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsections (b), (c), and (d). [L 2010, c 116, §1(1); am L 2011, c 43, §13]

 

 

     §431:3-305  Accounts; records.  Every insurer shall keep full and adequate accounts and records of its assets, obligations, transactions, and affairs.  Every domestic insurer shall maintain said accounts and records at its principal office in this State. [L 1987, c 347, pt of §2]

 

     §431:3-306  Limit of risk.  (a)  No insurer shall retain net any risk on any one subject of insurance, whether located or to be performed in this State or elsewhere, in an amount exceeding ten per cent of its surplus to policyholders.

     (b)  For the purposes of this section, a subject of insurance as to insurance against fire includes all properties insured by the same insurer which are customarily considered by underwriters to be subject to loss or damage from the same fire.

     (c)  Reinsurance in any reinsurer not qualified under article 4A may not be deducted in determining risk retained for the purposes of this section.

     (d)  In the case of surety insurance, the net retention shall be computed after deduction of reinsurances, the amount assumed by any co-surety, the value of any security deposited, pledged, or held subject to the consent of the surety and for the protection of the surety.

     (e)  This section shall not apply to insurance of marine risks or marine protection and indemnity risks. [L 1987, c 347, pt of §2; am L 1993, c 321, §10; am L 2004, c 122, §13]

 

     §431:3-306.5  Residential hurricane coverage.  (a)  Upon written request of the commissioner by certified mail, an insurer writing the peril of residential hurricane coverage in this State shall within thirty days after receipt of the request, make accessible to the commissioner or commissioner's designee information verifying that the insurer has the financial assets and ability to cover its hurricane insurance exposure.  The information to be made accessible shall include:

     (1)  The aggregate amount of hurricane coverage premiums and aggregate limits of coverage by type of coverage, which shall be compiled on a quarterly basis;

     (2)  The probable maximum loss associated with the above aggregate limits, assuming the occurrence of a hurricane of a severity unlikely to occur more frequently than once every one hundred years, as that loss is estimated in a report prepared by a recognized hurricane modeling company;

     (3)  All financial information relating to the insurer's capital base and reinsurance program for hurricane losses, such as:

          (A)  Information describing the reinsurance program in place as of the date notice was received;

          (B)  The names and financial ratings of each reinsurer;

          (C)  Aggregate limits of reinsurance coverage available; and

          (D)  Reinstatement provisions; and

     (4)  Any other related information the commissioner may require to evaluate the adequacy of the program.

     (b)  If the commissioner determines that the loss estimated pursuant to subsection (a) exceeds the sum of an insurer's capitalization and available reinsurance, the commissioner may further examine that insurer's financial position as allowed by article 2 and commence supervisory and other appropriate proceedings under article 15.

     (c)  The cost of an examination under this section shall be assessed against the insurer being examined and remitted to the commissioner for deposit into the compliance resolution fund.

     (d)  Any final order or decision of the commissioner under this section shall be made pursuant to chapter 91. [L 2001, c 120, §1; am L 2003, c 212, §24]

 

     §431:3-307  Free insurance.  Except as otherwise provided by law, no insurer, either domestic, foreign or alien, shall issue or cause to be issued any policy of insurance of any type or description upon life or property, real or personal, whenever the policy of insurance is to be furnished or delivered to the purchaser or bailee of any property, real or personal, either as an inducement to purchase or bailment of the property, real or personal, or as a part of the consideration for the purchase or bailment of the property, real or personal. [L 1987, c 347, pt of §2]

 

     §431:3-308  Alien government owned insurers.  No license to transact any kind of insurance business in this State shall be issued or renewed to any foreign or alien insurer or issued or continued in effect to any domestic insurer which is owned or financially controlled by another state of the United States other than this State, or by a foreign government, or by any political subdivision of either, or which is an agency or instrumentality of any such state, government, or subdivision, unless the insurer was so owned or controlled prior to January 1, 1957, and was authorized to do business in this State on or prior to that date. [L 1987, c 347, pt of §2]

 

     §431:3-309  Disclosure of profits by insurers.  All insurance companies transacting business in this State under authority provided by this code or any other provision of Hawaii law shall, within three months following the completion of the calendar year, submit to the commissioner a full and accurate written disclosure of:

     (1)  All profits derived from each line of insurance written for the applicable calendar year, and

     (2)  All profits for the entire company for the applicable calendar year.

All disclosures submitted pursuant to this section shall be in a form prescribed by the commissioner. [L 1987, c 347, pt of §2]

 

PART IV.  RISK-BASED CAPITAL FOR INSURERS

 

Note

 

  Part heading amended by L 1997, c 75, §2.

 

Cross References

 

  Civil relief for state military forces, see chapter 657D.

 

     §431:3-401  Definitions.  For purposes of this part unless the context otherwise requires:

     "Adjusted risk-based capital report" means a risk-based capital report which has been adjusted by the commissioner in accordance with section 431:3-402(e).

     "Benefit society" means a mutual benefit society registered under section 432:1-301 or a fraternal benefit society organized under section 432:2-301.

     "Corrective order" means an order issued by the commissioner specifying corrective actions which the commissioner has determined are required.

     "Domestic insurer" includes an insurer, a benefit society or a health maintenance organization.

     "Health maintenance organization" means a health maintenance organization authorized under section 432D-2.

     "Life or accident and health or sickness insurer" means any insurer that is within the definition of section 431:1-204 or 431:1-205 and is licensed under article 3, or a licensed property and casualty insurer writing only accident and health or sickness insurance.

     "NAIC" means the National Association of Insurance Commissioners.

     "Negative trend" means, with respect to a life or accident and health or sickness insurer, a negative trend over a period of time, as determined in accordance with the "trend test calculation" included in the risk-based capital instructions.

     "Property and casualty insurer" means any insurer that is within the definition of section 431:1-206, 431:1-207, 431:1-208, 431:1-209, 431:1-210, or 431:1-211 and is licensed under article 3, but shall not include monoline mortgage guaranty insurers, financial guaranty insurers, and title insurers.

     "Risk-based capital instructions" means the risk-based capital report including risk-based capital instructions adopted by the National Association of Insurance Commissioners, as such risk-based capital instructions may be amended by the National Association of Insurance Commissioners from time to time in accordance with the procedures adopted by the National Association of Insurance Commissioners.

     "Risk-based capital level" means an insurer's company action level risk-based capital, regulatory action level risk-based capital, authorized control level risk-based capital, or mandatory control level risk-based capital where:

     (1)  "Company action level risk-based capital" means, with respect to any insurer, the product of 2.0 and its authorized control level risk-based capital;

     (2)  "Regulatory action level risk-based capital" means, with respect to any insurer, the product of 1.5 and its authorized control level risk-based capital;

     (3)  "Authorized control level risk-based capital" means, with respect to any insurer, the number determined under the risk-based capital formula in accordance with the risk-based capital instructions; and

     (4)  "Mandatory control level risk-based capital" means, with respect to any insurer, the product of 0.70 and the authorized control level risk-based capital.

     "Risk-based capital plan" means a comprehensive financial plan containing the elements specified in section 431:3-403(b).  If the commissioner rejects the risk-based capital plan and it is revised by the insurer, with or without the commissioner's recommendation, the plan shall be called the "revised risk-based capital plan".

     "Risk-based capital report" means the report required in section 431:3-402.

     "Total adjusted capital" means the sum of:

     (1)  An insurer's statutory capital and surplus, or net worth, as determined in accordance with the statutory accounting applicable to the annual financial statements or reports required to be filed under section 431:3-301, 432:1-404, 432:2-602, or 432D-5; and

     (2)  Any other items that the risk-based capital instructions may provide. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §3; am L 1999, c 128, §2; am L 2003, c 212, §25; am L 2010, c 4, §7; am L 2011, c 80, §1]

 

 

     §431:3-402  Risk-based capital reports.  (a)  Every domestic insurer, on or before each March 1, the filing date, shall prepare and submit to the commissioner a report of its risk-based capital levels as of the end of the calendar year just ended, in a form and containing any information that is required by the risk-based capital instructions.  In addition, every domestic insurer shall file its risk-based capital report:

     (1)  With the National Association of Insurance Commissioners in accordance with the risk-based capital instructions; and

     (2)  With the insurance commissioner in any state in which the insurer is authorized to do business, if the commissioner has notified the insurer of its request in writing, in which case the insurer shall file its risk-based capital report not later than the later of:

          (A)  Fifteen days from the receipt of notice to file its risk-based capital report with that state; or

          (B)  The filing date.

     (b)  A life or accident and health or sickness insurer's risk-based capital shall be determined in accordance with the formula set forth in the risk-based capital instructions.  The formula shall take into account and may adjust for the covariance among the following, which shall be determined in each case by applying the factors in the manner set forth in the risk-based capital instructions:

     (1)  The risk with respect to the insurer's assets;

     (2)  The risk of adverse insurance experience with respect to the insurer's liabilities and obligations;

     (3)  The interest rate risk with respect to the insurer's business; and

     (4)  All other business risks and any other relevant risks that are set forth in the risk-based capital instructions.

     (c)  A property and casualty insurer's risk-based capital shall be determined in accordance with the formula set forth in the risk-based capital instructions.  The formula shall take into account and may adjust for the covariance among the following, which shall be determined in each case by applying the factors in the manner set forth in the risk-based capital instructions:

     (1)  Asset risk;

     (2)  Credit risk;

     (3)  Underwriting risk; and

     (4)  All other business risks and any other relevant risks as set forth in the risk-based capital instructions.

     (d)  A benefit society or health maintenance organization's risk-based capital shall be determined in accordance with the formula set forth in the risk-based capital instructions.  The formula shall take into account and may adjust for the covariance among the following, which shall be determined in each case by applying the factors in the manner set forth in the risk-based capital instructions:

     (1)  Asset risk;

     (2)  Credit risk;

     (3)  Underwriting risk; and

     (4)  All other business risks and any other relevant risks as set forth in the risk-based capital instructions.

     (e)  An excess of capital, or net worth, over the amount produced by the risk-based capital requirements contained in this part and the formulas, schedules, and instructions referenced in this part is desirable in the business of insurance.  Accordingly, insurers shall seek to maintain capital above the risk-based capital levels required by this part.  Additional capital is used and useful in the business of insurance and helps to secure an insurer against various risks inherent in or affecting the business of insurance and not accounted for or only partially measured by the risk-based capital requirements contained in this part.

     (f)  If a domestic insurer files a risk-based capital report which, in the judgment of the commissioner, is inaccurate, then the commissioner shall adjust the risk-based capital report to correct the inaccuracy and shall notify the insurer of the adjustment.  The notice shall contain a statement of the reason for the adjustment.  A risk-based capital report adjusted pursuant to this subsection is referred to as an adjusted risk-based capital report. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §4; am L 1998, c 71, §2; am L 1999, c 128, §2; am L 2003, c 212, §26; am L 2011, c 80, §2]

 

 

     §431:3-403  Company action level event.  (a)  "Company action level event" means any of the following events:

     (1)  The filing of a risk-based capital report by an insurer which indicates that:

          (A)  The insurer's total adjusted capital is greater than or equal to its regulatory action level risk-based capital but less than its company action level risk-based capital;

          (B)  If a life or accident and health or sickness insurer, the insurer has total adjusted capital greater than or equal to its company action level risk-based capital but less than the product of its authorized control level risk-based capital and three, and has a negative trend;

          (C)  If a property and casualty insurer, the insurer has a total adjusted capital greater than or equal to its company action level risk-based capital but less than the product of its authorized control level risk-based capital and three, and triggers the trend test determined in accordance with the trend test calculation included in the property and casualty risk-based capital instructions; or

          (D)  If a benefit society or health maintenance organization, the benefit society or health maintenance organization has a total adjusted capital greater than or equal to its company action level risk-based capital but less than the product of its authorized control level risk-based capital and three, and triggers the trend test determined in accordance with the trend test calculation included in the health risk-based capital instructions;

     (2)  The notification by the commissioner to the insurer of an adjusted risk-based capital report that indicates the occurrence of the event in paragraph (1), if the insurer does not challenge the adjusted risk-based capital report under section 431:3-407; or

     (3)  If, pursuant to section 431:3-407, the insurer challenges an adjusted risk-based capital report that indicates the occurrence of the event in paragraph (1), the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer's challenge.

     (b)  In the event of a company action level event, the insurer shall prepare and submit to the commissioner a risk-based capital plan which shall:

     (1)  Identify the conditions in the insurer which contribute to the company action level event;

     (2)  Contain proposals of corrective actions which the insurer intends to take and would be expected to result in the elimination of the company action level event;

     (3)  Provide projections of the insurer's financial results in the current year and at least the four succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital, and surplus.  The projections for both new and renewal business may include separate projections for each major line of business and separately identify each significant income, expense, and benefit component;

     (4)  Identify the key assumptions having an impact on the insurer's projections and the sensitivity of the projections to the assumptions; and

     (5)  Identify the quality of, and problems associated with, the insurer's business, including but not limited to its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business, and use of reinsurance in each case, if any.

     (c)  The risk-based capital plan shall be submitted:

     (1)  Within forty-five days of the company action level event; or

     (2)  If the insurer challenges an adjusted risk-based capital report pursuant to section 431:3-407, within forty-five days after notification to the insurer that the commissioner has, after a hearing, rejected the insurer's challenge.

     (d)  Within sixty days after the submission by an insurer of a risk-based capital plan to the commissioner, the commissioner shall notify the insurer whether the risk-based capital plan shall be implemented or is, in the judgment of the commissioner, unsatisfactory.  If the commissioner determines the risk-based capital plan is unsatisfactory, the notification to the insurer shall set forth the reasons for the determination, and may set forth proposed revisions which will render the risk-based capital plan satisfactory, in the judgment of the commissioner.  Upon notification from the commissioner, the insurer shall prepare a revised risk-based capital plan, which may incorporate by reference any revisions proposed by the commissioner, and shall submit the revised risk-based capital plan to the commissioner:

     (1)  Within forty-five days after the notification from the commissioner; or

     (2)  If the insurer challenges the notification from the commissioner under section 431:3-407, within forty-five days after a notification to the insurer that the commissioner has, after a hearing, rejected the insurer's challenge.

     (e)  In the event of a notification by the commissioner to an insurer that the insurer's risk-based capital plan or revised risk-based capital plan is unsatisfactory, the commissioner, at the commissioner's discretion, subject to the insurer's right to a hearing under section 431:3-407, may specify in the notification that the notification constitutes a regulatory action level event.

     (f)  Every domestic insurer that files a risk-based capital plan or revised risk-based capital plan with the commissioner shall file a copy of the risk-based capital plan or revised risk-based capital plan with the insurance commissioner in any state in which the insurer is authorized to do business if:

     (1)  That state has a risk-based capital provision substantially similar to section 431:3-408(a); and

     (2)  The insurance commissioner of that state has notified the insurer of its request for the filing in writing, in which case the insurer shall file a copy of the risk-based capital plan or revised risk-based capital plan in that state no later than the later of:

          (A)  Fifteen days after the receipt of notice to file a copy of its risk-based capital plan or revised risk-based capital plan with that state; or

          (B)  The date on which the risk-based capital plan or revised risk-based capital plan is filed under subsections (c) and (d). [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §5; am L 1999, c 128, §2; am L 2003, c 212, §27; am L 2011, c 80, §3; am L 2013, c 190, §1]

 

 

     §431:3-404  Regulatory action level event.  (a)  "Regulatory action level event" means, with respect to any insurer, any of the following events:

     (1)  The filing of a risk-based capital report by the insurer which indicates that the insurer's total adjusted capital is greater than or equal to its authorized control level risk-based capital but less than its regulatory action level risk-based capital;

     (2)  The notification by the commissioner to an insurer of an adjusted risk-based capital report that indicates the occurrence of the event in paragraph (1), if the insurer does not challenge the adjusted risk-based capital report under section 431:3-407;

     (3)  If, pursuant to section 431:3-407, the insurer challenges an adjusted risk-based capital report that indicates the occurrence of the event in paragraph (1), the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer's challenge;

     (4)  The failure of the insurer to file a risk-based capital report by the filing date, unless the insurer has provided an explanation for the failure which is satisfactory to the commissioner and has cured the failure within ten days after the filing date;

     (5)  The failure of the insurer to submit a risk-based capital plan to the commissioner within the time set forth in section 431:3-403(c);

     (6)  Notification by the commissioner to the insurer that:

          (A)  The risk-based capital plan or revised risk-based capital plan submitted by the insurer is, in the judgment of the commissioner, unsatisfactory; and

          (B)  The notification constitutes a regulatory action level event with respect to the insurer, if the insurer has not challenged the determination under section 431:3-407;

     (7)  If, pursuant to section 431:3-407, the insurer challenges a determination by the commissioner under paragraph (6), the notification by the commissioner to the insurer that the commissioner, after a hearing, has rejected the challenge;

     (8)  Notification by the commissioner to the insurer that the insurer has failed to adhere to its risk-based capital plan or revised risk-based capital plan, but only if the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event in accordance with its risk-based capital plan or revised risk-based capital plan and the commissioner has so stated in the notification, and if the insurer has not challenged the determination under section 431:3-407; or

     (9)  If, pursuant to section 431:3-407, the insurer challenges a determination by the commissioner under paragraph (8), the notification by the commissioner to the insurer that the commissioner, after a hearing, has rejected the challenge.

     (b)  In the event of a regulatory action level event the commissioner shall:

     (1)  Require the insurer to prepare and submit a risk-based capital plan or, if applicable, a revised risk-based capital plan;

     (2)  Perform any examination or analysis that the commissioner deems necessary of the assets, liabilities, and operations of the insurer including a review of its risk-based capital plan or revised risk-based capital plan; and

     (3)  Subsequent to the examination or analysis, issue a corrective order specifying the corrective actions the commissioner determines are required.

     (c)  In determining corrective actions, the commissioner may take into account any relevant factors with respect to the insurer based upon the commissioner's examination or analysis of the assets, liabilities, and operations of the insurer, including but not limited to the results of any sensitivity tests undertaken pursuant to the risk-based capital instructions.  The risk-based capital plan or revised risk-based capital plan shall be submitted:

     (1)  Within forty-five days after the occurrence of the regulatory action level event;

     (2)  If the insurer challenges an adjusted risk-based capital report pursuant to section 431:3-407 and the challenge is not frivolous in the judgment of the commissioner, within forty-five days after the notification to the insurer that the commissioner, after a hearing, has rejected the insurer's challenge; or

     (3)  If the insurer challenges a revised risk-based capital plan pursuant to section 431:3-407 and the challenge is not frivolous in the judgment of the commissioner, within forty-five days after notification to the insurer that the commissioner, after a hearing, has rejected the insurer's challenge.

     (d)  The commissioner may retain actuaries and investment experts and other consultants that may be necessary, in the judgment of the commissioner, to review the insurer's risk-based capital plan or revised risk-based capital plan, examine or analyze the assets, liabilities, and operations of the insurer, and formulate the corrective order with respect to the insurer.  The fees, costs, and expenses relating to consultants shall be borne by the affected insurer or any other party as directed by the commissioner. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §§6, 7; am L 1999, c 128, §2]

 

     §431:3-405  Authorized control level event.  (a)  "Authorized control level event" means any of the following events:

     (1)  The filing of a risk-based capital report by the insurer which indicates that the insurer's total adjusted capital is greater than or equal to its mandatory control level risk-based capital but less than its authorized control level risk-based capital;

     (2)  The notification by the commissioner to the insurer of an adjusted risk-based capital report that indicates the occurrence of the event in paragraph (1), if the insurer does not challenge the adjusted risk-based capital report under section 431:3-407;

     (3)  If, pursuant to section 431:3-407, the insurer challenges an adjusted risk-based capital report that indicates the occurrence of the event in paragraph (1), notification by the commissioner to the insurer that the commissioner, after a hearing, has rejected the insurer's challenge;

     (4)  The failure of the insurer to respond in a manner satisfactory to the commissioner to a corrective order; provided the insurer has not challenged the corrective order under section 431:3-407; or

     (5)  If the insurer has challenged a corrective order under section 431:3-407 and the commissioner, after a hearing, has rejected the challenge or modified the corrective order, the failure of the insurer to respond in a manner satisfactory to the commissioner to the corrective order subsequent to rejection or modification by the commissioner.

     (b)  In the event of an authorized control level event with respect to an insurer, the commissioner shall:

     (1)  Take any actions that are required under section 431:3-404 regarding an insurer with respect to which a regulatory action level event has occurred; or

     (2)  If the commissioner deems it to be in the best interests of the policyholders and creditors of the insurer and of the public, take any actions that are necessary to cause the insurer to be placed under regulatory control under article 15.  In the event the commissioner takes such actions, the authorized control level event shall be deemed sufficient grounds for the commissioner to take action under article 15, and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in article 15.  In the event the commissioner takes actions under this paragraph pursuant to an adjusted risk-based capital report, the insurer shall be entitled to the protections that are afforded to insurers under the provisions of section 431:15-201. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §8; am L 1999, c 128, §2]

 

     §431:3-406  Mandatory control level event.  (a)  "Mandatory control level event" means any of the following events:

     (1)  The filing of a risk-based capital report which indicates that the insurer's total adjusted capital is less than its mandatory control level risk-based capital;

     (2)  Notification by the commissioner to the insurer of an adjusted risk-based capital report that indicates the occurrence of the event in paragraph (1), if the insurer does not challenge the adjusted risk-based capital report under section 431:3-407; or

     (3)  If, pursuant to section 431:3-407, the insurer challenges an adjusted risk-based capital report that indicates the occurrence of the event in paragraph (1), notification by the commissioner to the insurer that the commissioner, after a hearing, has rejected the insurer's challenge.

     (b)  In the event of a mandatory control level event:

     (1)  With respect to a life or accident and health or sickness insurer, the commissioner shall take any actions that are necessary to cause the insurer to be placed under regulatory control under article 15.  In that event, the mandatory control level event shall be deemed sufficient grounds for the commissioner to take action under article 15, and the commissioner shall have the rights, powers, and duties with respect to the insurer as provided by article 15.  In the event the commissioner takes actions pursuant to an adjusted risk-based capital report, the insurer shall be entitled to the protections afforded to insurers under section 431:15-201.  Notwithstanding the requirements of this paragraph, the commissioner may forego action for up to ninety days after the mandatory control level event if the commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the ninety-day period;

     (2)  With respect to a property and casualty insurer, the commissioner shall take any actions that are necessary to cause the insurer to be placed under regulatory control under article 15, or, in the case of an insurer that is writing no business and is running-off its existing business, may allow the insurer to continue its run-off under the supervision of the commissioner.  In either event, the mandatory control level event shall be deemed sufficient grounds for the commissioner to take action under article 15 and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in article 15.  In the event the commissioner takes actions pursuant to an adjusted risk-based capital report, the insurer shall be entitled to the protections afforded to insurers under section 431:15-201.  Notwithstanding the requirements of this paragraph, the commissioner may forego action for up to ninety days after the mandatory control level event if the commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the ninety-day period; or

     (3)  With respect to a benefit society or health maintenance organization, the commissioner shall take any actions that are necessary to cause the insurer to be placed under regulatory control under article 15. In that event, the mandatory control level event shall be deemed sufficient grounds for the commissioner to take action under article 15, and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in article 15.  In the event the commissioner takes actions pursuant to an adjusted risk-based capital report, the insurer shall be entitled to the protections that are afforded to insurers under section 431:15-201.  Notwithstanding the requirements of this paragraph, the commissioner may forego action for up to ninety days after the mandatory control level event if the commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the ninety-day period. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §9; am L 1999, c 128, §2; am L 2003, c 212, §28; am L 2011, c 80, §4]

 

 

     §431:3-407  Hearing.  (a)  The insurer shall have the right to a hearing pursuant to chapter 91 upon being notified of any of the following:

     (1)  Notification to an insurer by the commissioner of an adjusted risk-based capital report;

     (2)  Notification to an insurer by the commissioner that:

          (A)  The insurer's risk-based capital plan or revised risk-based capital plan is unsatisfactory; and

          (B)  The notification constitutes a regulatory action level event with respect to the insurer;

     (3)  Notification to any insurer by the commissioner that the insurer has failed to adhere to its risk-based capital plan or revised risk-based capital plan and that the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event with respect to the insurer in accordance with its risk-based capital plan or revised risk-based capital plan; or

     (4)  Notification to an insurer by the commissioner of a corrective order with respect to the insurer.

     (b)  The insurer shall have the right to a confidential hearing exempt from chapter 92, on the record, and pursuant to chapter 91, at which the insurer may challenge any determination or action by the commissioner.  The insurer shall notify the commissioner of its request for a hearing within five days after receiving the notification by the commissioner pursuant to subsection (a).  Upon receipt of the insurer's request for a hearing, the commissioner shall set a date for the hearing, which date shall be no less than ten days, nor more than thirty days, after the date of the insurer's request. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §10; am L 1999, c 128, §2]

 

     §431:3-408  Confidentiality and prohibition on announcements; prohibition on use in ratemaking.  (a)  All risk-based capital reports, to the extent the information contained in the report is not required to be set forth in a publicly available annual statement schedule, and risk-based capital plans, including the results or report of any examination or analysis of an insurer performed pursuant to this part and any corrective order issued by the commissioner pursuant to examination or analysis, with respect to any domestic insurer or foreign insurer that are in the possession or under the control of the commissioner shall be confidential by law and shall be privileged.  Risk-based capital reports and risk-based capital plans subject to this section shall not be made public, shall not be subject to subpoena or discovery, and shall not be admissible as evidence in any private civil action; provided that:

     (1)  This section shall not be construed to limit the commissioner's authority to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the commissioner's official duties; and

     (2)  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 this subsection.

     (b)  The commissioner may share documents, materials, or other information, including 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; provided that the recipient agrees to maintain the confidential and privileged status of the document, material, or other information and has the legal authority to do so.

     (c)  The commissioner 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.  The commissioner shall maintain as confidential or privileged, pursuant to subsection (a)(2), 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.

     (d)  The commissioner may enter into agreements governing sharing and use of information consistent with subsections (b) and (c).

     (e)  No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information subject to this section shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsections (b) and (c).

     (f)  The comparison of an insurer's total adjusted capital to any of its risk-based capital levels is a regulatory tool which may indicate the need for possible corrective action with respect to the insurer and is not intended as a means to rank insurers generally.  Except as otherwise required under this part, making, publishing, disseminating, circulating, or placing before the public or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public in a newspaper, magazine, or other publication; in the form of a notice, circular, pamphlet, letter, or poster; over any radio or television station; or in any other way, an advertisement, announcement, or statement containing an assertion, representation, or statement with regard to the risk-based capital levels of any insurer or of any component derived in the calculation by any insurer, producer, or other person engaged in any manner in the insurance business is misleading and is prohibited.  If any materially false statement with respect to the comparison of an insurer's total adjusted capital to any or all of its risk-based capital levels or any inappropriate comparison of any other amount to the insurer's risk-based capital levels is published in any written publication and the insurer is able to demonstrate to the commissioner with substantial proof the falsity or inappropriateness of the statement then the insurer may publish an announcement in a written publication for the sole purpose of rebutting the materially false or inappropriate statement.

     (g)  Risk-based capital instructions, risk-based capital reports, adjusted risk-based capital reports, risk-based capital plans, and revised risk-based capital plans are intended solely for use by the commissioner in monitoring the solvency of insurers and the need for possible corrective action with respect to insurers and shall not be used by the commissioner for ratemaking, considered or introduced as evidence in any rate proceeding, or used by the commissioner to calculate or derive any elements of an appropriate premium level or rate of return for any line of insurance which an insurer or any affiliate is authorized to write. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §11; am L 1999, c 128, §2; am L 2003, c 212, §29; am L 2011, c 80, §5]

 

 

     §431:3-409  Supplemental provisions; rules; exceptions.  (a)  This part is supplemental to any other laws of this State, and shall not preclude or limit any other powers or duties of the commissioner under those laws, including but not limited to article 15.

     (b)  The commissioner may adopt rules pursuant to chapter 91 necessary for the implementation of this part.

     (c)  The commissioner may exempt from the application of this part any domestic property and casualty insurer that:

     (1)  Writes direct business in this State;

     (2)  Writes direct annual premiums of $2,000,000 or less; and

     (3)  Assumes no reinsurance in excess of five per cent of direct premiums written.

     (d)  The commissioner may exempt from the application of this part any domestic benefit society or health maintenance organization that:

     (1)  Writes direct business only in this State;

     (2)  Assumes no reinsurance in excess of five per cent of direct premiums written; and

     (3)  Writes direct annual premiums for comprehensive medical business of $2,000,000 or less; or

     (4)  Is a benefit society or health maintenance organization that covers fewer than two-thousand lives. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §12; am L 1999, c 128, §2; am L 2011, c 80, §6]

 

 

     §431:3-410  Foreign insurers.  (a)  Any foreign insurer, upon the written request of the commissioner, shall submit to the commissioner a risk-based capital report as of the end of the calendar year just ended by the later of:

     (1)  The date a risk-based capital report would be required to be filed by a domestic insurer under this part; or

     (2)  Fifteen days after the request is received by the foreign insurer.

Any foreign insurer, at the written request of the commissioner, shall promptly submit to the commissioner a copy of any risk-based capital plan that is filed with the insurance commissioner of any other state.

     (b)  In the event of a company action level event, regulatory action level event, or authorized control level event with respect to any foreign insurer as determined under the risk-based capital statute applicable in the state of domicile of the insurer, or if no risk-based capital provision is in force in that state, under this part, if the insurance commissioner of the state of domicile of the foreign insurer fails to require the foreign insurer to file a risk-based capital plan in the manner specified under the risk-based capital law of that state, or if no risk-based capital provision is in force in that state, under section 431:3-403, the commissioner may require the foreign insurer to file a risk-based capital plan with the commissioner. In this event, the failure of the foreign insurer to file a risk-based capital plan with the commissioner shall be grounds to order the insurer to cease and desist from writing new insurance business in this State.

     (c)  In the event of a mandatory control level event with respect to any foreign insurer, if no domiciliary receiver has been appointed with respect to the foreign insurer under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign insurer, the commissioner may make application to the circuit court of the first judicial circuit of this State under article 15 with respect to the liquidation of property of foreign insurers found in this State, and the occurrence of the mandatory control level event shall be considered adequate grounds for the application. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §13; am L 1999, c 128, §2]

 

     [§431:3-411]  Severability.  If any provision of this part, or the application thereof to any person or circumstance, is held invalid, such determination shall not affect the provisions or application of this part which can be given effect without the invalid provision or application, and to that end the provisions of this part are severable. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1999, c 128, §2]

 

     [§431:3-412]  Notices.  All notices by the commissioner to an insurer which may result in regulatory action hereunder shall be effective upon dispatch if transmitted by registered or certified mail or, in the case of any other transmission, shall be effective upon the insurer's receipt of the notice. [L 1994, c 190, pt of §1 am L 1995, c 61, §2 as superseded by c 232, §4; am L 1999, c 128, §2]

 

     §431:3-413  Phase-in provision.  (a)  For risk-based capital reports required to be filed by life or health insurers with respect to 1994, the following requirements shall apply in lieu of sections 431:3-403, 431:3-404, 431:3-405, and 431:3-406:

     (1)  In the event of a company action level event with respect to a domestic insurer, the commissioner shall take no regulatory action hereunder;

     (2)  In the event of a regulatory action level event under section 431:3-404(a)(1), (2), or (3), the commissioner shall take the actions required under section 431:3-403;

     (3)  In the event of a regulatory action level event under section 431:3-404(a)(4), (5), (6), (7), (8), or (9), or an authorized control level event, the commissioner shall take the actions required under section 431:3-404 with respect to the insurer; and

     (4)  In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under section 431:3-405 with respect to the insurer.

     (b)  For risk-based capital reports required to be filed by property and casualty insurers with respect to 1997, the following requirements shall apply in lieu of sections 431:3-403, 431:3-404, 431:3-405, and 431:3-406:

     (1)  In the event of a company action level event with respect to a domestic insurer, the commissioner shall take no regulatory action hereunder;

     (2)  In the event of a regulatory action level event under section 431:3-404(a)(1), (2), or (3), the commissioner shall take the actions required under section 431:3‑403;

     (3)  In the event of a regulatory action level event under section 431:3-404(a)(4), (5), (6), (7), (8), or (9), or an authorized control level event, the commissioner shall take the actions required under section 431:3-404 with respect to the insurer; and

     (4)  In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under section 431:3-405 with respect to the insurer. [L 1994, c 190, pt of §1; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1997, c 75, §14; am L 1999, c 128, §2]

 

     [§431:3-414]  Immunity.  There shall be no liability on the part of, and no cause of action shall rise against, the State, the commissioner, or the insurance division or its employees, agents, or independent contractors for any action taken by them in the performance of their powers and duties under this part. [L 1997, c 75, §1]

 

[ARTICLE 3A]

PRIVACY OF CONSUMER FINANCIAL INFORMATION

 

Note

 

  Personal information protection requirements.  L Sp 2008, c 10, §§7 to 15.

 

Cross References

 

  Information privacy and security council; personal information security, see §§487N-5 to 487N-7.

  Personal information policy and oversight responsibilities for government agencies, see §487J-5.

 

PART I.  GENERAL PROVISIONS

 

     [§431:3A-101]  Purpose; scope; applicability.  (a)  This article governs the treatment of nonpublic personal financial information about individuals by all insurance licensees.  This article:

     (1)  Requires licensees to provide notice to individuals about its privacy policies and practices;

     (2)  Establishes the conditions under which a licensee may disclose nonpublic personal financial information about individuals to affiliates and nonaffiliated third parties; and

     (3)  Provides methods for individuals to prevent a licensee from disclosing that information.

     (b)  This article shall apply to nonpublic personal financial information about individuals who obtain or are claimants or beneficiaries of a licensee's products or services primarily for personal, family, or household purposes.  This article shall not apply to information about companies or about individuals that obtain products or services for business, commercial, or agricultural purposes.

     (c)  Notice provisions under part II of this article shall not apply to licensees in liquidation or receivership. [L 2001, c 220, pt of §1]

 

 

     §431:3A-102  Definitions.  As used in this article:

     "Affiliate" means any company that controls, is controlled by, or is under common control with another company.

     "Clear and conspicuous" means reasonably understandable and designed to call attention to the nature and significance of the information in the notice.

     "Collect" means to obtain information that the licensee organizes or can retrieve by the name of an individual or by identifying number, symbol, or other identifying particular assigned to the individual, without regard to the source of the underlying information.

     "Commissioner" means the insurance commissioner of the State.

     "Company" means a corporation, limited liability company, business trust, general or limited partnership, association, sole proprietorship, mutual benefit society, health maintenance organization, nonprofit corporation, or similar organization.

     "Consumer" means an individual, or that individual’s legal representative, who seeks to obtain, obtains, or has obtained an insurance product or service from a licensee that is to be used primarily for personal, family, or household purposes, and about whom the licensee has nonpublic personal information.

     "Consumer reporting agency" has the same meaning as in section 603(f) of the federal Fair Credit Reporting Act, Title 15 United States Code section 168la(f), as amended.

     "Control" means:

     (1)  Ownership, control, or power to vote twenty‑five per cent or more of the outstanding shares of any class of voting security of the company, directly or indirectly, or acting through one or more other persons;

     (2)  Control in any manner over the election of a majority of the directors, trustees, or general partners or individuals exercising similar functions of the company; or

     (3)  The power to exercise, directly or indirectly, a controlling influence over the management or policies of the company, as the commissioner determines.

     "Customer" means a consumer who has a customer relationship with a licensee.

     "Customer relationship" means a continuing relationship between a consumer and a licensee under which the licensee provides one or more insurance products or services to the consumer that are to be used primarily for personal, family, or household purposes.

     "Financial institution" means any institution in the business of engaging in activities that are financial in nature or incidental to financial activities as described in the Bank Holding Company Act of 1956, Title 12 United States Code section 1843(k), as amended.  "Financial institution" shall not include:

     (1)  Any person or entity with respect to any financial activity that is subject to the jurisdiction of the Commodity Futures Trading Commission under the Commodity Exchange Act, Title 7 United States Code section 1, et seq., as amended;

     (2)  The Federal Agricultural Mortgage Corporation or any entity charged and operating under the Farm Credit Act of 1971, Title 12 United States Code section 2001, et seq., as amended; or

     (3)  Institutions chartered by Congress specifically to engage in securitizations, secondary market sales (including sales of servicing rights), or similar transactions relating to a transaction of a consumer, if the institutions do not sell or transfer nonpublic personal information to a nonaffiliated third party.

     "Financial product or service" means any product or service that a financial holding company could offer by engaging in an activity that is financial in nature or incidental to a financial activity under the Bank Holding Company Act of 1956, Title 12 United States Code section 1843(k).  "Financial product or service" includes a financial institution’s evaluation or brokerage of information that the financial institution collects in connection with a request or an application from a consumer for a financial product or service.

     "Health information" means any information or data except age or gender, whether oral or recorded in any form or medium, created by or derived from a health care provider or the consumer that relates to:

     (1)  The past, present, or future physical, mental, or behavioral health or condition of an individual;

     (2)  The provision of health care to an individual; or

     (3)  Payment for the provision of health care to an individual.

     "Insurance product or service" means any product or service that is offered by a licensee pursuant to the insurance laws of this State.  "Insurance product or service" includes a licensee’s evaluation, brokerage, or distribution of information that the licensee collects in connection with a request or an application from a consumer for an insurance product or service.

     "Licensee" means every licensed insurer, producer, and any other person licensed or required to be licensed, or authorized or required to be authorized, or registered or required to be registered, under chapter 431 or 432, or holding a certificate of authority under chapter 432D.  A licensee shall not be subject to part II of this article if the licensee is an employee, agent, or other representative of another licensee acting as the principal if:

     (1)  The principal otherwise complies with, and provides the notices required by this article; and

     (2)  The licensee does not disclose any nonpublic personal financial information to any person other than to the principal or its affiliates in a manner permitted by this article.

"Licensee" includes an unauthorized insurer that accepts business placed through a licensed surplus lines broker in this State, but only in regard to the surplus lines placements under article 8, chapter 431.  A surplus lines broker or surplus lines insurer shall be deemed to be in compliance with part II of this article if:

     (1)  The broker or insurer does not disclose nonpublic personal financial information of a consumer or a customer to nonaffiliated third parties for any purpose, including joint servicing or marketing under section 431:3A-401, except as permitted by sections 431:3A-402 and 431:3A-403; and

     (2)  The broker or insurer delivers a notice to the consumer at the time a customer relationship is established on which the following is printed in sixteen point type:

 

          "PRIVACY NOTICE:  NEITHER THE U.S. BROKERS THAT HANDLED THIS INSURANCE NOR THE INSURERS THAT HAVE UNDERWRITTEN THIS INSURANCE WILL DISCLOSE NONPUBLIC PERSONAL FINANCIAL INFORMATION CONCERNING THE BUYER TO NONAFFILIATES OF THE BROKERS OR INSURERS EXCEPT AS PERMITTED BY LAW."

 

     "Nonaffiliated third party" means any person except:

     (1)  A licensee’s affiliate; or

     (2)  A person employed jointly by a licensee and any company that is not the licensee’s affiliate; provided that for purposes of this paragraph, a nonaffiliated third party includes the other company that jointly employs the person.

"Nonaffiliated third party" includes any company that is an affiliate solely by virtue of the direct or indirect ownership or control of the company by the licensee or its affiliate in conducting merchant banking or investment banking activities of the type described in section 4(k)(4)(H) of the federal Bank Holding Company Act, Title 12 United States Code section 1843(k)(4)(H), as amended, or insurance company investment activities of the type described in the federal Bank Holding Company Act, Title 12 United States Code section 1843(k)(4)(H) and (I).

     "Nonpublic personal financial information" means:

     (1)  Personally identifiable financial information; and

     (2)  Any list, description, or other grouping of consumers and publicly available information pertaining to them, that is derived using any personally identifiable financial information that is not publicly available.

"Nonpublic personal financial information" shall not include health information, publicly available information except as included on a list described under paragraph (2) of this definition, or any list, description, or other grouping of consumers and publicly available information pertaining to them that is derived without using any personally identifiable financial information that is not publicly available.

     "Opt out" means a direction by a consumer that a licensee not disclose nonpublic financial information about that consumer to a nonaffiliated third party, other than as permitted by part IV of this article.

     "Personally identifiable financial information" means any information:

     (1)  Provided by a consumer to a licensee to obtain an insurance product or service from the licensee;

     (2)  About a consumer resulting from a transaction involving an insurance product or service between a licensee and a consumer; or

     (3)  The licensee otherwise obtains about a consumer in connection with providing a service to that consumer.

"Personally identifiable financial information" shall not include:

     (1)  Health information;

     (2)  A list of names and addresses of customers of an entity that is not a financial institution; or

     (3)  Information that does not identify a consumer, such as aggregate information or blind data that does not contain personal identifiers such as account numbers, names, or addresses.

     "Producer" means a person required to be licensed under the laws of this State to sell, solicit, or negotiate insurance.

     "Publicly available information" means any information that a licensee has a reasonable basis to believe is lawfully made available to the general public from:

     (1)  Federal, state, or local government records;

     (2)  Widely distributed media; or

     (3)  Disclosures to the general public that are required to be made by federal, state, or local law.

For purpose of this definition, a licensee has a reasonable basis to believe that information is lawfully made available to the general public if the licensee has taken steps to determine that:

     (1)  The information is of the type that is available to the general public; and

     (2)  The licensee's consumer has made the information available to the general public, for information that is of a nature that an individual can direct not be made available to the general public. [L 2001, c 220, pt of §1; am L 2003, c 212, §30]

 

PART II.  PRIVACY AND OPT OUT

NOTICES FOR FINANCIAL INFORMATION

 

     §431:3A-201  Initial privacy notice to consumers required.  (a)  A licensee shall provide a clear and conspicuous notice that accurately reflects its privacy policies and practices to a consumer:

     (1)  Not later than when the licensee establishes a customer relationship, except as provided in subsection (d); and

     (2)  Before the licensee discloses any nonpublic personal financial information about the consumer to any nonaffiliated third party, if the licensee makes a disclosure other than as authorized by sections 431:3A-402 and 431:3A-403.

     (b)  A licensee shall not be required to provide an initial notice to a consumer under subsection (a)(2) if:

     (1)  The licensee does not disclose any nonpublic personal financial information about the consumer to any nonaffiliated third party, other than as authorized by sections 431:3A-402 and 431:3A-403, and the licensee does not have a customer relationship with the consumer; provided that for purpose of this paragraph, a licensee establishes a customer relationship at the time the licensee and the consumer enter into a continuing relationship; and

     (2)  A notice has been provided by an affiliated licensee, if the notice clearly identifies all licensees to whom the notice applies and is accurate with respect to the licensee and the other institutions.

     (c)  When an existing customer obtains a new insurance product or service from a licensee that is to be used primarily for personal, family, or household purposes, the licensee shall be deemed to satisfy the initial notice requirements of subsection (a) if:

     (1)  The licensee provides a revised privacy notice, under section 431:3A-205, that covers the customer's new insurance product or service; or

     (2)  The initial, revised, or annual notice that the licensee most recently provided to that customer was accurate with respect to the new insurance product or service, in which case the licensee does not need to provide a new privacy notice under subsection (a).

     (d)  A licensee may provide the initial notice under subsection (a)(1) within a reasonable time after the licensee establishes a customer relationship if:

     (1)  Establishing the customer relationship is not at the customer’s election; or

     (2)  Providing notice not later than when the licensee establishes a customer relationship would substantially delay the customer’s transaction and the customer agrees to receive the notice at a later time.

     (e)  When a licensee is required to deliver an initial privacy notice by this section, the licensee shall deliver it according to section 431:3A-206.  If the licensee uses a short-form initial notice for noncustomers according to section 431:3A-203(c), the licensee may deliver its privacy notice according to section 431:3A-206. [L 2001, c 220, pt of §1; am L 2003, c 212, §31]

 

     [§431:3A-202]  Annual privacy notice to customers required.  (a)  A licensee shall provide a clear and conspicuous notice to customers that accurately reflects its privacy policies and practices not less than annually during the continuation of the customer relationship.  Annually means at least once in any period of twelve consecutive months during which that relationship exists.  A licensee may define the twelve consecutive month period, but the licensee shall apply it to the customer on a consistent basis.

     (b)  A licensee shall not be required to provide an annual notice to a former customer.  A former customer is an individual with whom a licensee no longer has a continuing relationship.

     (c)  If a licensee is required under this section to deliver an annual privacy notice, the licensee shall deliver it according to section 431:3A-206. [L 2001, c 220, pt of §1]

 

     [§431:3A-203]  Information to be included in privacy notices.  (a)  The initial, annual, and revised privacy notices that a licensee provides under sections 431:3A-201, 431:3A-202, and 431:3A-205 shall include the following information, in addition to any other information the licensee wishes to provide, that applies to the licensee and to the consumers to whom the licensee sends its privacy notice:

     (1)  The categories of nonpublic personal financial information that the licensee collects;

     (2)  The categories of nonpublic personal financial information that the licensee discloses;

     (3)  The categories of affiliates and nonaffiliated third parties to whom the licensee discloses nonpublic personal financial information, other than those parties to whom the licensee discloses information under sections 431:3A-402 and 431:3A-403;

     (4)  The categories of nonpublic personal financial information about the licensee’s former customers that the licensee discloses, and the categories of affiliates and nonaffiliated third parties to whom the licensee discloses nonpublic personal financial information about the licensee’s former customers, other than those parties to whom the licensee discloses information under sections 431:3A-402 and 431:3A-403;

     (5)  A separate description of the categories of information the licensee discloses and the categories of third parties with whom the licensee has contracted, if a licensee discloses nonpublic personal financial information to a nonaffiliated third party under section 431:3A-401 and no other exception in sections 431:3A-402 and 431:3A-403 applies to that disclosure;

     (6)  An explanation of the consumer’s right under section 431:3A-301(a) to opt out of the disclosure of nonpublic personal financial information to nonaffiliated third parties, including the methods by which the consumer may exercise that right at that time;

     (7)  Any disclosures that the licensee makes under section 603(d)(2)(A)(iii) of the federal Fair Credit Reporting Act, Title 15 United States Code section 1681a(d)(2)(A)(iii), as amended;

     (8)  The licensee’s policies and practices with respect to protecting the confidentiality and security of nonpublic personal information; and

     (9)  Any disclosure that the licensee makes under subsection (b).

     (b)  If a licensee discloses nonpublic personal financial information under sections 431:3A-402 and 431:3A-403, the licensee is not required to list those exceptions in the initial or annual privacy notices required by sections 431:3A-201 and 431:3A-202.  When describing the categories of parties to whom disclosure is made, the licensee shall state only that it makes disclosures to other affiliated or nonaffiliated third parties, as applicable, as permitted by law.

     (c)  A licensee may satisfy the initial notice requirements in sections 431:3A-201(a) and 431:3A-204(c) for a consumer who is not a customer by providing a short form initial notice at the same time the licensee delivers an opt out notice under section 431:3A-204.  A short form initial notice shall:

     (1)  Be clear and conspicuous;

     (2)  State that the licensee’s privacy notice is available upon request; and

     (3)  Explain a reasonable means by which the consumer may obtain that notice.

     The licensee shall deliver a short form initial notice in accordance with section 431:3A-206.  The licensee shall not be required to deliver its privacy notice with its short form initial notice; provided that the licensee provides the consumer a reasonable means to obtain a privacy notice.  If a consumer receives the licensee’s short form notice and requests a privacy notice, the licensee shall deliver a privacy notice under section 431:3A-206.

     (d)  The privacy notice may include:

     (1)  Categories of nonpublic personal financial information that the licensee reserves the right to disclose in the future, but does not currently disclose; and

     (2)  Categories of affiliates or nonaffiliated third parties to whom the licensee reserves the right in the future to disclose, but to whom the licensee does not currently disclose, nonpublic personal financial information. [L 2001, c 220, pt of §1]

 

     [§431:3A-204]  Form of opt out notice to consumers and opt out methods.  (a)  A licensee shall provide an opt out notice to each of the licensee's consumers that is clear and conspicuous and accurately explains the right to opt out.  The notice shall state:

     (1)  That the licensee discloses or reserves the right to disclose nonpublic personal financial information about its consumer to a nonaffiliated third party;

     (2)  That the consumer has the right to opt out of that disclosure; and

     (3)  A reasonable means by which the consumer may exercise the opt out right.

     (b)  A licensee may provide the opt out notice together with or on the same written or electronic form as the initial notice the licensee provides in accordance with section 431:3A-201.

     (c)  If a licensee provides the opt out notice later than required for the initial notice in accordance with section 431:3A-201, the licensee shall also include a copy of the initial notice with the opt out notice in writing or, if the consumer agrees, electronically.

     (d)  If two or more consumers jointly obtain an insurance product or service from a licensee, the licensee may provide a single opt out notice.  The licensee’s opt out notice shall explain that any of the joint consumers may exercise the right to opt out; provided that the licensee may:

     (1)  Treat an opt out direction by a joint consumer as applying to all of the associated joint consumers; or

     (2)  Permit each joint consumer to opt out separately; provided that if a licensee permits each joint consumer to opt out separately, the licensee shall permit one of the joint consumers to opt out on behalf of all of the joint consumers.

A licensee may not require all joint consumers to opt out before it implements any opt out direction.

     (e)  A licensee shall comply with a consumer’s opt out direction as soon as reasonably practicable after the licensee receives it.

     (f)  A consumer may exercise the right to opt out at any time.

     (g)  A consumer’s direction to opt out under this section shall be effective until the consumer revokes it in writing or, if the consumer agrees, electronically.  When a customer relationship terminates, the customer’s opt out direction shall continue to apply to the nonpublic personal financial information that the licensee collected during or related to that relationship.  If the individual subsequently establishes a new customer relationship with the licensee, the opt out direction that applied to the former relationship shall not apply to the new relationship.

     (h)  If a licensee is required to deliver an opt out notice by this section, the licensee shall deliver it in accordance with section 431:3A-206. [L 2001, c 220, pt of §1]

 

     [§431:3A-205]  Revised privacy notices.  (a)  Except as otherwise provided in this article, a licensee shall not, directly or through an affiliate, disclose any nonpublic personal financial information about a consumer to a nonaffiliated third party other than as described in the initial notice that the licensee provided to that consumer under section 431:3A-201, unless:

     (1)  The licensee has provided to the consumer a clear and conspicuous revised notice that accurately describes its policies and practices;

     (2)  The licensee has provided to the consumer a new opt out notice;

     (3)  The licensee has given the consumer a reasonable opportunity, before the licensee discloses the information to the nonaffiliated third party, to opt out of the disclosure; and

     (4)  The consumer does not opt out.

     (b)  If a licensee is required to deliver a revised privacy notice under subsection (a), the licensee shall deliver it in accordance with section 431:3A-206. [L 2001, c 220, pt of §1]

 

     [§431:3A-206]  Delivery.  (a)  A licensee shall provide any notices required under this article so that each consumer can reasonably be expected to receive actual notice in writing or, if the consumer agrees, electronically.

     (b)  A licensee may reasonably expect that a customer will receive actual notice of the licensee's annual privacy notice if:

     (1)  The customer uses the licensee's web site to access insurance products and services electronically and agrees to receive notices at the web site and the licensee posts its current privacy notice continuously in a clear and conspicuous manner on the web site; or

     (2)  The customer has requested that the licensee refrain from sending any information regarding the customer relationship, and the licensee's current privacy notice remains available to the customer upon request.

     (c)  A licensee shall not provide any notice required under this article solely by oral explanation of the notice, either in person or over the telephone.

     (d)  For customers only, a licensee shall provide the initial notice required by section 431:3A-201(a), the annual notice required by section 431:3A-202(a), and the revised notice required by section 431:3A-205, so that the customer can retain them or obtain them later in writing or, if the customer agrees, electronically.

     (e)  A licensee may provide a joint notice from the licensee and one or more of its affiliates or other financial institutions, as identified in the notice, if the notice is accurate with respect to the licensee and the other institutions.  A licensee also may provide a notice on behalf of another financial institution.

     (f)  If two or more consumers jointly obtain an insurance product or service from a licensee, the licensee may satisfy the initial, annual, and revised notice requirements of sections 431:3A-201(a), 431:3A-202(a), and 431:3A-205(a), by providing one notice to those consumers jointly. [L 2001, c 220, pt of §1]

 

PART III.  LIMITS ON DISCLOSURES OF

FINANCIAL INFORMATION

 

     [§431:3A-301]  Limits on disclosure of nonpublic personal financial information to nonaffiliated third parties.  (a)  Except as otherwise authorized under this article, a licensee may not disclose, directly or through any affiliate, any nonpublic personal financial information about a consumer to a nonaffiliated third party unless:

     (1)  The licensee has provided to the consumer an initial notice as required under section 431:3A-201;

     (2)  The licensee has provided to the consumer an opt out notice as required under section 431:3A-204;

     (3)  The licensee has given the consumer a reasonable opportunity, before it discloses the information to the nonaffiliated third party, to opt out of the disclosure; and

     (4)  The consumer does not opt out.

     (b)  A licensee shall comply with this section, whether or not the licensee and the consumer have established a customer relationship.  If a licensee fails to comply with this section, the licensee may not disclose, directly or through any affiliate, any nonpublic personal financial information about a consumer that the licensee has collected, whether or not the licensee collected it before or after receiving the direction to opt out from the consumer.

     (c)  A licensee may allow a consumer to select certain nonpublic personal financial information or certain nonaffiliated third parties with respect to which the consumer wishes to opt out. [L 2001, c 220, pt of §1]

 

     §431:3A-302  Limits on redisclosure and reuse of nonpublic personal financial information.  (a)  If a licensee receives nonpublic personal financial information from a nonaffiliated financial institution under an exception in section 431:3A-402 or 431:3A-403, the licensee's disclosure and use of that information shall be as follows:

     (1)  The licensee may disclose the information to the affiliates of the financial institution from which the licensee received the information;

     (2)  The licensee may disclose the information to its affiliates who may disclose and use the information only to the extent that the licensee may disclose and use the information; and

     (3)  The licensee may disclose and use the information pursuant to an exception under section 431:3A-402 or 431:3A-403, in the ordinary course of business to carry out the activity covered by the exception under which the licensee received the information.

     (b)  If a licensee receives nonpublic personal financial information from a nonaffiliated financial institution other than under an exception in section 431:3A-402 or 431:3A-403, the licensee may disclose the information only:

     (1)  To the affiliates of the financial institution from which the licensee received the information;

     (2)  To its affiliates who may disclose the information only to the extent that the licensee may disclose the information; and

     (3)  To any other person, if the disclosure would be lawful if made directly to that person by the financial institution from which the licensee received the information.

     (c)  If a licensee discloses nonpublic personal financial information to a nonaffiliated third party under an exception in section 431:3A-402 or 431:3A-403, the third party may disclose and use that information, as follows:

     (1)  Disclose to the licensee's affiliates;

     (2)  Disclose to its affiliates, who may disclose and use the information only to the extent that the third party may disclose and use the information; and

     (3)  Disclose and use the information pursuant to an exception under section 431:3A-402 or 431:3A-403 in the ordinary course of business to carry out the activity covered by the exception under which it received the information.

     (d)  If a licensee discloses nonpublic personal financial information to a nonaffiliated third party other than under an exception under section 431:3A-402 or 431:3A-403, the third party may disclose the information only:

     (1)  To the licensee's affiliates;

     (2)  To the third party's affiliates who may disclose the information only to the extent the third party can disclose the information; and

     (3)  To any other person, if the disclosure would be lawful if the licensee made it directly to that person. [L 2001, c 220, pt of §1; am L 2003, c 212, §32]

 

     [§431:3A-303]  Limits on sharing account number information for marketing purposes.  (a)  A licensee shall not disclose, directly or through an affiliate other than to a consumer reporting agency, a policy number or similar form of access number or access code for a consumer’s policy or transaction account to any nonaffiliated third party for use in telemarketing, direct mail marketing, or other marketing through electronic mail to the consumer.

     (b)  Subsection (a) does not apply if a licensee discloses a policy number or similar form of access number or access code:

     (1)  To the licensee’s service provider solely in order to perform marketing for the licensee’s own products or services, if the service provider is not authorized to directly initiate charges to the account;

     (2)  To a licensee who is a producer solely in order to perform marketing for the licensee’s own products or services; or

     (3)  To a participant in an affinity or similar program if the participants in the program are identified to the customer when the customer enters into the program. [L 2001, c 220, pt of §1]

 

PART IV.  EXCEPTIONS TO LIMITS ON DISCLOSURES

OF FINANCIAL INFORMATION

 

     [§431:3A-401]  Exception to opt out requirements for disclosure of nonpublic personal financial information for service providers and for joint marketing.  (a)  The opt out requirements in sections 431:3A-204 and 431:3A-301 shall not apply if a licensee provides nonpublic personal financial information to a nonaffiliated third party to perform services for the licensee or functions on the licensee’s behalf, if the licensee:

     (1)  Provides the initial notice in accordance with section 431:3A-201; and

     (2)  Enters into a contractual agreement with the third party that prohibits the third party from disclosing or using the information other than to carry out the purposes for which the licensee disclosed the information, including use under an exception in sections 431:3A-402 and 431:3A-403 in the ordinary course of business to carry out those purposes.

     (b)  The services a nonaffiliated third party performs for a licensee under subsection (a) include marketing of the licensee’s own products or services or marketing of financial products or services offered pursuant to joint agreements between the licensee and one or more financial institutions.

     (c)  For purposes of this section, "joint agreement" means a written contract pursuant to which a licensee and one or more financial institutions jointly offer, endorse, or sponsor a financial product or service. [L 2001, c 220, pt of §1]

 

     [§431:3A-402]  Exceptions to notice and opt out requirements for disclosure of nonpublic personal financial information for processing and servicing transactions.  (a)  The requirements for initial notice under section 431:3A-201, for the opt out in sections 431:3A-204 and 431:3A-301, and for service providers and joint marketing in [section] 431:3A-401 shall not apply if the licensee discloses nonpublic personal financial information as necessary to effect, administer, or enforce a transaction that a consumer requests or authorizes, or in connection with:

     (1)  Servicing or processing an insurance product or service that a consumer requests or authorizes;

     (2)  Maintaining or servicing the consumer’s account with a licensee, or with another entity as part of a private label credit card program or other extension of credit on behalf of the entity;

     (3)  A proposed or actual securitization, secondary market sale including sales of servicing rights, or similar transaction related to a transaction of the consumer; or

     (4)  Reinsurance, stop loss, or excess loss insurance.

     (b)  As used in this section, "necessary to effect, administer, or enforce a transaction" means that the disclosure is:

     (1)  Required, or is one of the lawful or appropriate methods, to enforce the licensee’s rights or the rights of other persons engaged in carrying out the financial transaction or providing the product or service; or

     (2)  Required, or is a usual, appropriate, or acceptable method:

          (A)  To carry out the transaction or the product or service business of which the transaction is a part, and to record, service, or maintain the consumer’s account in the ordinary course of providing the insurance product or service;

          (B)  To administer, service the benefits, or process the claims relating to the transaction or the product or service business of which it is a part;

          (C)  To provide a confirmation, statement, or other record of the transaction or to provide information on the status or value of the insurance product, or to service to the consumer or the consumer’s agent or broker;

          (D)  To accrue or recognize incentives or bonuses associated with the transaction that are provided by a licensee or any other party;

          (E)  To underwrite insurance at the consumer’s request or for purposes, as they relate to the consumer's insurance, of account administration, reporting, investigating, or preventing fraud or material misrepresentation, processing premium payments, processing insurance claims, administering insurance benefits including utilization review activities, participating in research projects, or as otherwise required or specifically permitted by federal or state law; or

          (F)  In connection with:

               (i)  The authorization, settlement, billing, processing, clearing, transferring, reconciling, or collection of amounts charged, debited, or otherwise paid using a debit, credit or other payment card, check, or account number, or by other payment means;

              (ii)  The transfer of receivables, accounts, or interests therein; or

             (iii)  The audit of debit, credit, or other payment information. [L 2001, c 220, pt of §1]

 

     [§431:3A-403]  Other exceptions to notice and opt out requirements for disclosure of nonpublic personal financial information.  (a)  The requirements for initial notice in section 431:3A-201, the opt out in sections 431:3A-204, and 431:3A-301, and service providers and joint marketing in section 431:3A-401 shall not apply if a licensee discloses nonpublic personal financial information:

     (1)  With the consent or at the direction of the consumer, who has not revoked the consent or direction;

     (2)  To protect the confidentiality or security of a licensee’s records pertaining to the consumer, service, product, or transaction;

     (3)  To protect against or prevent actual or potential fraud or unauthorized transactions;

     (4)  For required institutional risk control;

     (5)  For resolving consumer disputes or inquiries;

     (6)  To persons holding a legal or beneficial interest relating to the consumer or to persons acting in a fiduciary or representative capacity on behalf of the consumer;

     (7)  To provide information to insurance rate advisory organizations, guaranty funds or agencies, agencies that are rating a licensee, persons that are assessing the licensee’s compliance with industry standards, or the licensee’s attorneys, accountants, and auditors;

     (8)  To the extent specifically permitted or required under other provisions of law and in accordance with the Right to Financial Privacy Act of 1978, Title 12 United States Code section 3401 et seq., as amended, to law enforcement agencies including the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Office of Thrift Supervision, National Credit Union Administration, the Securities and Exchange Commission, and the Secretary of the Treasury, with respect to Title 31 United States Code chapter 53, subchapter II (Records and Reports on Monetary Instruments and Transactions), as amended, and Title 12 United States Code chapter 21 (Financial Recordkeeping), as amended, a state insurance authority, and the Federal Trade Commission, self‑regulatory organizations, or for an investigation on a matter related to public safety;

     (9)  To a consumer reporting agency in accordance with the federal Fair Credit Reporting Act, Title 15 United States Code section 1681, et seq., as amended, or from a consumer report reported by a consumer reporting agency;

    (10)  In connection with a proposed or actual sale, merger, transfer, or exchange of all or a portion of a business or operating unit if the disclosure of nonpublic personal financial information concerns solely consumers of the business or unit;

    (11)  To comply with federal, state, or local laws, rules, and other applicable legal requirements;

    (12)  To comply with a properly authorized civil, criminal, or regulatory investigation, or subpoena or summons by federal, state, or local authorities;

    (13)  To respond to judicial process or government regulatory authorities having jurisdiction over a licensee for examination, compliance, or other purposes as authorized by law; or

    (14)  For purposes related to the replacement of a group benefit plan, a group health plan, a group welfare plan, or a workers’ compensation plan.

     (b)  A consumer may revoke a consent by subsequently exercising the right to opt out of future disclosures of nonpublic personal information as permitted under section 431:3A-204. [L 2001, c 220, pt of §1]

 

PART V.  ADDITIONAL PROVISIONS

 

     [§431:3A-501]  Protection of Fair Credit Reporting Act.  Nothing in this article shall be construed to modify, limit, or supersede the federal Fair Credit Reporting Act, Title 15 United States Code section 1681, et seq., as amended, and no inference shall be drawn on the basis of the provisions of this article regarding whether information is transaction or experience information under Title 15 United States Code section 602, et seq., as amended. [L 2001, c 220, pt of §1]

 

     [§431:3A-502]  Nondiscrimination.  A licensee shall not unfairly discriminate against any consumer or customer because that consumer or customer has opted out from the disclosure of nonpublic personal financial information under this article. [L 2001, c 220, pt of §1]

 

     [§431:3A-503]  Violation.  A violation of this article shall be deemed an unfair method of competition or unfair or deceptive trade act or practice in the business of insurance in violation of section 431:13-102. [L 2001, c 220, pt of §1]

 

     [§431:3A-504]  Rules.  The commissioner may adopt rules pursuant to chapter 91 to further the purposes of this article. [L 2001, c 220, pt of §1]

 

[ARTICLE 3D]

RISK MANAGEMENT AND OWN RISK AND SOLVENCY ASSESSMENT

 

     [§431:3D-101]  Scope and purpose.  (a)  This article shall apply to all insurers domiciled in this State unless exempt pursuant to section 431:3D-106.

     (b)  The purposes of this article shall be to:

     (1)  Provide the requirements for maintaining a risk management framework and completing an own risk and solvency assessment; and

     (2)  Provide guidance and instructions for filing an own risk and solvency assessment summary report with the commissioner. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-102]  Definitions.  As used in this article:

     "Insurance group" means those insurers and affiliates included within an insurance holding company system as defined in article 11.

     "Insurer" shall have the same meaning as set forth in article 1, except that it shall not include:

     (1)  Agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;

     (2)  Fraternal benefit societies;

     (3)  Nonprofit medical and hospital service associations that are exempt from state and federal income taxes; or

     (4)  Unauthorized insurers.

     "Own risk and solvency assessment" means a confidential internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group and conducted by that insurer or insurance group, of the material and relevant risks associated with the insurer or insurance group's current business plan and the sufficiency of capital resources to support those risks.

     "Own Risk and Solvency Assessment Guidance Manual" means the Own Risk and Solvency Assessment Guidance Manual as developed and adopted by the National Association of Insurance Commissioners and as amended from time to time.  A change in the Own Risk and Solvency Assessment Guidance Manual shall take effect on the January 1 following the calendar year in which the changes have been adopted by the National Association of Insurance Commissioners.

"Own risk and solvency assessment summary report" means a confidential, high-level summary of an insurer or insurance group's own risk and solvency assessment. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-103]  Risk management framework.  An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting its material and relevant risks.  This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-104]  Own risk and solvency assessment requirement.  Subject to section 431:3D-106, an insurer or the insurance group of which the insurer is a member shall regularly conduct an own risk and solvency assessment consistent with a process comparable to the Own Risk and Solvency Assessment Guidance Manual.  The own risk and solvency assessment shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-105]  Own risk and solvency assessment summary report.  (a)  Upon the commissioner's request, and no more than once each year beginning in 2018, an insurer shall submit to the commissioner an own risk and solvency assessment summary report or any combination of reports that together contain the information described in the Own Risk and Solvency Assessment Guidance Manual, which is applicable to the insurer, the insurance group of which it is a member, or both.

     (b)  Notwithstanding any request from the commissioner, if the insurer is a member of an insurance group, the insurer shall submit any reports required by this section if the commissioner is the lead state commissioner of the insurance group as determined by the procedures in the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.

     (c)  Any reports filed pursuant to this section shall include a signature of the insurance group's chief risk officer or another executive responsible for the oversight of the insurer's enterprise risk management process attesting, to the best of the person's belief and knowledge, that:

     (1)  The insurer applies the enterprise risk management process described in the own risk and solvency assessment summary report; and

     (2)  A copy of the report has been provided to the insurer's board of directors or the appropriate committee thereof.

     (d)  An insurer may comply with subsection (a) by providing the most recent and substantially similar report, which is provided by the insurer or another member of an insurance group of which the insurer is a member, or any combination of reports that together contain the information described in the Own Risk and Solvency Assessment Guidance Manual, to the commissioner of another state or a supervisor or regulator of a foreign jurisdiction if that report provides information comparable to that described in the Own Risk and Solvency Assessment Guidance Manual.  Any such report in a language other than English must be accompanied by a translation of that report into the English language. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-106]  Exemption.  (a)  An insurer shall be exempt from the requirements of this article if:

     (1)  The insurer's annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, is less than $500,000,000; and

     (2)  The insurance group of which the insurer is a member has an annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, less than $1,000,000,000.

     (b)  If an insurer qualifies for exemption pursuant to subsection (a)(1), but the insurance group of which the insurer is a member does not qualify for exemption pursuant to subsection (a)(2), then the own risk and solvency assessment summary report required pursuant to section 431:3D-105 shall include every insurer within the insurance group.  This requirement may be satisfied by the submission of more than one own risk and solvency assessment summary report for any combination of insurers; provided that any combination of reports includes every insurer within the insurance group.

     (c)  If an insurer does not qualify for exemption pursuant to subsection (a)(1), but the insurance group of which it is a member qualifies for exemption pursuant to subsection (a)(2), then the only own risk and solvency assessment summary report required pursuant to section 431:3D-105 shall be the report applicable to that insurer.

     (d)  An insurer that does not qualify for exemption pursuant to subsection (a) may apply to the commissioner for a waiver from the requirements of this article based upon unique circumstances.

     (1)  In deciding whether to grant the insurer's request for waiver, the commissioner may consider:

          (A)  The type and volume of business written;

          (B)  The ownership and organizational structure; and

          (C)  Any other factor the commissioner considers relevant to the insurer or insurance group of which the insurer is a member.

     (2)  If the insurer is part of an insurance group with insurers domiciled in more than one state, the commissioner shall coordinate with the lead state commissioner and other domiciliary commissioners in considering whether to grant the insurer's request for a waiver.

     (e)  Notwithstanding the exemptions stated in this section:

     (1)  The commissioner may require that an insurer maintain a risk management framework, conduct an own risk and solvency assessment, and file an own risk and solvency assessment summary report based upon unique circumstances including but not limited to the type and volume of business written, the ownership and organizational structure, federal agency requests, and international supervisor requests.

     (2)  The commissioner may require that an insurer maintain a risk management framework, conduct an own risk and solvency assessment, and file an own risk and solvency assessment summary report if the insurer:

          (A)  Has risk-based capital for company action level event as set forth in section 431:3-403;

          (B)  Meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in section 431:15-103.5; or

          (C)  Otherwise exhibits qualities of a troubled insurer as determined by the commissioner.

     (f)  If an insurer that qualifies for an exemption pursuant to subsection (a) subsequently no longer qualifies for that exemption due to changes in premium, as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one year following the year the threshold is exceeded to comply with the requirements of this article. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-107]  Contents of own risk and solvency assessment summary report.  (a)  The own risk and solvency assessment summary report shall be prepared consistent with the Own Risk and Solvency Assessment Guidance Manual and subject to the requirements of subsection (b).  Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner.

     (b)  The review of the own risk and solvency assessment summary report and any additional requests for information shall be made using similar procedures currently used in the analysis and examination of multi-state or global insurers and insurance groups. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-108]  Confidentiality.  (a)  Documents, materials, or other information, including the own risk and solvency assessment summary report, in the possession or control of the commissioner that are obtained by, created by, or disclosed to the commissioner or any other person under this article are recognized as proprietary and containing trade secrets.

     All such documents, materials, or other information shall be confidential by law and privileged, shall not be disclosable under chapter 92F, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.

     The commissioner is authorized to use the documents, materials, or other information to further any regulatory or legal action brought as a part of the commissioner's official duties.  The commissioner shall not otherwise make the documents, materials, or other information public without prior written consent of the insurer.

     (b)  Neither the commissioner nor any person who received documents, materials, or other own risk and solvency assessment information through examination or otherwise, while acting under the authority of the commissioner or with whom such 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 performing the commissioner's regulatory duties, the commissioner:

     (1)  May, upon request, share information subject to subsection (a) and proprietary and trade secret documents with:

          (A)  Other state, federal, and international financial regulatory agencies; and

          (B)  Members of any supervisory college referred to in section 431:11-107.5, the National Association of Insurance Commissioners, and any third-party consultants designated by the commissioner;

          provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the own risk and solvency assessment documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality;

     (2)  May receive information subject to subsection (a) and proprietary and trade secret documents from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college referred to in section 431:11-107.5, and the National Association of Insurance Commissioners.  The commissioner shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and

     (3)  Shall enter into a written agreement with the National Association of Insurance Commissioners or a third-party consultant governing sharing and use of information provided pursuant to this article and consistent with this subsection, which shall:

          (A)  Specify procedures and protocols regarding the confidentiality and security of information shared with the National Association of Insurance Commissioners or a third-party consultant pursuant to this article, including procedures and protocols for sharing by the National Association of Insurance Commissioners with other state regulators from states in which the insurance group has domiciled insurers.  The agreement shall provide that the recipient agrees to maintain the confidentiality and privileged status of the own risk and solvency assessment documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality;

          (B)  Specify that ownership of information shared with the National Association of Insurance Commissioners or a third-party consultant pursuant to this article remains with the commissioner and that use of the information by the National Association of Insurance Commissioners or a third-party consultant is subject to the direction of the commissioner;

          (C)  Prohibit the National Association of Insurance Commissioners or third-party consultant from storing the information shared pursuant to this article in a permanent database after the underlying analysis is completed;

          (D)  Require prompt notice to be given to an insurer whose confidential information in the possession of the National Association of Insurance Commissioners or a third-party consultant pursuant to this article is subject to a request or subpoena to the National Association of Insurance Commissioners or a third-party consultant for disclosure or production;

          (E)  Require the National Association of Insurance Commissioners or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the National Association of Insurance Commissioners or a third-party consultant may be required to disclose confidential information about the insurer shared with the National Association of Insurance Commissioners or a third-party consultant pursuant to this article; and

          (F)  In the case of an agreement involving a third-party consultant, provide for the insurer's written consent.

     (d)  The sharing of information and documents by the commissioner pursuant to this article shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this article.

     (e)  No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary, and trade secret materials or other own risk and solvency assessment information shall occur as a result of disclosing any own risk and solvency assessment information or documents to the commissioner pursuant to this section or as a result of sharing as authorized in this article.

     (f)  Documents, materials, or other information in the possession or control of the National Association of Insurance Commissioners or a third-party consultant pursuant to this article 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. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-109]  Sanctions.  (a)  Any insurer failing without just cause to timely file the own risk and solvency assessment summary report as required in this article shall be required after notice and hearing to pay a penalty of not less than $100 and not more than $500 for each day's delay, which shall be recovered by the commissioner.  Any penalty recovered pursuant to this section shall be paid into the compliance resolution fund.

     (b)  The maximum penalty under this section is $50,000.  The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that imposing the penalty would constitute a financial hardship to the insurer. [L 2016, c 140, pt of §1]

 

 

     [§431:3D-110]  Severability.  If any provision of this article or its application to any person or circumstance is held invalid, that determination shall not affect the provisions or applications of this article that can be given effect without the invalid provision or application, and to that end, the provisions of this article are severable. [L 2016, c 140, pt of §1]

 

 

ARTICLE 4

DOMESTIC INSURERS

 

PART I.  ORGANIZATION, POWERS AND SALE OF SECURITIES OF

DOMESTIC INSURERS

 

     §431:4-101  Definitions.  As used in this article:

     (1)  Surplus funds means the excess of the insurer's assets over its liabilities, including its capital stock as a liability.

     (2)  Available surplus means the excess over the minimum amount of surplus required for the classes of insurance the insurer is authorized to transact.

     (3)  Equity security means any stock or similar security; any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; any such warrant or right; or any security which the commissioner by such rules and regulations as the commissioner may prescribe in the public interest or for the protection of investors designate as an equity security. [L 1987, c 347, pt of §2]

 

     §431:4-102  Types of insurers permitted.  An insurer formed in this State shall be either:

     (1)  An incorporated stock insurer,

     (2)  An incorporated mutual insurer which charges for and collects in advance cash premiums in an amount adequate to maintain full legal reserves and to fully meet and discharge all of its obligations and liabilities under its policies without assessments or calls upon its members for additional premium, except as provided in this article relative to the contingent liability of its members, or

     (3)  A reciprocal insurer, with respective powers, duties and restrictions as provided in this article. [L 1987, c 347, pt of §2]

 

     §431:4-103  Corporation law applies in general.  The laws of this State relating to private corporations, except where inconsistent with the express provisions of this code, shall apply to incorporated domestic insurers. [L 1987, c 347, pt of §2]

 

     §431:4-104  Articles of incorporation.  (a)  This section applies to insurers incorporated in this State.

     (b)  The incorporators shall be individuals who are United States citizens, and a majority of them shall be residents of this State.  The number of incorporators shall be:

     (1)  Not less than five if a stock insurer, or

     (2)  Not less than ten if a mutual insurer.

     (c)  After the articles of incorporation have been approved by the department of commerce and consumer affairs and by the commissioner, the original shall be filed with the department, one copy with the commissioner, and one copy retained by the insurer.

     (d)  The articles of incorporation shall state in addition to the requirements set forth in section 414-32:

     (1)  The name of the insurer, which shall include the word "Insurance" and, as the last word thereof, one of the words "Corporation", "Incorporated", or "Limited", or one of the abbreviations "Corp.", "Inc.", or "Ltd.".  In the case of the reciprocal insurer, the name shall include the word "Reciprocal", "Interinsurer", "Interinsurance", "Exchange", "Underwriters", or "Underwriting";

     (2)  (A)  Whether it is a stock or mutual insurer; and

          (B)  The classes of insurance it will issue, according to the designations made in this article.

     (3)  The place of its principal office, which shall be established and maintained in this State.

     (4)  (A)  If a stock insurer, the amount of its capital, the aggregate number of shares, and the par value of each share, which par value shall not be less than $2, and if the privilege of subsequent extension of the authorized capital stock is sought, then the limit of such extension shall be stated;

          (B)  If a mutual insurer, the maximum contingent liability of its policyholders for the payment of its expenses and losses occurring under its policies.

     (5)  The names and addresses, both business and residence, of the officers of the insurer for the initial term.

     (6)  Other provisions, not inconsistent with law, as may be deemed proper by the incorporators. [L 1987, c 347, pt of §2; am L 2002, c 40, §68]

 

     §431:4-105  Affidavit.  (a)  Before applying to the commissioner for an initial certificate of authority, a stock or mutual insurer is required to file with the commissioner an affidavit, sworn to by the president, secretary, and treasurer of the corporation as named in the articles of incorporation.

     (b)  The affidavit shall set forth:

     (1)  The number of shares which the corporation is authorized to issue;

     (2)  The par value of the shares;

     (3)  The names of the shareholders;

     (4)  The number of shares owned by each shareholder;

     (5)  The amount of money paid to the corporation by each shareholder; and

     (6)  That the required capital has been paid in full in cash. [L 1987, c 347, pt of §2; am L 2003, c 212, §33]

 

     §431:4-106  Board of directors.  The board of directors of a domestic insurer shall consist of not less than five individuals, at least three-fourths of the individuals shall be United States citizens, and a majority of the individuals shall be residents of this State. [L 1987, c 347, pt of §2]

 

     §431:4-106.5  Membership in mutual or subscriber in reciprocal insurers; no personal liability of representative.  Any person may make application to enter into agreement for and hold policies or contracts in or with and be a member or subscriber of any domestic, foreign, or alien mutual or reciprocal insurer.  Any officer, representative, or trustee, receiver, or legal representative of any such member or policyholder shall be recognized as acting for or on its behalf for the purpose of such contracts or membership, but shall not be personally liable upon the contract by reason of acting in such representative capacity. [L 1989, c 195, §1]

 

     §431:4-107  Solicitation permit required.  (a)  No person forming or proposing to form in this State any of the following shall advertise, solicit or receive any funds, agreement, stock subscription or membership on account thereof, unless the person has applied for and has received from the commissioner a solicitation permit:

     (1)  An insurer,

     (2)  An insurance holding corporation,

     (3)  A stock corporation to finance an insurer or insurance production, or

     (4)  A corporation to manage an insurer.

     (b)  Any person violating this section shall be fined not more than $10,000 or imprisoned not more than ten years, or both. [L 1987, c 347, pt of §2]

 

     §431:4-108  Application for a solicitation permit.  To apply for a solicitation permit a person shall:

     (1)  File with the commissioner a request showing:

          (A)  Name, type and purpose of insurer or corporation proposed to be formed;

          (B)  Names, addresses and business records of each person associated or to be associated with in the formation of the proposed insurer or corporation;

          (C)  Full disclosure of the terms of all understandings and agreements existing or proposed among persons so associated relative to the proposed insurer or corporation or the formation thereof;

          (D)  The plan according to which solicitations are to be made;

          (E)  Such additional information as the commissioner may reasonably require.

     (2)  File with the commissioner:

          (A)  (i)  The articles of incorporation, or

              (ii)  The proposed subscribers' agreement and power of attorney, if the proposed insurer is a reciprocal;

          (B)  Original and one copy of any proposed bylaws;

          (C)  Copy of any security proposed to be issued and copy of application or subscription agreement therefor;

          (D)  Copy of any insurance contract proposed to be offered and copy of application therefor;

          (E)  Copy of any prospectus, advertising or literature proposed to be used;

          (F)  Copy of proposed form of any escrow agreement required.

     (3)  Deposit with the commissioner the appropriate fees required by this code. [L 1987, c 347, pt of §2]

 

     §431:4-109  Permit issued or denied.  (a)  The commissioner shall expeditiously examine the application for a solicitation permit and make any investigation relative thereto deemed necessary.

     (b)  The commissioner shall give notice to the applicant that the commissioner will issue a solicitation permit, stating the terms to be contained therein, if the commissioner finds:

     (1)  The application is complete;

     (2)  The documents therewith filed are equitable in terms and proper in form;

     (3)  The agreements made or proposed are equitable to present and future shareholders, subscribers, members, or policyholders; and

     (4)  None of the persons named in the application as being associated or to be associated with the formation of the insurer or corporation is untrustworthy.

     (c)  After such notice, the commissioner shall issue to the applicant a solicitation permit upon the applicant's filing of the following:

     (1)  The bond required by section 431:4-110; and

     (2)  The articles of incorporation of the incorporated insurer or other corporation with the department of commerce and consumer affairs and upon presentation of evidence of such filing to the commissioner.

     (d)  If the commissioner denies the application for a solicitation permit, the commissioner shall give notice to the applicant that the permit will not be granted, state the grounds therefor, and refund to the applicant all sums so deposited except the application fee. [L 1987, c 347, pt of §2]

 

     §431:4-110  Bond or cash deposit.  (a)  The commissioner shall not issue a solicitation permit until the person applying therefor files with the commissioner a corporate surety bond in the penalty sum of $150,000, in favor of this State and for the use and benefit of this State and of subscribers and creditors of the proposed organization.  The bond shall be conditioned upon the payment of costs incurred by this State in the event of any legal proceedings for liquidation or dissolution of the proposed organization before completion of organization or in the event a certificate of authority is not granted; upon a full accounting for funds received until the proposed insurer has been granted its certificate of authority; or until the proposed corporation has completed its organization as defined in the solicitation permit.

     (b)  In lieu of filing the bond described in subsection (a), the person may deposit with the director of finance through the commissioner $150,000 in cash or in United States government bonds at par value, to be held in trust upon the same conditions as required for the bond.

     (c)  The commissioner may waive the requirement for a bond or deposit in lieu thereof if the permit provides that:

     (1)  The proposed securities are to be distributed solely and finally to those few persons who are the active promoters intimate to the formation of the insurer or other corporation, or to the formation of the insurer or other corporation; or

     (2)  The securities are to be issued in connection with subsequent financing as provided in section 431:4-120, and distribution thereof is not to be made to the general public.

     (d)  Any bond filed, or any deposit or remaining portion thereof held under this section shall be released and discharged upon settlement or termination of all liabilities against it. [L 1987, c 347, pt of §2; am L 1993, c 205, §8]

 

     §431:4-111  Expiration and contents.  Every solicitation permit issued by the commissioner shall:

     (1)  Expire two years from its date, unless earlier terminated by the commissioner, and shall so state.

     (2)  State the securities for which subscriptions are to be solicited, the number, classes, par value, and selling price thereof, or identify the insurance contract for which applications and advance premiums or deposits are to be solicited.

     (3)  Limit the portion of funds received on account of stock subscriptions, if any are proposed to be taken, which may be used for promotion and organization expenses to such amount as the commissioner deems adequate, but in no event to exceed fifteen per cent of such funds as and when actually received.

     (4)  If to be for a mutual or reciprocal insurer, limit the portion of funds received on account of applications for insurance which may be used for promotion or organization expenses to a reasonable commission upon such funds, giving consideration to the class or classes of insurance and policy or policies involved and to the costs incurred by insurers generally in the production of similar business, and provide that no such commission shall be deemed to be earned nor be paid until the insurer has received its certificate of authority and the policies applied for, and upon which such commission is to be based, have been actually issued and delivered.

     (5)  Contain such other information required by this part or reasonable conditions relative to accounting and reports or otherwise as the commissioner deems necessary. [L 1987, c 347, pt of §2]

 

     §431:4-112  Permit not an inducement.  The granting of a solicitation permit is permissive only and shall not constitute an endorsement by the commissioner of any person or thing related to the proposed insurer or corporation.  The existence of the permit shall not be advertised or used as an inducement in any solicitation.  The substance of this section in boldfaced type not less than ten point shall be printed at the top of each solicitation permit. [L 1987, c 347, pt of §2]

 

     §431:4-113  Organization solicitor's license.  Solicitation for sale of securities to members of the public under a solicitation permit shall be made only by individuals registered therefor pursuant to chapter 485A. [L 1987, c 347, pt of §2; am L 2006, c 229, §14]

 

 

     §431:4-114  Revocation of solicitation permit.  (a)  The commissioner shall revoke a solicitation permit if requested in writing by:

     (1)  A majority of the incorporators and at least two-thirds of the subscribers to stock or applicants for insurance in the proposed incorporated insurer or corporation; or

     (2)  A majority of the subscribers of a proposed reciprocal insurer.

     (b)  The commissioner may, for cause, modify a solicitation permit, or may, after a hearing, revoke any solicitation permit for:

     (1)  Violation of this code;

     (2)  Violation of the terms of the permit;

     (3)  Violation of any proper order of the commissioner; or

     (4)  Misrepresentation. [L 1987, c 347, pt of §2]

 

     §431:4-115  Escrow of funds.  (a)  All funds received pursuant to a solicitation permit shall be deposited and held in escrow in a bank or trust company under an agreement approved by the commissioner.  No part of any such deposit shall be withdrawn except:

     (1)  For the payment of promotion and organization expenses as authorized by the solicitation permit;

     (2)  For the purpose of making any deposit with the commissioner required for the issuance of a certificate of authority to an insurer;

     (3)  Upon completion of payments on stock subscriptions made under the solicitation permit and deposit or appropriation of such funds for the purposes specified in the solicitation permit, if the proposed organization is not to be an insurer; or

     (4)  For making of refunds as provided in section 431:4-119.

     (b)  When the commissioner has issued a certificate of authority to an insurer, any such funds remaining in escrow for its account shall be released to the insurer. [L 1987, c 347, pt of §2]

 

     §431:4-116  Expense pending completion.

  (a)(1)  The incorporators of any insurer shall be jointly and severally liable for its debts or liabilities until it has secured a certificate of authority.

     (2)  The incorporators of a corporation other than an insurer or the persons proposing to form a reciprocal insurer shall be jointly and severally liable for its debts or liabilities until it has completed its organization.

     (b)  Any portion of funds received on account of stock subscriptions which is allowed under the solicitation permit, may be applied concurrently toward the payment of promotion and organization expenses incurred. [L 1987, c 347, pt of §2]

 

     §431:4-117  Issuance and forfeiture of securities.  (a)  No proposed stock insurer or corporation shall issue any share of stock or participation agreement until:

     (1)  All subscriptions received under the solicitation permit have been fully paid in:

          (A)  Cash or securities eligible for investment of funds of insurers, or

          (B)  Other property after securing the written approval of the commissioner; and

     (2)  A certificate of authority has been issued to it, if an insurer.

     (b)  Every subscription contract to shares of a stock insurer or other corporation calling for payment in installments shall provide that such contracts, together with all amounts paid thereon, may be forfeited at the option of the corporation, upon failure to make good a delinquency in any installment upon not less than forty-five days notice in writing. [L 1987, c 347, pt of §2]

 

     §431:4-118  Insurance application.  All applications for insurance obtained in forming a mutual or reciprocal insurer shall provide that:

     (1)  Issuance of the policy is contingent upon completion of organization of the insurer and issuance of a certificate of authority to it;

     (2)  The prepaid premium or deposit will be refunded in full to the applicant if the organization is not completed and the certificate of authority issued prior to the solicitation permit's date of expiration; and

     (3)  The agreement for insurance is not effective until a policy has been issued under it. [L 1987, c 347, pt of §2]

 

     §431:4-119  Refund upon failure to complete or qualify or upon revocation of solicitation permit.  (a)  The commissioner shall withdraw all funds held in escrow and refund to subscribers or applicants all sums paid in on stock subscriptions, less that part of such sums paid in on subscriptions as has been allowed and used for promotion and organization expenses, and all sums paid in on insurance applications, and shall dissolve the proposed insurer or corporation if:

     (1)  The proposed insurer or corporation fails to complete its organization and obtain full payment for subscriptions and applications; and

     (2)  It fails to secure its certificate of authority before expiration of the solicitation permit, if an insurer; or

     (b)  The commissioner revokes the solicitation permit. [L 1987, c 347, pt of §2]

 

     §431:4-120  Subsequent financing.  (a)  No domestic insurer, insurance holding corporation, stock corporation for financing operations of a mutual insurer, or attorney-in-fact corporation of a reciprocal insurer shall solicit or receive funds in exchange for any new issue of its corporate securities, other than through a stock dividend, until it has applied to the commissioner for, and has been granted, a solicitation permit, after:

     (1)  It has received a certificate of authority, if an insurer, or

     (2)  It has completed its initial organization and financing, if a corporation other than an insurer.

     (b)  The commissioner shall issue a solicitation permit unless the commissioner finds that:

     (1)  The funds proposed to be secured are excessive in amount for the purpose intended,

     (2)  The proposed securities or the manner of their distribution are inequitable, or

     (3)  The issuance of the securities would jeopardize the interests of policyholders or the holders of other securities of the insurer or corporation.

     (c)  A solicitation permit shall contain such terms and be issued upon such conditions as the commissioner may reasonably specify or require, and shall expire when the new issue of corporate securities has been completed.

     (d)  A solicitation permit shall limit the portion of funds received on account of such new issue of corporate securities which may be used for promotion and sales expenses for the new issue to such amount as the commissioner deems adequate, but in no event to exceed fifteen per cent of such funds as and when actually received.

     (e)  For purposes of this section, insurance holding corporation means any domestic corporation:

     (1)  Which, directly or indirectly through one or more intermediaries, controls a domestic insurer; and

     (2)  In which the total assets of the insurer, as reported in its most recent annual statement filed with the commissioner pursuant to section 431:3-301, is twenty per cent or more of the consolidated total assets of the corporation as reported in its most recent annual report to its owners.  The annual report to owners shall be prepared in accordance with generally accepted accounting principles by a certified public accountant. [L 1987, c 347, pt of §2; am L 1989, c 207, §3]

 

     §431:4-121  False exhibits.  Every person who, with intent to deceive knowingly exhibits any false account, document or advertisement, relative to the affairs of any insurer, or of any corporation of the kind enumerated in section 431:4-107, formed or proposed to be formed, is punishable in accordance with section 431:2-203. [L 1987, c 347, pt of §2]

 

     §431:4-122  Depositaries.  The funds of a domestic insurer shall not be deposited in any bank or banking institution which has not first been approved as a depositary by the insurer's board of directors or by a committee designated for the purpose. [L 1987, c 347, pt of §2]

 

     §431:4-123  Corrupt practices.  No person shall buy, sell or barter a vote or proxy, relative to any meeting of shareholders or members of an incorporated domestic insurer, or engage in any corrupt or dishonest practice in or relative to the conduct of any such meeting. [L 1987, c 347, pt of §2]

 

     §431:4-124  Prohibited guaranty.  No domestic insurer or its affiliates or subsidiaries shall guarantee the financial obligation of any director or officer of such insurer or affiliate or subsidiary in the director's or officer's personal capacity, and any such guaranty attempted shall be void.  This prohibition shall not apply to obligations of the insurer under surety bonds or insurance contracts issued in the regular course of business. [L 1987, c 347, pt of §2]

 

     §431:4-125  Fees on use of funds.  (a)  No director, officer or employee having any authority in the investment or disposition of the funds of a domestic insurer shall accept, except on behalf of the insurer, or be the beneficiary of any fee, brokerage, gift, or other emolument because of any investment, loan, deposit, purchase, sale, payment, or exchange made by or for the insurer.

     (b)  The commissioner may adopt rules to define and permit additional exceptions to the prohibition in subsection (a), solely to enable payment of reasonable compensation to a director who is not otherwise an officer or employee of the insurer, for necessary services performed or sales or purchases made to or for the insurer in the ordinary course of the insurer's business and in the usual private professional or business capacity of such director. [L 1987, c 347, pt of §2; am L 2004, c 122, §14]

 

     §431:4-126  Comply with foreign laws.  Any domestic insurer doing business in a state, territory or sovereignty may design and issue insurance contracts and transact insurance in such state, territory or sovereignty as required or permitted by the laws thereof. [L 1987, c 347, pt of §2]

 

     §431:4-127  Solicitation in other states.  (a)  No domestic insurer shall knowingly solicit insurance business in any reciprocating state in which it is not then licensed as an authorized insurer.

     (b)  A reciprocating state, as used herein, is one under the laws of which a similar prohibition is imposed upon and is enforced against insurers domiciled in that state.

     (c)  This section shall not prohibit:

     (1)  Advertising through publications and radio broadcasts originating outside the reciprocating state, if the insurer is licensed in a majority of the states in which such advertising is disseminated, and if the advertising is not specially directed to residents of the reciprocating state; and

     (2)  Insurance covering persons or risks located in a reciprocating state, under contracts solicited and issued in states in which the insurer is then licensed.  Nor shall it prohibit insurance effectuated by the insurer as an unauthorized insurer in accordance with the laws of the reciprocating state. [L 1987, c 347, pt of §2]

 

PART II.  DOMESTIC STOCK INSURERS

 

     §431:4-201  Other laws applicable.  Domestic stock insurers shall be subject to title 23 and any applicable general laws enacted pertaining to stock corporations except where inconsistent with the express provisions of this article. [L 1987, c 347, pt of §2; am L 1993, c 205, §9]

 

     §431:4-202  Increase of capital.  (a)  A domestic stock insurer may increase its capital stock by complying with section 414-281 and section 431:4-120.  The increase in capital shall be effective upon the payment of the increased capital in full in cash.

     (b)  If the increased capital stock is to be distributed as stock dividend, the increased capital stock may be fully paid in out of any available surplus funds as is provided in section 431:4-204, and the payment shall be effected by a transfer on the insurer's books from its surplus account to its capital account. [L 1987, c 347, pt of §2; am L 1989, c 207, §4; am L 2002, c 40, §69]

 

     §431:4-203  Decrease of capital.  (a)  A domestic stock insurer may decrease its capital stock by:

     (1)  Vote of not less than seventy-five per cent of the holders of the shares of stock outstanding and entitled to vote; and

     (2)  Filing a certificate executed in the same manner as provided in section 414-11, that such vote occurred, upon which filing the decrease in capital is effective.

     (b)  No such decrease shall be made which results in capital stock less in amount than the minimum required by this code for the classes of insurance thereafter to be transacted by the insurer.

     (c)  No surplus funds of the insurer resulting from a decrease of its capital stock shall be distributed to shareholders, except:

     (1)  As a stock dividend on a subsequent increase of capital stock;

     (2)  Upon dissolution of the insurer; or

     (3)  Upon approval of the commissioner, provided the commissioner has received satisfactory proof that the distribution will not impair the interests of policyholders or the solvency of the insurer.

     (d)  Upon a decrease of capital stock, the insurer's directors shall call in any outstanding stock certificates required to be changed pursuant thereto and shall issue proper certificates in their stead. [L 1987, c 347, pt of §2; am L 1989, c 195, §14; am L 2004, c 122, §15]

 

     §431:4-204  Dividends to stockholders.  (a)  No domestic stock insurer shall pay any cash dividend to stockholders except out of that part of its available surplus funds which is derived from any realized net profits.

     (b)  Such an insurer may pay a stock dividend out of any available surplus funds.

     (c)  No dividend shall be declared or paid which would reduce the insurer's surplus to an amount less than the minimum required for the classes of insurance thereafter to be transacted.

     (d)  The commissioner may revoke the certificate of authority of any insurer violating this section. [L 1987, c 347, pt of §2]

 

     §431:4-205  Illegal dividends; reductions.  Any director of a domestic stock insurer who votes for or concurs in the declaration or payment of any dividend to stockholders or a reduction of capital stock not authorized by law shall, in addition to any other liability imposed by law, be guilty of violation of this code. [L 1987, c 347, pt of §2]

 

     §431:4-206  Repayment of contributed surplus.  Contributions to the surplus of a domestic stock insurer, other than resulting from sale of its capital stock, shall not be subject to repayment except out of surplus in excess of the minimum surplus initially required of such an insurer transacting like classes of insurance. [L 1987, c 347, pt of §2]

 

     §431:4-207  Participating policies.  (a)  Any domestic stock insurer may, if its charter so provides, issue policies entitled to participate from time to time in the earnings of the insurer through dividends.

     (b)  The directors of a stock insurer may from time to time apportion and pay to the holders of participating policies dividends only out of that part of its surplus which is in excess of its required capital and minimum surplus.  The dividends may be paid or credited according to a reasonable classification of its policies.  No dividend shall be paid which unfairly discriminates among policies within the same classification.

     (c)  No such insurer shall issue in this State both participating and nonparticipating policies for the same class of risks, unless the right or absence of right to participate is reasonably related to the premium charge or the special character of the risk assumed.

     (d)  Dividends to participating life insurance policies issued by the insurer shall be paid only out of its surplus funds as defined in section 431:4-101.  Dividends to participating policies for other classes of insurance shall be paid only out of that part of the surplus funds which is derived from any realized net profits.

     (e)  No dividend, otherwise earned, shall be made contingent upon the payment of renewal premium on any policy. [L 1987, c 347, pt of §2]

 

     §431:4-208  Statement by beneficial owner, director, officer.  Every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of any equity security of a domestic stock insurance company, or who is a director or an officer of such company, shall file in the office of the commissioner within ten days after the person becomes such beneficial owner, director, or officer a statement, in such form as the commissioner may prescribe, of the amount of all equity securities of such company of which the person is the beneficial owner, and within ten days after the close of each calendar month, if there has been a change in such ownership during such month, shall file in the office of the commissioner a statement, in such form as the commissioner may prescribe, indicating the person's ownership at the close of the calendar month and such changes in the person's ownership as have occurred during the calendar month. [L 1987, c 347, pt of §2]

 

     §431:4-209  Recovery of profits realized.  For the purpose of preventing the unfair use of information which may have been obtained by the beneficial owner, director, or officer by reason of the owner's, director's, or officer's relationship to the company, any profit realized by the owner, director, or officer from any purchase and sale, or any sale and purchase, of an equity security of the company within any period of less than six months, unless the security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the company, irrespective of any intention on the part of the beneficial owner, director or officer in entering into the transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months.  Suit to recover the profit may be instituted in any court of competent jurisdiction by the company, or by the owner of any security of the company in the name and in behalf of the company if the company fails or refuses to bring the suit within sixty days after request or fails diligently to prosecute the same thereafter; but no suit shall be brought more than two years after the date such profit was realized.  This section shall not be construed to cover any transaction where the beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the commissioner by rules and regulations may exempt as not comprehended within the purpose of this section. [L 1987, c 347, pt of §2]

 

     §431:4-210  Unlawful sales of equity security.  It shall be unlawful for any beneficial owner, director or officer, directly or indirectly, to sell any equity security of such company if the person selling the security or the person's principal (1) does not own the security sold, or (2) if owning the security, does not deliver it against such sale within twenty days thereafter, or does not within five days after such sale deposit it in the mails or other usual channels of transportation.  No person shall be deemed to have violated this section if the person proves that notwithstanding the exercise of good faith the person was unable to make such delivery or deposit within the time, or that to do so would cause undue inconvenience or expense. [L 1987, c 347, pt of §2]

 

     §431:4-211  Exempt transactions.  Section 431:4-209 shall not apply to any purchase and sale, or sale and purchase, and section 431:4-210 shall not apply to any sale, of an equity security of a domestic stock insurance company not then or theretofore held by the person in an investment account, by a dealer in the ordinary course of the dealer's business and incident to the establishment or maintenance by the dealer of a primary or secondary market (otherwise than on an exchange as defined in the Securities Exchange Act of 1934) for such security.  The commissioner may, by such rules and regulations as the commissioner deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market. [L 1987, c 347, pt of §2]

 

     §431:4-212  Arbitrage transactions not affected.  Section 431:4-208 to section 431:4-210 shall not apply to foreign or domestic arbitrage transactions unless made in contravention of such rules and regulations as the commissioner may adopt in order to carry out the purposes of section 431:4-208 to section 431:4-214. [L 1987, c 347, pt of §2]

 

     §431:4-213  Exempt equity securities.  Section 431:4-208 to section 431:4-210 shall not apply to equity securities of a domestic stock insurance company (1) if the equity securities of such company have been registered with the United States Securities and Exchange Commission under section 12 of the Securities Exchange Act of 1934, as amended, (2) if the equity securities of the company are required to be registered with the United States Securities and Exchange Commissioner under section 12 of the Securities Exchange Act of 1934, as amended, or (3) if the domestic stock insurance company shall not have any class of its equity securities held of record by one hundred persons on the last business day of the year next preceding the year in which equity securities of the company would be subject to section 431:4-208 to section 431:4-210 except for item (3). [L 1987, c 347, pt of §2]

 

     §431:4-214  Rules and regulations.  The commissioner may make such rules and regulations as may be necessary for the execution of the functions vested in the commissioner by section 431:4-208 to section 431:4-214, and may for such purpose classify domestic stock insurance companies, securities, and other persons or matters within the commissioner's jurisdiction.  No provision of section 431:4-208 to section 431:4-210 imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the commissioner, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason. [L 1987, c 347, pt of §2]

 

[PART IIA.]  PROXIES, CONSENTS, AND AUTHORIZATIONS

OF DOMESTIC STOCK INSURERS

 

     [§431:4-231]  Applicability.  This part is applicable to all domestic stock insurers having one hundred or more stockholders; provided that this part shall not apply to any insurer if ninety-five per cent or more of its stock is owned or controlled by a parent or an affiliated insurer and the remaining shares are held by less than five hundred stockholders.  A domestic stock insurer that files with the Securities and Exchange Commission forms of proxies, consents, and authorizations complying with the requirements of the Securities Exchange Act of 1934 (Title 15 United States Code section 78a), the Securities and Exchange Acts Amendments of 1964 (P.L. 88-467), and Regulation X-14 of the Securities and Exchange Commission adopted thereunder shall be exempt from this part. [L 2000, c 24, pt of §2]

 

     §431:4-232  Schedule A: information required in a proxy statement.  (a)  When applicable, information in schedule A shall include, among other things:

     (1)  Whether or not the person giving the proxy has the power to revoke it;

     (2)  A brief outline of the rights of appraisal of dissenting stockholders;

     (3)  A statement as to who is making the solicitation;

     (4)  A description of the interest of persons in the matters to be acted upon;

     (5)  A statement as to the class of voting stock to be voted at the meeting, the number of shares outstanding, and the number of votes to which each class is entitled;

     (6)  Detailed information on nominees for directors;

     (7)  A statement on remuneration and other transactions with management and others;

     (8)  Information on the insurer's bonus, profit sharing, and other remuneration plans;

     (9)  Information on the insurer's pension or retirement plan;

    (10)  Information on the options, warrants, or rights to purchase stock of the insurer;

    (11)  Information of the title, amount, and description of stock to be authorized or issued;

    (12)  Detailed information on mergers, consolidations, acquisitions, and other similar matters; and

    (13)  Detailed information on any asset, capital, or surplus of the insurer.

     (b)  If action is to be taken with respect to any matter which is not required to be submitted to a vote of stockholders, the schedule shall state the nature of the matter, the reason for the matter being submitted to a vote of the stockholders, and the action intended to be taken by the management in the event of a negative vote on the matter by the stockholders.

     (c)  If action is to be taken with respect to any amendment of the insurer's charter, bylaws, or other such documents as to which information is not required, the schedule shall briefly state the reasons for and the general effect of the amendment and the vote needed for its approval. [L 2000, c 24, pt of §2; am L 2003, c 212, §34]

 

     [§431:4-233]  Schedule B:  information to be included in statements filed by or on behalf of a participant other than an insurer in a proxy solicitation in an election contest.  Information in schedule B shall include, among other things:

     (1)  The name and address of the insurer;

     (2)  Detailed information about the participant;

     (3)  The participant's interest in the stock of the insurer;

     (4)  A description of the time and circumstances in which the participant became involved with the solicitation and the nature and extent of the activities or proposed activities of the participant; and

     (5)  The date and signature of the participant. [L 2000, c 24, pt of §2]

 

     [§431:4-234]  Proxies, consents, and authorizations.  No domestic stock insurer, or any director, officer, or employee of the insurer, or any other person, shall solicit, or permit the use of the person's name to solicit, by mail or otherwise, any proxy, consent, or authorization with respect to any stock of the insurer in contravention of this part or schedule A in section 431:4-232 and schedule B in [section] 431:4-233. [L 2000, c 24, pt of §2]

 

     [§431:4-235]  Schedules and exhibits.   Reporting of the information required in schedule A under section 431:4-232 and in schedule B under section 431:4-233, and the exhibit entitled "stockholders information supplement-financial reporting to stockholder" shall be made on forms or in a format approved by the commissioner. [L 2000, c 24, pt of §2]

 

     [§431:4-236]  Disclosure of equivalent information.  Unless proxies, consents, or authorizations with respect to a stock of a domestic insurer, subject to section 431:4-231, are solicited by or on behalf of the management of the insurer from the holders of record of stock of the insurer in accordance with this part and the schedules thereunder prior to any annual or other meeting, the insurer shall file with the insurance commissioner and transmit to all stockholders of record information substantially equivalent to the information that would be required to be transmitted if a solicitation were made. [L 2000, c 24, pt of §2]

 

     [§431:4-237]  Definitions.  As used in this part:

     "Participant" or "participant in a solicitation" includes:

     (1)  The insurer;

     (2)  Any director of the insurer and any proxy for a nominee for whom an election as a director is solicited; or

     (3)  Any other person acting alone or with one or more other persons, committees, or groups in organizing, directing, or financing the solicitation.

     "Participant" or "participant in a solicitation" does not include:

     (1)  A bank, broker, or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of stock and who is not otherwise a participant;

     (2)  Any person or organization retained or employed by a participant to solicit stockholders or any person who merely transmits proxy soliciting material or performs ministerial or clerical duties;

     (3)  Any person employed in the capacity of attorney, accountant, or advertising, public relations, or financial advisor, and whose activities are limited to the performance of the person's duties in the course of the employment of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant;

     (4)  Any person regularly employed as an officer or employee of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant; or

     (5)  Any officer, director, or person regularly employed by any other participant, if the officer, director, or employee is not otherwise a participant.

     "Solicit" or "solicitation" includes:

     (1)  Any request for a proxy, whether or not accompanied by or included in a form of proxy;

     (2)  Any request to execute or not to execute, or to revoke a proxy; or

     (3)  The furnishing of a proxy or other communication to stockholders under circumstances reasonably calculated to result in the procurement, withholding, or revocation of a proxy.

     "Solicit" or "solicitation" does not include:

     (1)  Any solicitation by a person in respect to stock of which the person is the beneficial owner;

     (2)  Action by a broker or other person in respect to stock carried in the person's name;

     (3)  Action in the name of the nominee in forwarding to the beneficial owner of the stock soliciting material received from the company;

     (4)  Impartially instructing the beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy;

     (5)  Impartially requesting instructions from the beneficial owner with respect to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date; or

     (6)  The furnishing of a form of proxy to a stockholder upon the unsolicited request of the stockholder, or the performance by any person of ministerial acts on behalf of a person soliciting a proxy. [L 2000, c 24, pt of §2]

 

     [§431:4-238]  Information to be furnished to stockholders.  (a)  No solicitation shall be made unless the person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information required under schedule A pursuant to section 431:4-232.

     (b)  If the solicitation is made on behalf of the management of the insurer and relates to an annual meeting of stockholders at which directors are to be elected, each proxy statement furnished pursuant to subsection (a) shall be accompanied or preceded by an annual report (in preliminary or final form) to the stockholders containing the financial statements for the last fiscal year as are included in the exhibit entitled "stockholders information supplement-financial reporting to stockholder".  Subject to these requirements with respect to financial statements, the annual report to stockholders may be in any form deemed suitable by the management.

     (c)  Two copies of each annual report sent to the stockholders pursuant to this part shall be mailed to the commissioner not later than the date on which the annual report is first sent or given to stockholders or the date on which preliminary copies of solicitation are filed with the commissioner, pursuant to section 431:4-240(a), whichever date is later. [L 2000, c 24, pt of §2]

 

     [§431:4-239]  Requirements as to proxy.  (a)  The form of proxy shall:

     (1)  Indicate in boldface type whether or not the proxy is solicited on behalf of the management;

     (2)  Provide a specifically designated blank space for dating the proxy; and

     (3)  Identify clearly and impartially each matter or group of related matters intended to be acted upon, whether proposed by the management or stockholders.  No reference need be made to proposals for which discretionary authority is conferred pursuant to subsection (c).

     (b)  The proxy shall provide a means by which the person solicited may specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein, other than elections to office.  A proxy may confer discretionary authority with respect to matters for which no choice is specified if the form of proxy states in boldface type how it is intended to vote the shares or authorization represented by the proxy in each case.

     (c)  A proxy may confer discretionary authority with respect to other matters which may come before the meeting; provided the persons on whose behalf the solicitation is made are not aware a reasonable time prior to the time the solicitation is made that any other matters are to be presented for action at the meeting and provided that a specific statement to that effect is made in the proxy statement or in the form of a proxy.

     (d)  No proxy shall confer authority to:

     (1)  Vote for the election of any person to office for which a bona fide nominee is not named in the proxy statement; or

     (2)  Vote at any annual meeting other than the next annual meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to stockholders.

     (e)  The proxy statement or form of proxy shall provide, subject to reasonable specified conditions, that the proxy will be voted and that where the person solicited specifies, by means of a ballot provided pursuant to subsection (b), a choice with respect to any matter to be acted upon, the vote will be in accordance with the specification so made.

     (f)  The information included in the proxy statement shall be clearly presented and the statement made shall be divided into groups according to subject matter, with appropriate headings.  All printed proxy statements shall be clearly and legibly presented. [L 2000, c 24, pt of §2]

 

     [§431:4-240]  Material required to be filed.  (a)  Two preliminary copies of the proxy statement and form of proxy and any other soliciting material to be furnished to stockholders concurrently therewith shall be filed with the commissioner at least ten days prior to the date final form copies of the material are first sent or given to stockholders, or a shorter period prior to that date as the insurance commissioner may authorize upon a showing of good cause.

     (b)  Two preliminary copies of any additional soliciting material relating to the same meeting or subject matter to be furnished to stockholders subsequent to the proxy statements shall be filed with the commissioner at least two days (exclusive of Saturdays, Sundays, or legal state holidays) prior to the date copies of this material are first sent or given to stockholders or a shorter period prior to that date as the commissioner may authorize upon a showing of good cause.

     (c)  Two definitive copies of the proxy statement, final form of proxy, and all other soliciting material, in the form in which the material is furnished to stockholders, shall be filed with, or mailed for filing to, the commissioner not later than the date the material is first sent or given to the stockholders.

     (d)  Where any proxy statement, form of proxy, or other material filed pursuant to this chapter is amended or revised, two of the copies shall be marked to clearly show the changes.

     (e)  Copies of replies to inquiries from stockholders requesting further information and copies of communications that only request that forms of proxy theretofore solicited be signed and returned need not be filed pursuant to this part.

     (f)  Notwithstanding subsections (a) and (b), and section 431:4-245, copies of soliciting material in the form of speeches, press releases, and radio or television scripts may be filed with the commissioner prior to use or publication.  Final form copies, however, shall be filed with or mailed for filing to the commissioner as required by subsection (c) not later than the date the material is used or published.  Subsections (a) and (b) and section 431:4-245 shall apply to any reprints or reproductions of all or any part of the material. [L 2000, c 24, pt of §2]

 

     [§431:4-241]  False or misleading statements.  No solicitation subject to this part shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication, written or oral, containing any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits any material fact necessary in order to make the statements not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading. [L 2000, c 24, pt of §2]

 

     [§431:4-242]  Prohibition of certain solicitations.  No person making a solicitation shall solicit any undated or postdated proxy or any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the stockholder. [L 2000, c 24, pt of §2]

 

     [§431:4-243]  Election contests; applicability.  This part shall apply to any solicitation by any person or group for the purpose of opposing a solicitation by any person or group with respect to the election or removal of directors at any annual or special meeting of stockholders. [L 2000, c 24, pt of §2]

 

     [§431:4-244]  Filing of information required by schedule B.  (a)  No solicitation shall be made by any person, other than the management of an insurer unless at least five business days prior thereto or a shorter period as the commissioner may authorize upon a showing of good cause, there has been filed, with the commissioner, by or on behalf of each participant in the solicitation, a statement in duplicate containing the information specified in schedule B pursuant to section 431:4-233 and a copy of any material proposed to be distributed to stockholders in furtherance of the solicitation.  Where preliminary copies of any materials are filed, distribution to stockholders shall be deferred until the commissioner's comments have been received and complied with.

     (b)  Within five business days after a solicitation is made by the management of an insurer, or a longer period as the commissioner may authorize upon a showing of good cause, there shall be filed with the commissioner by or on behalf of each participant in the solicitation, other than the insurer and by or on behalf of each management nominee or director, a statement in duplicate containing the information specified by schedule B under section 431:4-233.

     (c)  If any solicitation on behalf of the management or any other person has been made, or if proxy material is ready for distribution, prior to a solicitation in opposition thereto, a statement in duplicate containing the information specified in schedule B shall be filed with the commissioner, by or on behalf of each participant in the prior solicitation, other than the insurer, as soon as reasonably practicable after the commencement of the solicitation in opposition thereto.

     (d)  If, subsequent to the filing of the statements required by subsections (a), (b), and (c), additional persons become participants in a solicitation, there shall be filed with the commissioner, by or on behalf of each person, a statement in duplicate containing the information specified in schedule B under section 431:4-233, within three business days after the person becomes a participant, or longer period as the commissioner may authorize upon a showing of good cause.

     (e)  If any material change occurs in the facts reported in any statement filed by or on behalf of any participant, an appropriate amendment to the statement shall be filed within three business days by or on behalf of each respective participant with the commissioner.

     (f)  Each statement and amendment thereto filed pursuant to this section shall be part of the public files of the commissioner. [L 2000, c 24, pt of §2]

 

     [§431:4-245]  Solicitations prior to furnishing required written proxy statement.  Notwithstanding section 431:4-238(a), a solicitation subject to this part may be made prior to furnishing stockholders a written proxy statement containing the information specified in schedule A under section 431:4-232 with respect to the solicitation, provided that:

     (1)  The statements required by section 431:4-244 are filed by or on behalf of each participant in the solicitation;

     (2)  No form of proxy is furnished to stockholders prior to the time the proxy statement required by section 431:4-238(a) is furnished to such persons.  This paragraph shall not apply where a proxy statement then meeting the requirements of schedule A under section 431:4-232 has been furnished to stockholders;

     (3)  At the minimum, the information specified in paragraphs (2) and (3) of the statements required by schedule B under section 431:4-233 to be filed by each participant, or an appropriate summary thereof, is included in each communication sent or given to stockholders in connection with the solicitation; and

     (4)  A written proxy statement containing the information specified in schedule A pursuant to section 431:4-232 with respect to a solicitation is sent or given to stockholders at the earliest practicable date. [L 2000, c 24, pt of §2]

 

     [§431:4-246]  Solicitation prior to furnishing required written proxy statement; filing requirements.  Two copies of any soliciting material proposed to be sent or given to stockholders prior to the furnishing of the written proxy statement required by section 431:4-238(a) shall be filed with the commissioner in preliminary form at least five business days prior to the date final form copies of the material are first sent or given to the stockholders, or a shorter period as the commissioner may authorize upon a showing of good cause therefor. [L 2000, c 24, pt of §2]

 

     §431:4-247  Application of this part to annual report.  Notwithstanding section 431:4-238(b) and (c), two copies of any portion of the annual report referred to in section 431:4-238(b), which comments upon or refers to any solicitation subject to this part or to any participant in any solicitation, other than the solicitation by the management, shall be filed with the commissioner as proxy material subject to this part.  The portion of the annual report shall be filed with the commissioner in preliminary form at least five business days prior to the date copies of the annual report are first sent or given to stockholders. [L 2000, c 24, pt of §2; am L 2004, c 122, §16]

 

PART III.  DOMESTIC MUTUAL INSURERS

 

     §431:4-301  Other articles applicable.  The provisions applicable to domestic stock insurers shall apply except where inconsistent with the express provisions of this part. [L 1987, c 347, pt of §2]

 

     §431:4-302  Initial qualifications for mutual insurers.  (a)  The commissioner shall not issue a certificate of authority to a domestic mutual insurer unless:

     (1)  It has fully qualified under this code; and

     (2)  It has met the minimum requirements for the classes of insurance it proposes to transact as provided in this code.

     (b)  All applications for insurance submitted by such an insurer as fulfilling qualification requirements shall be bona fide applications from persons resident in this State covering life, property, or risks resident or located in this State.

     (c)  All qualifying premiums collected and initial surplus funds of such an insurer shall be in cash. [L 1987, c 347, pt of §2]

 

     §431:4-303  Mutual property insurer.  (a)  When applying for a certificate of authority a domestic mutual property insurer must:

     (1)  Have applications from at least one hundred persons for insurance covering at least two hundred and fifty nonadjacent properties, for insurance aggregating not less than $500,000; and

     (2)  Have collected from each applicant the proper premium at a rate not less than a rate adopted by a licensed rating organization for a term of at least one year; and

     (3)  Have a surplus over all liabilities, as at completion of issuance of the insurance contracts so applied for, amounting to not less than $750,000.

     (b)  The maximum of any single risk proposed to be assumed by the insurer shall not exceed ten per cent of its surplus.  Any reinsurance taking effect simultaneously with the policy shall be deducted in determining the amount at risk for purposes of this provision.

     (c)  In lieu of the applications, premiums, and surplus, it is required to have a surplus amounting to not less than $1,250,000 over all liabilities. [L 1987, c 347, pt of §2 as superseded by c 348, §5]

 

     §431:4-304  Mutual casualty insurer.  (a)  When applying for a certificate of authority a domestic mutual insurer proposing to transact casualty insurance, including vehicle insurance, must:

     (1)  Have applications for the insurance in a reasonable amount from at least two hundred and fifty persons covering not less than five hundred separate risks; and

     (2)  Have collected from each applicant the proper premium for a term of not less than one year at a rate filed with and approved by the commissioner; and

     (3)  Have a surplus over all liabilities, as at completion of issuance of the insurance contracts so applied for, amounting to not less than $1,500,000.

     (b)  In lieu of the applications, premiums, and surplus, it is required to have a surplus amounting to not less than $2,250,000 over all liabilities. [L 1987, c 347, pt of §2 as superseded by c 348, §6]

 

     §431:4-305  Mutual vehicle insurer.  (a)  When applying for a certificate of authority, a domestic mutual insurer formed to transact vehicle insurance must:

     (1)  Have applications from at least two hundred persons for insurance covering at least five hundred separate vehicles, for a maximum of retained liability not in excess of $50,000 for any one accident or other liability; and

     (2)  Have collected from each applicant the proper premium for insurance for one year according to its schedule of premium rates approved by the commissioner; and

     (3)  Have a surplus over all liabilities, as at completion of issuance of the insurance contracts so applied for, amounting to not less than $1,000,000.

     (b)  In lieu of the applications, premiums, and surplus, it is required to have a surplus amounting to not less than $1,500,000 over all liabilities. [L 1987, c 347, pt of §2 as superseded by c 348, §7]

 

     §431:4-306  Mutual life insurer.  (a)  When applying for a certificate of authority, a domestic mutual life insurer must:

     (1)  Have at least five hundred applications for life insurance, other than on the term plan for terms of ten years or less, covering at least five hundred separate insurable lives on an individual basis for a maximum insurance of not less than $5,000,000; and

     (2)  Have collected from each applicant the proper annual premium for one year, and have so received from all applicants premiums aggregating at least $125,000; and

     (3)  Have surplus over all liabilities, as at completion of issuance of the insurance contracts so applied for, amounting to not less than $600,000.

     (b)  In lieu of the applications, premiums, and surplus, it is required to have a surplus amounting to not less than $900,000 over all liabilities. [L 1987, c 347, pt of §2 as superseded by c 348, §8]

 

     §431:4-307  Mutual accident and health or sickness insurer.  (a)  When applying for a certificate of authority, a domestic mutual accident and health or sickness insurer shall:

     (1)  Have at least five hundred applications from at least five hundred persons for individual accident and health or sickness insurance providing not more than $1,000 of accidental death benefit and not more than $25 of weekly indemnity for each applicant;

     (2)  Have collected from each applicant the proper premium for one year, and have so received from all applicants premiums aggregating at least $25,000; and

     (3)  Have a surplus over all liabilities, as at completion of issuance of the insurance contracts so applied for, amounting to not less than $450,000.

     (b)  In lieu of the applications, premiums, and surplus, it is required to have a surplus amounting to not less than $675,000 over all liabilities. [L 1987, c 347, pt of §2 as superseded by c 348, §9; am L 2002, c 155, §10]

 

     §431:4-308   Membership.  Each holder of one or more insurance contracts issued by a domestic mutual insurer, other than a contract of reinsurance, is a member of the insurer, with the rights and obligations of such membership, and each insurance contract issued shall so stipulate. [L 1987, c 347, pt of §2]

 

     §431:4-309  Rights of members.  (a)  A domestic mutual insurer is owned by and shall be operated in the interest of its members.

     (b)  Each member is entitled to one vote in the election of directors and on matters coming before corporate meetings of members, subject to such reasonable minimum requirements as to duration of membership and amount of insurance held as may be made in the insurer's bylaws.  The person named as the policyholder in any group insurance policy issued by the insurer shall be deemed the member, and shall have but one vote regardless of the number of individuals insured by the policy.

     (c)  With respect to the management, records, and affairs of the insurer, a member shall have the same character of rights and relationship as a stockholder has toward a domestic stock insurer. [L 1987, c 347, pt of §2]

 

     §431:4-310  Bylaws.  (a)  A domestic mutual insurer shall adopt bylaws for the conduct of its affairs.

     (b)  The bylaws, or any modification of the bylaws, shall be filed with the commissioner.

     (c)  The commissioner shall disapprove any such bylaws, or as so modified, and the commissioner shall communicate such disapproval to the insurer, if the commissioner finds after a hearing thereon, that:

     (1)  It is not in compliance with the laws of this State, or

     (2)  It unreasonably interferes with the rights of members or exercise of such rights.

     (d)  No bylaws or modification, so disapproved shall be effective during the existence of such disapproval. [L 1987, c 347, pt of §2]

 

     §431:4-311  Notice of annual meeting.  (a)  Notice of the time and place of the annual meeting of members of a domestic mutual insurer shall be given by imprinting the notice plainly on the policies issued by the insurer.

     (b)  Any change of the date or place of the annual meeting shall be made only at an annual meeting of members.  Notice of the change may be given:

     (1)  By imprinting the new date or place on all policies which will be in effect as of the date of such changed meeting; or

     (2)  Unless the commissioner otherwise orders:

          (A)  Through policies issued after the date of the annual meeting at which such change was made, and

          (B)  In or attached to premium notices and renewal certificates issued during the twenty-four months immediately following the meeting. [L 1987, c 347, pt of §2]

 

     §431:4-312  Members proxies.  (a)  A member of a domestic mutual insurer may vote in person or by proxy given another member on any matter coming before a corporate meeting of members.

     (b)  No proxy shall be valid beyond the earlier of the following dates:

     (1)  The date of expiration set forth in the proxy;

     (2)  The date of termination of membership; or

     (3)  Five years from the date of execution of the proxy.

     (c)  No member's vote upon any proposal to divest the insurer of its business and assets, or the major part thereof, shall be registered or taken except in person or by a proxy newly executed and specific as to the matter to be voted upon. [L 1987, c 347, pt of §2]

 

     §431:4-313  Directors.  (a)  No individual shall be a director of a domestic mutual insurer by reason of the individual's holding public office (i.e. ex officio).

     (b)  An individual is disqualified from being or acting as a director if such person:

     (1)  Is adjudged as a bankrupt;

     (2)  Took the benefit of any insolvency law; or

     (3)  Made a general assignment for the benefit of creditors. [L 1987, c 347, pt of §2]

 

     §431:4-314  Limitation on expenses incurred in writing property and casualty.  For any calendar year after its first two full calendar years of operation, no domestic mutual insurer, other than one issuing nonassessable policies, shall incur any costs or expense in the writing or administration of property, accident and health or sickness, and casualty insurances, other than boiler and machinery or elevator, transacted by it which, exclusive of losses paid, loss adjustment expenses, investment expenses, dividends, and taxes exceeds the sum of:

     (1)  Forty per cent of the net premium income during that year after deducting therefrom net earned reinsurance premiums for the year, plus

     (2)  All of the reinsurance commissions received on reinsurance ceded by it. [L 1987, c 347, pt of §2; am L 2003, c 212, §35]

 

     §431:4-315  Violation of expense limitation.  (a)  The officers and directors of an insurer violating section 431:4-314 shall be jointly and severally liable to the insurer for any excess of expenses incurred.

     (b)  For failure or refusal of the insurer to exercise reasonable diligence in enforcing such liability, the commissioner may:

     (1)  Prosecute action thereon for the benefit of the insurer; and

     (2)  Revoke the insurer's certificate of authority. [L 1987, c 347, pt of §2]

 

     §431:4-316  Actions on officers' salaries.  No action to recover, or no action on account of, any salary or other compensation due or claimed to be due any officer or director of a domestic mutual insurer, or on any note or agreement relative thereto, shall be brought against the insurer later than twelve months after the date on which the salary or compensation, or any installment thereof, first accrued. [L 1987, c 347, pt of §2]

 

     §431:4-317  Contingent liability of members.  (a)  Each member of a domestic mutual insurer, except as otherwise provided in this part, shall have a contingent liability, pro rata and not one for another, for the discharge of its obligations.  The contingent liability shall be in such maximum amount as is stated in the insurer's articles of incorporation, but shall be not less than one, nor more than five, additional premiums for the member's policy at the annual premium rate and for a term of one year.

     (b)  Every policy issued by the insurer shall contain a statement of the contingent liability.

     (c)  Termination of the policy of any member shall not relieve the member of contingent liability for the member's proportion of the obligations of the insurer which accrued while the policy was in force. [L 1987, c 347, pt of §2]

 

     §431:4-318  Accrual of liability.  (a)  If at any time the assets of a domestic mutual insurer are less than its liabilities and the minimum surplus, if any, required of it by this code as prerequisite for continuance of its certificate of authority, and the deficiency is not cured from other sources, its directors may, if approved by the commissioner, make an assessment only on its members who at any time within the twelve months immediately preceding the date assessment was authorized by its directors held policies providing for contingent liability.

     (b)  The assessment shall be for such an amount of money as is required in the opinion of the commissioner, to render the insurer fully solvent, and provide a reasonable amount of working capital above the minimum amount of surplus, but the working capital so provided shall not exceed five per cent of the insurer's liabilities as of the date on which the amount of deficiency was determined.

     (c)  A member's proportionate part of any assessment shall be computed by applying to the premium earned within the twelve-month period on the member's contingently liable policy or policies the ratio of the total assessment to the total premium earned during the period on all contingently liable policies which are subject to the assessment.

     (d)  No member shall have an offset against any assessment for which the member is liable, on account of any claim for unearned premium or losses payable. [L 1987, c 347, pt of §2]

 

     §431:4-319  Contingent liability as asset.  Any contingent liability to assessment of members of a domestic mutual insurer does not constitute an asset of the insurer in any determination of its financial condition. [L 1987, c 347, pt of §2]

 

     §431:4-320  Lien on reserves.  As to life insurance, any portion of an assessment of contingent liability upon a policyholder which remains unpaid following notice of such assessment, demand for payment, and lapse of a reasonable waiting period as specified in such notice, may, if approved by the commissioner, be secured by placing a lien on the reserves held by the insurer to the credit of the policyholder. [L 1987, c 347, pt of §2]

 

     §431:4-321  Nonassessable policies.  (a)  A domestic mutual insurer, after it has established a surplus not less in amount than the minimum capital funds required of a domestic stock insurer to transact like classes of insurance, may extinguish the contingent liability of its members to assessment and omit provisions imposing contingent liability in all policies currently issued.

     (b)  When the surplus has been so established and the commissioner has so ascertained, the commissioner shall issue to the insurer, at its request, the commissioner's certificate authorizing the extinguishment of the contingent liability of its members and the issuance of policies free therefrom.

     (c)  While it maintains surplus funds in amount not less than the minimum paid-up capital stock and surplus required of a domestic stock insurer authorized to transact like classes of insurance, a foreign or alien mutual insurer may, if consistent with its charter and the laws of its domicile, issue nonassessable policies covering subjects located, resident, or to be performed in this State. [L 1987, c 347, pt of §2]

 

     §431:4-322  Applies to all policies.  The commissioner shall not authorize a domestic mutual insurer so to extinguish the contingent liability of any of its members or in any of its policies to be issued, unless it qualifies to and does extinguish such liability of all its members and in all policies for all classes of insurance transacted by it.  Except that, if required by the laws of another state in which the insurer is transacting insurance as an authorized insurer, the insurer may issue policies providing for the contingent liability of such of its members as may acquire such policies in such state, and need not extinguish the contingent liability applicable to policies theretofore in force in the state. [L 1987, c 347, pt of §2]

 

     §431:4-323  Revocation of authority.  (a)  The commissioner shall revoke the authority of a domestic mutual insurer to extinguish the contingent liability of its members if:

     (1)  At any time the insurer's assets are less than the sum of its liabilities and the surplus required for such authority, or

     (2)  The insurer, by resolution of its directors approved by its members, requests that the authority be revoked.

     (b)  Upon revocation of such authority for any cause, the insurer shall not thereafter issue any policies without contingent liability, nor renew any policies then in force without written endorsement thereon providing for contingent liability. [L 1987, c 347, pt of §2]

 

     §431:4-324  Dividends.  (a)  The directors of a domestic mutual insurer may from time to time apportion and pay to its members dividends only out of that part of its surplus which is in excess of its required minimum surplus.

     (b)  The dividends shall be paid or credited to policyholders according to such reasonable classification of its policies as the directors may in their discretion from time to time establish.  No dividend shall be paid which unfairly discriminates between policies within the same classification.

     (c)  No dividend, otherwise earned, shall be made contingent upon the payment of renewal premium on any policy. [L 1987, c 347, pt of §2]

 

     §431:4-325  Nonparticipating policies.  (a)  If its bylaws so provide, a domestic mutual insurer may issue policies not entitled to participate in the insurer's savings and earnings, provided it is authorized to issue policies without contingent liability to assessment.

     (b)  Such insurer shall not issue in this State both participating and nonparticipating policies for the same class of risks, unless the right or absence of right to participate is reasonably related to the premium charge or the special character of the risks assumed. [L 1987, c 347, pt of §2]

 

     §431:4-326  Members' share of assets.  (a)  Upon the liquidation of a domestic mutual insurer, its assets remaining after discharge of its indebtedness and policy obligations shall be distributed to its members who were members within the thirty-six months prior to the last termination of its certificate of authority.

     (b)  The distributive share of each member shall be in the proportion that the aggregate premiums earned by the insurer on the policies of the member during the combined periods of the member's membership, bear to the aggregate of all premiums so earned on the policies of all members.  If a life insurer, the insurer shall make a reasonable classification of its life insurance policies so held by the members and a formula, based upon such classification, for determining the equitable distributive share of each such member.  The classification and formula shall be subject to the commissioner's approval. [L 1987, c 347, pt of §2]

 

PART IV.  RECIPROCAL INSURERS

 

     §431:4-401  Application of other sections.  The provisions of article 3, Insurers General Requirements, shall apply except where inconsistent with the express provisions of this article. [L 1987, c 347, pt of §2]

 

     §431:4-402  Scope.  Except where made expressly applicable to domestic reciprocal insurers, the provisions of this part shall apply to all authorized reciprocal insurers. [L 1987, c 347, pt of §2]

 

     §431:4-403  Insuring powers of reciprocals.  (a)  Upon complying with the provisions of this part, a reciprocal insurer, as defined in section 431:3-108, may transact any class or classes of insurance defined by this code, other than life or accident and health or sickness insurance.

     (b)  A reciprocal insurer may purchase reinsurance upon the risk of any subscriber, and may grant reinsurance as to any class of insurance which it is authorized to transact direct. [L 1987, c 347, pt of §2; am L 2003, c 212, §36]

 

     §431:4-404  Suits.  A reciprocal insurer shall sue and be sued in its own name. [L 1987, c 347, pt of §2]

 

     §431:4-405  Attorney.  Attorney as used in this part refers to the attorney-in-fact of a reciprocal insurer.  The attorney may be an individual, partnership, or corporation.  The  principal office of the attorney for a domestic reciprocal insurer shall be maintained within this State. [L 1987, c 347, pt of §2; am L 2003, c 212, §37]

 

     §431:4-406  Power of attorney.  (a)  The rights and powers of the attorney of a reciprocal insurer shall be as provided in the power of attorney given it by the subscribers.

     (b)  The power of attorney must set forth:

     (1)  The powers, duties, and compensation of the attorney;

     (2)  That the attorney is empowered to accept service of process on behalf of the insurer and to authorize the commissioner to receive service of process in actions against the insurer upon contracts exchanged;

     (3)  Except as to nonassessable policies, a provision for contingent several liability of each subscriber in a specified amount, which amount shall be not less than one nor more than ten times the premium or premium deposit stated in the policy.

     (c)  The power of attorney may:

     (1)  Provide for the right of substitution of the attorney and revocation of the power of attorney and rights thereunder;

     (2)  Impose such restrictions upon the exercise of the power as are agreed upon by the subscribers;

     (3)  Provide for the exercise of any right reserved to the subscribers directly or through their advisory committee; and

     (4)  Contain other lawful provisions deemed advisable.

     (d)  The terms of any power of attorney, or agreement collateral thereto, shall be reasonable and equitable, and no such power, agreement or any amendment thereof, shall be used or be effective in this State until approved by the commissioner. [L 1987, c 347, pt of §2]

 

     §431:4-407  Modifications.  Modification of the terms of the subscribers' agreement or of the power of attorney of a domestic reciprocal insurer shall be made jointly by the attorney and the subscribers' advisory committee.  No modification shall be effective retroactively, nor as to any insurance contract issued prior thereto, nor shall it be effective until approved by the commissioner. [L 1987, c 347, pt of §2]

 

     §431:4-408  Organization of reciprocal insurers.  Twenty-five or more persons domiciled in this State, may organize a domestic reciprocal insurer and, in compliance with this part, make application to the commissioner for a certificate of authority to transact insurance. [L 1987, c 347, pt of §2]

 

     §431:4-409  Application for authority; declaration required.  (a)  When applying for a certificate of authority, the original subscribers and the proposed attorney shall fulfill the requirements of section 431:3-212, and execute and file with the commissioner a declaration setting forth:

     (1)  The name of the insurer, in compliance with section 431:3-202(b) and section 431:4-104(d)(1);

     (2)  The location of the insurer's principal office, which shall be the same as that of the attorney;

     (3)  The classes of insurance proposed to be transacted;

     (4)  The names and addresses of the original subscribers;

     (5)  The designation and appointment of the proposed attorney and a copy of the power of attorney;

     (6)  The names and addresses of the officers and directors of the attorney if a corporation, or of its members if a partnership;

     (7)  The powers of the subscribers' advisory committee and the names and terms of office of the members thereof;

     (8)  That all moneys paid to the reciprocal, after deducting therefrom any sum payable to the attorney, shall be held by the attorney-in-fact in the name of the reciprocal insurer for the purposes specified in the subscribers' agreement;

     (9)  A copy of the subscribers' agreement;

    (10)  A statement that each of the original subscribers has in good faith applied for insurance of the class proposed to be transacted, and that the insurer has received from each such subscriber the full premium or premium deposit required for the policy applied for, for a term of not less than twelve months at the rate theretofore filed with and approved by the commissioner;

    (11)  A statement of the financial condition of the insurer, and a schedule of its assets; and

    (12)  A copy of each policy, endorsement, and application form it then proposes to issue or use.

     (b)  Such declaration shall be acknowledged by each subscriber and by the attorney before any officer authorized to take acknowledgements of deeds. [L 1987, c 347, pt of §2]

 

     §431:4-410  Policies effective.  Any policy applied for by an original subscriber shall become effective concurrently with the issuance of a certificate of authority to the reciprocal insurer. [L 1987, c 347, pt of §2]

 

     §431:4-411  Attorney's bond.  (a)  Concurrently with the filing of the declaration provided for in section 431:4-409, the attorney of a domestic reciprocal shall file with the commissioner a bond in favor of this State.  The bond shall be executed by the attorney and by an authorized corporate surety, and shall be subject to the commissioner's approval.

     (b)  The bond shall be in the sum of $25,000 conditioned that the attorney will faithfully account, before a notary public, in a sworn affidavit, for all moneys and other property of the insurer coming into the attorney's hands, and that the attorney will not withdraw or appropriate for the attorney's own use from the funds of the insurer any moneys or property to which the attorney is not entitled under the power of attorney.

     (c)  The bond shall provide that it is not subject to cancellation unless sixty days' advance notice in writing of intent to cancel is given to both the attorney and the commissioner. [L 1987, c 347, pt of §2]

 

     §431:4-412  Deposit in lieu.  In lieu of the bond, the attorney may maintain on deposit with the commissioner a like amount in cash or in value of securities qualified under this code as insurers' investments, and subject to the same conditions as the bond. [L 1987, c 347, pt of §2]

 

     §431:4-413  Actions on bond.  Action on the attorney's bond or to recover against any such deposit made in lieu thereof may be brought at any time by one or more subscribers suffering loss through a violation of the conditions thereof or by a receiver or liquidator of the insurer.  Amounts so recovered shall be deposited in and become part of the insurer's funds. [L 1987, c 347, pt of §2]

 

     §431:4-414  Subscribers.  Any person may make application for, enter into agreement for and hold policies or contracts in or with, and be a subscriber of a domestic, foreign or alien reciprocal insurer. [L 1987, c 347, pt of §2]

 

     §431:4-415  Subscribers' advisory committee.  (a)  The advisory committee of a domestic reciprocal insurer exercising the subscribers' rights shall be selected under such rules as the subscribers adopt.

     (b)  Not less than three-fourths of the committee shall be composed of subscribers other than the attorney, or any person employed by, representing, or having a financial interest in the attorney.

     (c)  The committee shall:

     (1)  Supervise the finances of the insurer;

     (2)  Supervise the insurer's operations to such extent as to assure their conformity with the subscribers' agreement and power of attorney;

     (3)  Procure the audit of the accounts and records of the insurer and of the attorney at the expense of the insurer; and

     (4)  Have such additional powers and functions as may be conferred by the subscribers' agreement. [L 1987, c 347, pt of §2]

 

     §431:4-416  Subscriber's liability.  (a)  The liability of each subscriber subject to assessment for the obligations of the reciprocal insurer shall not be joint, but shall be individual and several.

     (b)  Each subscriber who is subject to assessment shall have a contingent assessment liability, in the amount provided for in the power of attorney or in the subscribers' agreement, for payment of actual losses and expenses incurred while the subscriber's policy was in force.  The contingent liability may be at the rate of not less than one nor more than ten times the premium or premium deposit stated in the policy, and the maximum aggregate thereof shall be computed in the manner set forth in section 431:4-418.

     (c)  Each assessable policy issued by the insurer shall plainly set forth a statement of contingent liability. [L 1987, c 347, pt of §2]

 

     §431:4-417  Subscriber's liability on judgments.  (a)  No action shall lie against any subscriber upon any obligation claimed against the insurer until a final judgment has been obtained against the insurer and remains unsatisfied for thirty days.

     (b)  Any such judgment, or any judgment against the insurer based upon legal process served in compliance with section 431:2-206, shall be binding upon each of the insurer's subscribers only in such proportion as the subscriber's interests may appear and in an amount not exceeding the subscriber's contingent liabilities. [L 1987, c 347, pt of §2]

 

     §431:4-418  Aggregate liability.  No one policy or subscriber as to such policy shall be assessed or be charged with an aggregate of contingent liability as to obligations incurred by a domestic reciprocal insurer in any one calendar year, in excess of the number of times the premium as stated in the policy, computed solely upon premium earned on such policy during that year. [L 1987, c 347, pt of §2]

 

     §431:4-419  Assessment.  (a)  Assessment may be levied from time to time upon the subscribers of a domestic reciprocal insurer, other than as to nonassessable policies, by the attorney upon approval in advance by the subscribers' advisory committee and the commissioner, or by the commissioner in liquidation of the insurer.

     (b)  Each subscriber's share of a deficiency for which an assessment is made, not exceeding in any event the subscriber's aggregate contingent liability as computed in accordance with section 431:4-418, shall be computed by applying to the premium earned on the subscriber's policy or policies during the period to be covered by the assessment, the ratio of the total deficiency to the total premiums earned during the period upon all policies subject to assessment.

     (c)  In computing the earned premiums for the purposes of this section, the gross premium received by the insurer for the policy shall be used as a base, deducting therefrom solely charges not recurring upon the renewal or extension of the policy.

     (d)  No subscriber shall have an offset against any assessment for which the subscriber is liable on account of any claim for unearned premium or losses payable. [L 1987, c 347, pt of §2]

 

     §431:4-420  Time limit for assessment.  Every subscriber of a domestic reciprocal insurer having contingent liability shall be liable for, and shall pay the subscriber's share of any assessment, as computed and limited in accordance with this part if:

     (1)  While the subscriber's policy is in force or within one year after its termination, the subscriber is notified by either the attorney or the commissioner of the attorney's or the commissioner's intentions to levy such assessment, or

     (2)  If an action to have a receiver, conservator, rehabilitator, or liquidator of the insurer appointed is commenced pursuant to article 15 while the subscriber's policy is in force or within one year after its termination. [L 1987, c 347, pt of §2]

 

Revision Note

 

  Subsection designation deleted.

 

     §431:4-421  Nonassessable policies.  (a)  If a reciprocal insurer has a surplus of assets over all liabilities at least equal to the minimum paid-up capital stock and surplus required of a domestic stock insurer authorized to transact like classes of insurance, upon application of the attorney and as approved by the subscribers' advisory committee, the commissioner shall issue the commissioner's certificate authorizing the insurer to extinguish the contingent liability of subscribers under its policies then in force in this State, and to omit provisions imposing contingent liability of subscribers under its policies then in force in this State, and to omit provisions imposing contingent liability in all policies delivered or issued for delivery in this State for so long as the surplus remains unimpaired.

     (b)  Upon impairment of the surplus, the commissioner shall forthwith revoke the certificate.  No policy shall thereafter be issued or renewed without providing for the contingent assessment liability of subscribers.

     (c)  The commissioner shall not authorize a domestic reciprocal insurer to extinguish the contingent liability of any of its subscribers or in any of its policies to be issued, unless it qualifies to and does extinguish the liability of all its subscribers and in all such policies for all classes of insurance transacted by it.  Except, if required by the laws of another state in which the insurer is transacting insurance as an authorized insurer, the insurer may issue policies providing for the contingent liability of such of its subscribers as may acquire such policies in the state, and need not extinguish the contingent liability applicable to policies theretofore in force in the state. [L 1987, c 347, pt of §2]

 

     §431:4-422  Contributions of surplus.  The attorney or other parties may advance to the reciprocal insurer funds as it may require from time to time in its operations.  Sums so advanced shall not be treated as a liability of the insurer, and shall not be withdrawn or repaid except out of the insurer's realized earned surplus in excess of its minimum required surplus.  No such withdrawal or repayment shall be made without the advance approval of the commissioner. [L 1987, c 347, pt of §2]

 

     §431:4-423  Share in savings.  A reciprocal insurer may from time to time return to its subscribers any savings or credits accruing to their accounts.  Any such distribution shall not unfairly discriminate between classes of risks, or policies, or between subscribers, but the distribution may vary as to classes of subscribers, based upon the experience of the subscribers. [L 1987, c 347, pt of §2]

 

     §431:4-424  Subscriber's share of assets.  Upon the liquidation of a domestic reciprocal insurer, its assets remaining after discharge of its indebtedness and policy obligations, the return of any contributions to its surplus made as provided in section 431:4-422, and the return of any unused deposits, savings, or credits, shall be distributed to its subscribers who were such within the twelve months prior to such formula as may have been approved by the commissioner. [L 1987, c 347, pt of §2]

 

     §431:4-425  REPEALED.  L 1989, c 195, §42.

 

PART V.  REORGANIZATION AND CONVERSION OF DOMESTIC INSURERS

 

     §431:4-501  Reorganization, merger or consolidation.  (a)  A domestic insurer may reorganize, merge or consolidate with another insurer subject to the provisions of this part, and subject to the following conditions:

     (1)  The plan of reorganization, merger, or consolidation shall be submitted to and be approved by the commissioner in advance of the reorganization, merger, or consolidation.

     (2)  The commissioner shall not approve any such plan unless the commissioner finds that it is fair, equitable, and consistent with law.  If the commissioner fails to approve the plan, the commissioner shall state the commissioner's reasons for such failure in the commissioner's decision.

     (3)  No director, officer, member, or subscriber of any such insurer, except as is expressly provided by the plan of reorganization, merger, or consolidation, shall receive any fee, commission, other compensation or valuable consideration whatsoever, for in any manner aiding, promoting, or assisting in the reorganization, merger, or consolidation.

     (4)  Any reorganization, merger, or consolidation as to an incorporated domestic insurer shall in other respects be governed by the general laws of this State relating to business corporations.  Except, that as to domestic mutual insurers, approval by two-thirds of its members who vote thereon pursuant to the notice and procedure as was approved by the commissioner shall constitute approval of the reorganization, merger, or consolidation as respects the insurer's members.

     (b)  Reinsurance of all or substantially all of the insurance in force of a domestic insurer by another insurer shall be deemed a consolidation for the purposes of this part. [L 1987, c 347, pt of §2]

 

     §431:4-502  Mutualization of stock insurers.  (a)  Any domestic stock insurer may become a domestic mutual insurer pursuant to such plan and procedure as are approved by the commissioner in advance of such mutualization.

     (b)  The commissioner shall not approve any such plan, procedure, or mutualization unless:

     (1)  It is equitable to both shareholders and policyholders.

     (2)  It is approved by vote of the holders of not less than three-fourths of the insurer's capital stock having voting rights, and by vote of not less than two-thirds of the insurer's policyholders who vote on such plan, pursuant to such notice and procedure as may be approved by the commissioner; provided that in the case of a life insurer, the right to vote thereon is limited to those policyholders whose policies have face amounts of not less than $1,000 and have been in force one year or more.  Such vote may be registered in person, by proxy, or by mail.

     (3)  Mutualization will result in retirement of shares of the insurer's capital stock at a price not in excess of the fair value thereof as determined by competent disinterested appraisers.

     (4)  The plan provides for appraisal and purchase of the shares of any nonconsenting stockholder in accordance with the laws of this State relating to the sale or exchange of all the assets of a private corporation.

     (5)  The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective.

     (6)  Mutualization leaves the insurer with surplus funds reasonably adequate to preserve the security of its policyholders and its ability to continue successfully in business in the states in which it is then authorized, and in the classes of insurance it is then authorized to transact. [L 1987, c 347, pt of §2]

 

     §431:4-503  Conversion or reinsurance of mutual insurer. (a)  No domestic mutual insurer shall be converted, changed, or reorganized as a stock corporation.

     (b)  Such an insurer may be wholly reinsured in, its assets transferred to, and its liabilities assumed by another mutual or stock insurer under such terms and conditions as are approved by the commissioner in advance of such reinsurance.

     (c)  The commissioner shall not approve any such reinsurance agreement which does not determine the amount of and make adequate provision for paying to policyholders of the mutual insurer, reasonable compensation for their equities as owners of the insurer, such compensation to be apportioned to policyholders as identified and in the manner prescribed in section 431:4-326. [L 1987, c 347, pt of §2]

 

     §431:4-504  Merger or conversion of reciprocal insurer.  (a)  A domestic reciprocal insurer, upon affirmative vote of not less than two-thirds of the subscribers who vote upon such merger pursuant to such notice as may be approved by the commissioner and with approval of the commissioner of the terms therefor, may merge with another reciprocal insurer or be converted to a stock or mutual insurer.

     (b)  Every new reciprocal insurer formed by merger shall assume and succeed to all of the obligations and liabilities of the respective merging reciprocal insurers and shall be held liable to pay and discharge all such debts and liabilities and perform such obligations in the same manner as if they had been incurred or contracted by it, but the subscribers of the predecessor reciprocal insurers shall continue subject to all the liabilities, claims, and demands which shall then exist, or which may thereafter accrue against them, or any of them, by reason of any liabilities and obligations incurred by them, or on their behalf as the subscribers before the date of merger.

     (c)  Such a stock or mutual insurer shall be subject to the same capital requirements and shall have the same rights as a like domestic insurer transacting like classes of insurance.

     (d)  The commissioner shall not approve:

     (1)  Any plan for a merger or conversion which is inequitable to subscribers, or

     (2)  Any plan for a conversion to a stock insurer which does not give each subscriber preferential right to acquire stock of the proposed insurer proportionate to the subscriber's interest in the reciprocal insurer, as determined in accordance with section 431:4-424, and a reasonable length of time within which to exercise the right. [L 1987, c 347, pt of §2; am L 1989, c 195, §15]

 

[ARTICLE 4A]

CREDIT FOR REINSURANCE

 

     §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 reduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of 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.

     (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, or is accredited by the commissioner as a reinsurer in this State.  To be eligible for accreditation, a reinsurer shall:

     (1)  File with the commissioner evidence of its submission to this State's jurisdiction;

     (2)  Submit to this State's authority to examine its books and records;

     (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, be entered through and licensed to transact insurance or reinsurance in at least one state;

     (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

     (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.

     (c)  Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled 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:

     (1)   Maintains a surplus as regards policyholders in an amount not less than $20,000,000; and

     (2)   Submits to the authority of this State to examine its books and records;

provided that paragraph (1) does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.

     (d)  Credit shall be allowed as follows:

     (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 ceding insurers, their assigns and successors in interest.  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 shall consist of funds in trust in an amount not less than the assuming insurer's liabilities attributable to 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:

               (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 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 regulation and solvency control by the group's domiciliary regulator as are the unincorporated members.

                    Within ninety days after its financial statements are due to be filed with the group's domiciliary regulator, the group shall provide to the commissioner an annual certification by the group'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 group;

          (D)  In the case of a group of incorporated underwriters under common administration, 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;

              (ii)  Maintain aggregate policyholders' surplus of at least $10,000,000,000;

             (iii)  Maintain a trust fund in an amount 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;

              (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 these liabilities; 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 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.

     (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 the assuming insurer 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 a qualified 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 regulation 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; and

          (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, voluntarily 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 a 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.

     (f)  Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of 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.

     (g)  If the assuming insurer is not licensed, accredited, or certified to transact insurance or reinsurance in this State, the credit permitted by subsections (c) and (d) shall not be allowed unless the assuming insurer agrees in the reinsurance agreements:

     (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, shall comply with all requirements necessary to give the court jurisdiction, and shall abide by the final decision of that court or of any appellate court in the event of an appeal; and

     (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 insurer.

This subsection is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if 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 subsection.

     (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, exceed 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, are 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. [L 1992, c 176, pt of §5; am L 1993, c 321, §11; am L 1994, c 34, §1; am L 2014, c 234, §1]

 

 

     §431:4A-102  Asset or reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer.  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 31 of the year for which the filing is being made, and in the possession of, or in trust for, the ceding insurer on or before the filing date of its annual statement;

     (4)  Letters of credit 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

     (5)  Any other form of security acceptable to the commissioner. [L 1992, c 176, pt of §5; am L 2014, c 234, §2]

 

 

     [§431:4A-103]  Qualified United States financial institutions.  (a)  For purposes of section 431:4A-102(3), a "qualified United States financial institution" means an institution that:

     (1)  Is organized or (in the case of a United States office of a foreign banking organization) licensed, under the laws of the United States or any state thereof;

     (2)  Is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies; and

     (3)  Has been determined by either the commissioner, or the securities valuation office of the National Association of Insurance Commissioners to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.

     (b)  For purposes of those provisions of this article specifying those institutions that are eligible to act as a fiduciary of a trust, "qualified United States financial institution" means an institution that:

     (1)  Is organized, or (in the case of a United States branch or agency office of a foreign banking organization) licensed, under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers; and

     (2)  Is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies. [L 1992, c 176, pt of §5]

 

     [§431:4A-104]  Rules.  The commissioner may adopt rules under chapter 91 implementing this article. [L 1992, c 176, pt of §5]

 

     §431:4A-105  REPEALED.  L 2014, c 234, §3.

 

 

[ARTICLE 4F]

STATE OF ENTRY FOR ALIEN INSURERS

 

     [§431:4F-101]  Definitions.  As used in this article, unless the context requires otherwise:

     "Alien insurer" has the same meaning as set forth in section 431:3-101.

     "Trusteed assets" mean the assets in a trust account required by section 431:4F-104.

     "Trusteed surplus" means the aggregate value of the insurer's general state deposits and trusteed assets deposited with a trustee in compliance with section 431:4F-105, plus accrued investment income thereon where such interest is collected by the states for trustees, less the aggregate net amount of all of the insurer's reserves and other liabilities in the United States as determined in accordance with section 431:4F-106.

     "United States branch" means the business unit through which business is transacted within the United States by an alien insurer and the assets and liabilities of the insurer within the United States pertaining to such business. [L 2004, c 120, pt of §2]

 

 

     [§431:4F-102]  Scope.  This article applies to a United States branch using this State as a state of entry to transact insurance in the United States.  The United States branch shall be subject to all state laws applicable to an insurer domiciled in this State, unless otherwise provided. [L 2004, c 120, pt of §2]

 

 

     §431:4F-103  Authorization of entry.  (a)  An alien insurer may use this State as a state of entry to transact insurance in the United States through a United States branch by:

     (1)  Qualifying as an insurer licensed to do business in this State; and

     (2)  Establishing trust accounts, pursuant to trust agreements approved by the commissioner with a United States financial institution approved by the commissioner, in an amount at least equal to the minimum capital and surplus or authorized control level risk-based capital, whichever is greater, required to be maintained by a domestic insurer licensed for the same kind of insurance.

     (b)  Before authorizing the entry of a United States branch of any alien insurer through this State, the commissioner shall in addition to the requirements of section 431:4F-105 and any other requirement of this chapter, require the alien insurer to:

     (1)  Comply with the requirements of section 431:3-212;

     (2)  Submit an English language translation, as necessary, of any of the documents required in paragraph (1); and

     (3)  Submit to an examination of the insurer's affairs at its principal office within the United States. [L 2004, c 120, pt of §2; am L 2010, c 116, §1(4)]

 

 

     [§431:4F-104]  Maintenance of trust account.  The trusteed assets, or the assets of the trust account of an alien insurer, as required by section 431:4F-103, shall at all times be in an amount equal to the United States branch's reserves and other liabilities plus the minimum capital and surplus or authorized control level risk-based capital, whichever is greater, required to be maintained by a domestic insurer licensed to do the same kind of insurance. [L 2004, c 120, pt of §2]

 

 

     [§431:4F-105]  Requirements for trust agreement.  (a)  The terms of the trust agreement required by section 431:4F-103 shall be set forth in a deed of trust.  The deed of trust and all subsequent amendments shall be authenticated in a form and manner as the commissioner may prescribe and shall not be effective unless approved by the commissioner upon a finding that:

     (1)  A deed of trust or its amendments are sufficient in form and in conformity with law;

     (2)  The trustee or trustees are eligible as such; and

     (3)  The deed of trust is adequate to protect the interests of the beneficiaries of the trust.

     (b)  If at any time after reasonable notice and hearing, the commissioner finds that the requisites for the approval no longer exist, the commissioner may withdraw approval.

     (c)  The commissioner may approve modifications of, or variations in any deed of trust, which in the commissioner's judgment are not prejudicial to the interests of the people of this State or policyholders and creditors in the United States, of the United States branch.

     (d)  The deed of trust shall contain provisions that:

     (1)  Vest legal title to trusteed assets in the trustee or trustees, and their lawfully appointed successors;

     (2)  Require that all assets deposited in the trust shall be continuously kept within Hawaii;

     (3)  Provide for substitution of a new trustee or trustees in case of a vacancy by death, resignation, or otherwise, subject to the approval of the commissioner;

     (4)  Require that the trustee or trustees shall continuously maintain a record at all times sufficient to identify the assets of such fund;

     (5)  Require that the trusteed assets shall consist of cash or investments, or both, as permitted by article 6 for investment of the funds of domestic insurers and accrued interest thereon if collectable by the trustee;

     (6)  Require that the trust shall be for the exclusive benefit, security, and protection of the policyholders, or policyholders and creditors in the United States, of the United States branch;

     (7)  Require that the trust shall be maintained as long as there is any outstanding liability of the alien insurer arising out of its insurance transactions in the United States; and

     (8)  Provide, in substance, that no withdrawals of assets, other than income as specified in subsection (e) shall be made or permitted by the trustee or trustees without the approval of the commissioner except to:

          (A)  Make deposits required by law in any state for the security or benefit of all policyholders, or policyholders and creditors in the United States, of the United States branch;

          (B)  Substitute other assets permitted by law and at least equal in value and quality to those withdrawn, upon the specific written direction of the United States branch manager when duly empowered and acting pursuant to either general or specific written authority previously given or delegated by the board of directors; or

          (C)  Transfer such assets to an official liquidator or rehabilitator pursuant to an order of a court of competent jurisdiction.

     (e)  The deed of trust may provide that income, earnings, dividends, or interest accumulations of the assets of the fund may be paid over to the United States branch manager of the United States branch upon request; provided that the total trusteed assets shall not be less than the amount required to be maintained pursuant to section 431:4F-104.

     (f)  Upon withdrawal of trusteed assets deposited in another state in which the insurer is authorized to do business, it shall be sufficient if the deed of trust requires similar written approval of the insurance supervising official of that state in lieu of approval of the commissioner; provided that the total trusteed assets shall not be less than the amount required to be maintained pursuant to section 431:4F-104.  In all such cases, the United States branch shall notify the commissioner in writing of the nature and extent of the withdrawal.

     (g)  The commissioner may:

     (1)  Make examinations of the trusteed assets of any authorized United States branch at the insurer's expense; and

     (2)  Require the trustee or trustees to file a statement, in such form as the commissioner may prescribe, certifying the assets of the trust fund and the amounts thereof.

     (h)  Refusal or neglect of any trustee to comply with this section shall be grounds for the revocation of the insurer's license or the liquidation of its United States branch. [L 2004, c 120, pt of §2]

 

 

     [§431:4F-106]  Reporting requirements for United States branches of alien insurers.  (a)  In addition to other requirements of the insurance code, every authorized United States branch shall complete and file the report required of a domestic insurer in article 3, including:

     (1)  Annual and quarterly statements of the business transacted within the United States and the assets held by or for it within the United States for the protection of policyholders and creditors within the United States, and of the liabilities incurred against such assets.  The forms shall not contain any statement in regard to its assets and business elsewhere.  The statements shall be in the same format required of an insurer domiciled in Hawaii and licensed to write the same kinds of insurance; and

     (2)  A statement of trusteed surplus, in such form as the commissioner may prescribe, as of the end of the same period covered by the statement filed pursuant to paragraph (1).  In determining the net amount of the United States branch's liabilities in the United States to be reported in the statement of trusteed surplus, the United States branch shall make adjustments to total liabilities reported on the accompanying annual or quarterly statement as follows:

          (A)  Add back liabilities used to offset admitted assets reported in the accompanying quarterly or annual statement; and

          (B)  Deduct:

               (i)  Unearned premiums on agent's balances or uncollected premiums not more than ninety days past due not exceeding unearned premium reserves carried thereon;

              (ii)  Reinsurance on losses with authorized insurers, less unpaid reinsurance premiums;

             (iii)  Reinsurance recoverables on paid losses from unauthorized insurers that are included as assets in the annual or quarterly statement; but only to the extent a liability for such unauthorized recoverables is included in the liabilities report in the trusteed surplus statement;

              (iv)  Special state deposits held for the exclusive benefit of policyholders, or policyholders and creditors, of any particular state not exceeding net liabilities reported for that state;

               (v)  Secured accrued retrospective premiums;

              (vi)  If a life insurer, the amount of its policy loans to policyholders within the United States, not exceeding the amount of legal reserve required on each such policy;

             (vii)  If a life insurer, the net amount of uncollected and deferred premiums; and

            (viii)  Any other non-trusteed asset that the commissioner determines secures liabilities in a substantially similar manner; and

          (C)  Provide any additional information that the commissioner may require relating to the total business or assets, or any portion thereof, of the alien insurer.

     (b)  The annual statement and trusteed surplus statement shall be signed and verified by the United States branch manager, attorney-in-fact, or a duly empowered assistant United States branch manager, of the United States branch.  The items of securities and other property held under trust deeds shall be certified in the trusteed surplus statement by the United States trustee or trustees.

     (c)  Every report on examination of a United States branch shall include a trusteed surplus statement as of the date of examination in addition to the general statement of the financial condition of the United States branch. [L 2004, c 120, pt of §2]

 

 

     [§431:4F-107]  Additional requirements for United States branch license.  (a)  Before issuing any new or renewal license to any United States branch, the commissioner may require satisfactory proof, either in the alien insurer's charter or by an agreement evidenced by a duly certified resolution of its board of directors, or otherwise as the commissioner may require, that the insurer will not engage in any insurance business in contravention of this section or not authorized by its charter.

     (b)  The commissioner shall issue a renewal license to any United States branch if satisfied, by such proof as required, that the insurer is not delinquent with respect to any requirement imposed by this chapter and that its continuance in business in this State will not be hazardous or prejudicial to the best interests of the people of this State.

     (c)  No United States branch shall be licensed to do any kind of insurance business in this State, or any combination of kinds of insurance business, that are not permitted to be done by domestic insurers licensed under this chapter.  No United States branch shall be authorized to do an insurance business in this State if it does anywhere within the United States any kind of business other than an insurance business and the business necessarily or properly incidental to the kind or kinds of insurance business that it is authorized to do in this State.

     (d)  Except as otherwise specifically provided, no United States branch, entering through this State or another state, shall be or continue to be authorized to do an insurance business in this State if it fails to comply substantially with any requirement or limitation of this chapter, applicable to similar domestic insurers hereafter organized, which in the judgment of the commissioner is reasonably necessary to protect the interest of the policyholders.

     (e)  No United States branch that, outside of this State, does any kind or combination of kinds of insurance business not permitted to be done in this State by similar domestic insurers hereafter organized, shall be or continue to be authorized to do an insurance business in this State, unless in the judgment of the commissioner the doing of that kind or combination of kinds of insurance business will not be prejudicial to the best interests of the people of this State.

     (f)  No United States branch shall be or continue to be authorized to do an insurance business in this State if it fails to keep full and correct entries of its transactions, which shall at all times be open to the inspection of persons invested by law with the rights of inspection and be maintained in its principal office within this State. [L 2004, c 120, pt of §2]

 

 

     [§431:4F-108]  Authority of commissioner.  Whenever it appears to the commissioner from any annual statement, quarterly statement, trusteed surplus statement, or any other report that a United States branch's trusteed surplus is reduced below minimum capital and surplus or the authorized control level risk-based capital, whichever is greater, required to be maintained by a domestic insurer licensed to transact the same kinds of insurance, the commissioner may proceed against the insurer pursuant to articles 5 and 15 as an insurer whose condition is such that its further transaction of business in the United States will be hazardous to its policyholders, its creditors, or the public in the United States. [L 2004, c 120, pt of §2]

 

 

ARTICLE 5

FINANCIAL CONDITION

 

PART I.  STANDARDS

 

     §431:5-101  Impairment of capital.

    (a)   (1)  A domestic stock insurer's capital stock shall be deemed to be impaired if its qualified assets at any time are less than its liabilities, including its capital stock as a liability.

     (2)  If a domestic insurer's capital stock is deemed to be impaired, the commissioner shall at once determine the amount of the deficiency and serve notice upon the insurer to cure the deficiency within ninety days after service of such notice.

     (b)  The insurer may cure the deficiency by assessment of stockholders, by action of its board of directors, or by other lawful means.  The deficiency shall be cured:

     (1)  By the provision of cash or other assets eligible under this code for the investment of the insurer's funds; or

     (2)  By reduction of the insurer's capital stock to an amount not below the minimum required by either section 431:3-205, section 431:3-207 or section 431:3-208 for the classes of insurance to be thereafter transacted.

     (c)  Shares as to which such an assessment, made pursuant to this section, is not paid within sixty days after demand, shall be forfeitable and may be cancelled by vote of the directors and new shares issued to make up the deficiency.

     (d)  If the deficiency is not cured and proof thereof filed with the commissioner within the ninety-day period, the insurer shall be deemed insolvent and shall be proceeded against as authorized by article 15.

     (e)  If the deficiency is not cured, the insurer shall not issue or deliver any policy after the expiration of the ninety-day period.  Any officer or director who violates or knowingly permits the violation of this provision shall be fined not less than $500 nor more than $10,000 for each violation. [L 1987, c 347, pt of §2]

 

     §431:5-102  Impairment of surplus.

    (a)   (1)  A domestic mutual insurer's surplus shall be deemed to be impaired if its qualified assets are less than its liabilities, plus the amount of any surplus required by this code for the classes of insurance authorized to be transacted.

     (2)  If a domestic mutual insurer's surplus is deemed to be impaired, the commissioner shall at once ascertain the amount of the deficiency and serve notice upon the insurer to cure the deficiency within ninety days after service of such notice.

     (b)  The insurer shall cure the deficiency in cash or in assets eligible under this code for the investment of the insurer's funds.

     (c)  If the deficiency is not cured and proof thereof filed with the commissioner within such ninety-day period, the insurer shall be deemed insolvent and shall be proceeded against as authorized by article 15.

     (d)  If the deficiency is not cured the insurer shall not issue or deliver any policy after the expiration of such ninety-day period.  Any officer or director who violates or knowingly permits the violation of this provision shall be fined not less than $500 nor more than $10,000 for each violation. [L 1987, c 347, pt of §2]

 

     §431:5-103  Impairment of reciprocal's surplus.

    (a)   (1)  A domestic reciprocal insurer's surplus shall be deemed to be impaired if its qualified assets are at any time insufficient to discharge its liabilities other than any liability on account of funds contributed by the attorney or other parties, and insufficient to maintain the surplus required for the classes of insurance it is authorized to transact.

     (2)  Upon such impairment of a reciprocal insurer's surplus, its attorney shall forthwith levy an assessment upon subscribers made subject to assessment by the terms of their policies for the amount needed to make up the deficiency.

     (3)  For the purposes of a determination of impairment of a reciprocal under this section, surplus means the required surplus which corresponds to the paid-up capital stock required of a stock insurer for authority to transact a like class or classes of insurance.

     (b)  The insurer shall be deemed insolvent and shall be proceeded against as authorized by this code if:

     (1)  The attorney fails to make the assessment within thirty days after the commissioner orders the attorney to do so; or

     (2)  The deficiency is not fully made up within sixty days after the date the assessment was made.

     (c)  If liquidation of such an insurer is ordered, an assessment shall be levied upon the subscribers for such an amount, subject to limits as provided by this code, as the commissioner determines to be necessary to discharge all liabilities of the insurer, exclusive of any funds contributed by the attorney, but including the reasonable cost of the liquidation. [L 1987, c 347, pt of §2]

 

PART II.  ASSETS AND LIABILITIES

 

     §431:5-201  Qualified assets.  In any determination of the financial condition of an insurer, only such assets as are owned by the insurer, and which consist of the following may be used:

     (1)  Cash in the possession of the insurer or in transit under its control, and the true positive balance of any deposit of the insurer in a solvent bank or trust company;

     (2)  Investments, securities, properties, and secured loans acquired or held in accordance with article 6, and in connection therewith the following items:

          (A)  Interest due or accrued on any bond or evidence of indebtedness which is not in default and which is not valued on a basis including accrued interest.

          (B)  Declared and unpaid dividends on stocks and shares unless the amount has otherwise been allowed as an asset.

          (C)  Interest due or accrued upon a collateral loan in an amount not to exceed six months' interest thereon.

          (D)  Interest due or accrued on:

               (i)  Deposits in solvent banks, trust companies, and financial investment companies; and

              (ii)  Other assets if such interest is in the judgment of the commissioner a collectible asset.

          (E)  Interest due or accrued on a mortgage loan, in an amount not exceeding in any event the amount, if any, of the excess of the value of the property less delinquent taxes thereon over the unpaid principal; provided that interest due and unpaid for a period in excess of six months shall not be allowed as an asset.

          (F)  Rent due or accrued on real property if such rent is not in arrears for more than three months, unless the rent is secured by property held in the name of the tenant and conveyed to the insurer as collateral.

     (3)  Premium notes, policy loans, and other policy assets and liens on policies of life insurance, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy;

     (4)  The net amount of uncollected and deferred premiums on an effective date item basis and annuity considerations in the case of a life insurer, corresponding to the basis on which reserves are held;

     (5)  Producer balances or uncollected premiums, other than for life insurance and other receivables, not more than ninety days past due, less commissions payable thereon; provided that the foregoing limitation shall not apply to premiums and other receivables payable directly or indirectly by the United States government or any of its instrumentalities;

     (6)  Installment premiums other than life insurance premiums, in accordance with rules adopted by the commissioner consistent with practice formulated or adopted by the National Association of Insurance Commissioners;

     (7)  Notes and like written obligations not past due, taken for premiums other than life insurance premiums, on policies permitted to be issued on such basis, to the extent of the unearned premium reserves carried thereon and unless otherwise required by rules adopted by the commissioner;

     (8)  (A)  The full amount of reinsurance recoverable by a ceding insurer from a solvent reinsurer not disqualified to take such reinsurance under this code; or

          (B)  So much of reinsurance recoverable from such reinsurer as does not exceed the liabilities carried by the ceding insurer for amounts withheld under a reinsurance treaty with such reinsurer as security for the payment of obligations thereunder if such funds are held subject to withdrawal by, and under the control of, the ceding insurer in the case of a reinsurer disqualified under this code;

     (9)  Amounts receivable by an assuming insurer representing funds withheld by a solvent ceding insurer under a reinsurance treaty;

    (10)  Deposits or equities recoverable from underwriting associations and reinsurance funds, or from any suspended banking institution, to the extent deemed by the commissioner available for the payment of losses and claims and at values to be determined by the commissioner;

    (11)  Electronic data hardware;

    (12)  Other assets not inconsistent with the foregoing provisions, deemed by the commissioner available for the payment of losses and claims; and

    (13)  All assets, whether or not consistent with the provisions of this code, as may be allowed pursuant to the annual statement form provided for in section 431:3-301. [L 1987, c 347, pt of §2; am L 2002, c 155, §11]

 

     §431:5-202  Assets not allowed.  In addition to assets excluded under section 431:5-201, the following shall not be allowed as assets in any determination of the financial condition of an insurer:

     (1)  Trade names, agency plants, other like intangible assets, and any receivable without adequate documentation;

     (2)  Positive goodwill from all sources in excess of ten per cent of capital and surplus adjusted to exclude electronic data processing equipment and operating system software and net deferred tax assets;

     (3)  Prepaid or deferred charges for expenses and commissions paid by the insurer except the unaccrued portion of taxes paid prior to due date, on real property acquired or used pursuant to section 431:6-311;

     (4)  Advances to officers, employees, agents, and other persons on personal security only;

     (5)  Stock of the insurer, owned by it, or any equity therein or loans secured thereby, or any proportionate interest in such stock through the ownership by the insurer of an interest in another firm, corporation or business unit;

     (6)  Furniture, furnishings, fixtures, electronic data software, safes, vehicles, library, stationery, literature, and supplies; except such personal property:

          (A)  The insurer is permitted to hold pursuant to section 431:6-311(e)(5);

          (B)  Acquired through enforcement of rights arising from security agreements acquired pursuant to section 431:6-310; or

          (C)  Reasonably necessary for the maintenance and operation of real estate lawfully acquired and held by the insurer other than real estate used by it for home office, branch office, and similar purposes; and

     (7)  The amount, if any, by which the aggregate book value of investments, as carried in the ledger assets of the insurer, exceeds the aggregate value thereof as determined under this code. [L 1987, c 347, pt of §2; am L 2004, c 122, §17]

 

     §431:5-203  Liabilities.  In any determination of the financial condition of an insurer, liabilities to be charged against its assets shall include:

     (1)  The amount of its capital stock outstanding, if any;

     (2)  The amount, estimated consistent with this article, necessary to pay all of its unpaid losses and claims incurred on or prior to the date of statement, whether reported or unreported, together with the expense of adjustment or settlement thereof;

     (3)  With reference to life and accident and health or sickness insurance, and annuity contracts:

          (A)  The amount of reserves on life insurance policies and annuity contracts in force, valued according to the tables of mortality, rates of interest, and methods adopted pursuant to this article which are applicable thereto;

          (B)  Reserves for accident and health or sickness benefits, for both active and disabled lives;

          (C)  Reserves for accidental death benefits; and

          (D)  Any additional reserves which may be required by the commissioner, consistent with practices adopted or approved by the National Association of Insurance Commissioners, on account of such insurances;

     (4)  With reference to insurance other than those specified in paragraph (3), the amount of reserves equal to the unearned portions of the gross premiums charged on policies in force, computed in accordance with this article;

     (5)  Taxes, expenses, and other obligations accrued at the date of the statement; and

     (6)  Any additional reserve set up by the insurer for a specific liability purpose or required by the commissioner consistent with practices adopted or approved by the National Association of Insurance Commissioners. [L 1987, c 347, pt of §2; am L 2003, c 212, §38]

 

     §431:5-204  Determining financial condition of reciprocal insurers.  In determining the financial condition of a reciprocal insurer, the commissioner shall apply the following rules:

     (1)  The commissioner shall charge as liabilities the same reserves as are required of incorporated insurers issuing nonassessable policies on a reserve basis.

     (2)  The surplus deposits of subscribers shall be allowed as assets, except that any premium deposit delinquent for ninety days shall first be charged against the surplus deposits.

     (3)  The surplus deposits of subscribers shall not be charged as a liability.

     (4)  All premium deposits delinquent less than ninety days shall be allowed as assets.

     (5)  An assessment levied upon subscribers and not collected, shall not be allowed as an asset.

     (6)  The contingent liability of subscribers shall not be allowed as an asset.

     (7)  The computation of reserves shall be based upon premium deposits other than membership fees, and without any deduction for the compensation of the attorney. [L 1987, c 347, pt of §2]

 

PART III.  RESERVES AND VALUATION

 

     §431:5-301  Unearned premium reserve.  (a)  Every insurer shall maintain an unearned premium reserve on all policies in force for:

     (1)  Insurance against loss or damage to property, except as provided in section 431:5-302;

     (2)  General casualty insurance;

     (3)  Accident and health or sickness insurance, except as provided in section 431:5-303 and section 431:5-307; and

     (4)  Surety insurance.

     (b)  For purposes of this article, "unearned premium reserve" means the portions of the gross premiums in force, less authorized reinsurance.

     (c)  All reserves may be computed, at the insurer's option, on a monthly or more frequent, pro rata basis.

     (d)  After adopting any one of the methods for computing such reserve, an insurer shall not change methods without the commissioner's approval. [L 1987, c 347, pt of §2; am L 1997, c 368, §4; am L 2003, c 212, §39]

 

     §431:5-302  Unearned premium reserve for marine and transportation.  Marine and transportation insurance policy premiums on trip risks not terminated shall be deemed unearned.  The commissioner may require the insurer to carry a reserve equal to one hundred per cent on trip risks written during the month ended as of the date of statement, and:

     (1)  Computed upon a pro rata basis; or

     (2)  With the commissioner's consent, in accordance with the alternative methods provided in section 431:5-301(c) and section 431:5-301(d). [L 1987, c 347, pt of §2; am L 1997, c 368, §5]

 

     §431:5-303  Active life reserves and unearned premium reserves for noncancellable disability insurance.  (a)  The legal minimum standard for computing the active life reserve, including the unearned premium reserve, of noncancellable disability policies shall be based on conference modification of class III disability experience with interest not to exceed three and one-half per cent a year on the full preliminary term basis.

     (b)  The tables shall be extended to cover the provisions of such policies on such bases as the commissioner may approve for policies:

     (1)  With a waiting period of less than three months; or

     (2)  Providing benefits at ages beyond the limits of conference modification of class III disability experience.

     (c)  The reserve for losses under noncancellable disability policies shall be based on conference modification of class III disability experience, except that for claims of less than twenty-seven months' duration, the reserve may be taken as equivalent to the prospective claim payments for three and one-half times the elapsed period of disability.  In no case shall the reserve be less than the equivalent of seven weeks' claim payments.

     (d)  The commissioner shall modify the application of the tables and requirements prescribed in this section to policies or to claims arising under policies in accordance with the waiting period contained in such policies and in accordance with any limitation as to the time for which indemnity is payable. [L 1987, c 347, pt of §2]

 

     §431:5-304  Loss reserves for liability and workers' compensation insurance.  The reserves for outstanding losses and loss expenses under policies of liability insurance and workers' compensation insurance shall be determined in accordance with the applicable basis set forth in the convention annual statement blank of the National Association of Insurance Commissioners. [L 1987, c 347, pt of §2]

 

     §431:5-305  Increased reserves.  (a)  If the commissioner determines that an insurer's unearned premium reserves, however computed, are inadequate, the commissioner may require the insurer to compute such reserves or any part thereof according to such other method or methods as are prescribed in this code.

     (b)  If the loss reserves, however estimated, are inadequate, the commissioner shall require the insurer to maintain loss reserves in such increased amount as is needed to make them adequate. [L 1987, c 347, pt of §2]

 

     §431:5-306  Reserve credit for reinsurance.  (a)  An insurer may take credit for reserves on risks ceded to a reinsurer to the extent reinsured, except that:

     (1)  No credit shall be taken on account of reinsurance in any reinsurer not qualified under article 4A or in any reinsurer that has been disapproved by the commissioner; and

     (2)  No credit shall be allowed, as an asset or as a deduction from liability, to any ceding insurer for reinsurance unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding insurer under the contracts reinsured without diminution because of the insolvency of the ceding insurer.

     (b)  A reinsurance agreement may provide that:

     (1)  The liquidator, receiver or statutory successor of an insolvent ceding insurer shall be given written notice of the pendency of a claim against the insolvent ceding insurer on the policy or bond reinsured within a reasonable time after the claim is filed in the insolvency proceeding; and

     (2)  Any assuming insurer may investigate such claim and interpose any defense or defenses which it may deem available to the ceding insurer, its liquidator, receiver, or statutory successor, during the pendency of the claim, in the proceeding where the claim is to be adjudicated, at its own expense.

     (c)  Subject to court approval, the expense thus incurred by the assuming insurer shall be chargeable against the insolvent ceding insurer as a part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as a result of the defense undertaken by the assuming insurer.

     (d)  Where two or more assuming insurers are involved in the same claim and a majority in interest elect to interpose defense to the claim, the expense shall be apportioned in accordance with the terms of the reinsurance agreement as though the expense had been incurred by the ceding insurer. [L 1987, c 347, pt of §2; am L 2004, c 122, §18]

 

     §431:5-307  Standard valuation law; life.  (a)  This section shall be known as the standard valuation law.

  (b)(1)  For policies and contracts issued prior to 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 policies and annuity and pure endowment contracts of every life insurance company doing business in this State 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 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 under this section;

          (B)  Subsections (e) to (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 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 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 disclosable under 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 appointed actuary shall be defined by rules adopted by the commissioner.

     (e)  Except as otherwise provided in subsections (f), (g), and (n), 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 January 1, 1956.

     Except as otherwise provided in subsections (f), (g), and (n), the minimum standard for the valuation of all policies and contracts issued on or after January 1, 1956, shall be the commissioner's reserve valuation methods defined in subsections (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 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:

     (1)  For ordinary policies of life insurance issued on the standard basis, excluding any disability income 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)(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 431:10D-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):

          (A)  The Commissioners 1980 Standard Ordinary Mortality Table;

          (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;

          (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;

     (2)  For industrial life insurance policies issued on the standard basis, excluding any disability income 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 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 valuation for the policies;

     (3)  For individual annuity and pure endowment contracts, excluding any disability income and accidental death benefits in the policies:  the 1937 Standard Annuity Mortality Table, or at the option of the company, the Annuity Mortality Table for 1949, ultimate, or any modification of either of these tables approved by the commissioner;

     (4)  For group annuity and pure endowment contracts, excluding any disability income and accidental death benefits in the policies:  the Group Annuity Mortality Table for 1951, a modification of the table approved by the commissioner, or at the option of the company, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts;

     (5)  For total and permanent disability income 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 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 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;

     (6)  For accidental death benefits in or supplementary to 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 those policies, for policies issued after December 31, 1960, and prior to January 1, 1966, either that table or, at the option of the company, the Inter-company Double Indemnity Mortality Table.  Either table shall be combined with a mortality table for calculating the reserves for life insurance policies; and

     (7)  For group life insurance, life insurance issued on the substandard basis, and other special benefits:  tables approved by the commissioner.

     (f)  Except as provided in subsection (g), the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after the operative date of this subsection and for annuities and pure 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 (h) and (i) and the following tables and interest rates:

     (1)  For individual annuity and pure endowment contracts issued prior to June 1, 1979, excluding any disability income 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;

     (2)  For individual single premium immediate annuity contracts issued on or after June 1, 1979, excluding any disability income 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 valuation for these contracts, or any modification of these tables approved by the commissioner, and seven and one-half per cent interest;

     (3)  For individual annuity and pure endowment contracts issued on or after June 1, 1979, other than single premium immediate annuity contracts, excluding any disability income and accidental death benefits in 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 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;

     (4)  For annuities and pure endowment contracts purchased prior to June 1, 1979, under group annuity and pure endowment contracts, excluding any disability income 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 annuities and pure endowment contracts purchased on or after June 1, 1979, under group annuity and pure endowment contracts, excluding any disability income and accidental death benefits 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 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 company may file with the commissioner a written notice of its election to comply with this subsection after a specified date before January 1, 1979, which shall be the operative date of this subsection for that company.  If a company makes no election, the operative date of this subsection for that company shall be January 1, 1979.

  (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.

     (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:

          (A)  For life insurance,

                                             W

                    I = .03 + W (R1 - .03) + — (R2 - .09);

                                             2

          (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 subsection, and W is the weighting factor defined in this subsection;

          (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 subparagraph (B), the formula for life insurance stated in 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 subparagraph (B) shall apply to annuities and guaranteed interest contracts with guarantee duration of ten years or less;

          (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 subparagraph (B) shall apply; and

          (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 subparagraph (B) shall apply.

          If the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this subsection 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 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;

     (3)  The weighting factors referred to in the formulas stated in paragraph (2) are given in the following tables:

          (A)  Weighting factors for life insurance:

                Guarantee

                Duration    Weighting

                 (Years)      Factors

10 or (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;

          (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

          (C)  Weighting factors for other annuities and for guaranteed interest contracts, except as stated in 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

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) 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 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 subsection, "issue year basis" 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 "change in fund basis" 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;

     (4)  The reference interest rate referred to in paragraph (2) shall be defined as follows:

               (A)   For 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 preceding the year, of the monthly average of composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.;

          (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 the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.;

          (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 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 the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.;

          (D)  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 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 the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.;

          (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 the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.; and

          (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 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 the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.; and

     (5)  In the event that 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 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 adopted by the National Association of Insurance Commissioners and approved by rules adopted by the commissioner may be substituted.

     (h)(1)  Except as otherwise provided in subsections (i), (l), and (n), reserves, according to the commissioner's reserve valuation 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 a policy shall be the uniform percentage of the respective contract premiums for the benefits 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 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;

     (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, 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 (l), shall be the greater of the reserve as of the policy anniversary calculated pursuant to this paragraph and the reserve as of the policy anniversary calculated as described, but with:

          (A)  The value defined in paragraph (1) being reduced by fifteen per cent of the amount of the excess first year premium;

          (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;

          (C)  The policy being assumed to mature on that date as an endowment; and

          (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 subsections (e) and (g) shall be used; and

     (3)  Reserves according to the commissioner's reserve valuation method shall be calculated by a method consistent with the principles of paragraphs (1) and (2) 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)  Disability income 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.

     (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 disability income and accidental death benefits in 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 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 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.

     (j)  In no event shall a company's aggregate reserves for all life insurance policies, excluding disability income and accidental death benefits, issued on or after January 1, 1956, be less than the aggregate reserves calculated in accordance with the methods set forth in subsections (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 appointed actuary to be necessary to render the opinion required by subsections (c) and (d).

     (k)  With regard to optional reserve calculation:

     (1)  Reserves for policies and contracts issued prior to January 1, 1956, may be calculated, at the option of the company, according to any standards that produce greater aggregate reserves for 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 a standard valuation producing greater aggregate reserves than those calculated according to the minimum standard provided under this section, may adopt a lower standard of valuation with the approval of the commissioner, but not lower than the minimum provided herein; provided that for the purposes of this section, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion required by subsections (c) and (d) shall not be deemed to be the adoption of a higher standard of valuation.

     (l)  If in any contract year the gross premium charged by a company on 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 but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for 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 subsection are those standards stated in subsections (e) 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 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 (h), ignoring subsection (h)(2).  The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with subsection (h), including subsection (h)(2) and the minimum reserve calculated in accordance with this subsection.

     (m)  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 or annuity that is of such a nature that the minimum reserves cannot be determined by the methods described in subsections (h), (i), and (l), the reserves that are held under the plan shall:

     (1)  Be appropriate in relation to the benefits and the pattern of premiums for that plan; and

     (2)  Be computed by a method that is consistent with the principles of this section, as determined by rules adopted by the commissioner.

     (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 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) of this subsection;

     (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; and

             (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 disclosable under 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 (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 this clause and clause (i); 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); and

          (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) to (n) shall be applicable.  With respect to any company applying this exemption, any reference to subsection (o) found in subsections (c) to (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. [L 1987, c 347, pt of §2; am L 1994, c 190, §§3, 10; am L 1995, c 61, §2 as superseded by c 232, §4; am L 1999, c 302, §9 as superseded by c 128, §2; am L 2003, c 212, §40; am L 2014, c 234, §4; am L 2015, c 63, §5]

 

 

     §431:5-308  Valuation of bonds.  (a)  All bonds or other evidences of debt having a fixed term and rate held by any insurer may, if amply secured and not in default as to principal or interest, be valued as follows:

     (1)  If purchased at par, at the par value.

     (2)  If purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at the earliest date callable at par or maturing at par and so as to yield in the meantime the effective rate of interest at which the purchase was made; or in lieu of such method, according to such accepted method of valuation as is approved by the commissioner.

     (3)  Purchase price shall in no case be taken at a higher figure than the actual market value at the time of purchase plus actual brokerage, transfer, postage, or express charges paid in the acquisition of such securities.

     (4)  Unless otherwise provided by a valuation established or approved by the National Association of Insurance Commissioners, no such security shall be carried at above call price for the entire issue during any period within which the security may be so called.

     (b)  The commissioner shall have full discretion in determining the method of calculating values according to the rules set forth in this section, not inconsistent with any such methods then currently formulated or approved by the National Association of Insurance Commissioners. [L 1987, c 347, pt of §2]

 

     §431:5-309  Valuation of other securities.  (a)  Any security, other than a security covered by section 431:5-308, is required to be valued at its market value or, if there is no market, at its value as fixed by an impartial appraiser, all consistent with any current method for the valuation of any such security formulated or approved by the National Association of Insurance Commissioners.

     (b)  Preferred or guaranteed stock or shares while paying full dividends may be carried at a fixed value in lieu of market value, at the discretion of the commissioner and in accordance with such method of computation as the commissioner may approve.

     (c)  The stock of a subsidiary of an insurer acquired after January 1, 1956, shall be valued on the basis of the value of only such of the assets of the subsidiary as would constitute lawful investments for the insurer if acquired or held directly by the insurer. [L 1987, c 347, pt of §2]

 

     §431:5-310  Valuation of property.  (a)  Real property acquired pursuant to a mortgage loan or a contract for a deed, in the absence of a recent appraisal deemed by the commissioner to be reliable, shall not be valued at an amount greater than the unpaid principal of the defaulted loan or contract at the date of the acquisition, with accrued interest thereon for not in excess of eighteen months, together with any taxes and expenses paid or incurred in connection with the acquisition, the cost of improvements thereafter made by the insurer, and any amounts thereafter paid by the insurer on assessments levied for improvements in connection with the property.

     (b)  Other real property held by an insurer shall not be valued at any amount in excess of fair value.

     (c)  Personal property acquired pursuant to security agreements made under section 431:6-310 shall not be valued at an amount greater than the unpaid balance of principal on the defaulted loan at the date of acquisition together with taxes and expenses incurred in connection with the acquisition, or the fair value of the property, whichever amount is the lesser. [L 1987, c 347, pt of §2]

 

     §431:5-311  Valuation of purchase money mortgages.  Purchase money mortgages on real property referred to in section 431:5-310 shall be valued in an amount not exceeding the acquisition cost of the real property covered thereby or ninety per cent of the fair value of the real property, whichever is less. [L 1987, c 347, pt of §2]

 

PART IV.  RULES

 

     [§431:5-401]  Rules.  The commissioner may adopt rules under chapter 91 implementing this article. [L 1995, c 232, §5]

 

ARTICLE 6

INVESTMENTS

 

PART I.  GENERAL PROVISIONS

 

     §431:6-101  Definitions pertaining to investments.  (a)  For purposes of this article:

     "Cash" includes cash equivalents.

     "Cash equivalents" means highly-rated and highly-liquid investments or securities with a remaining term of ninety days or less and rated in the highest short-term category by a nationally recognized statistical rating organization recognized by the SVO.  Cash equivalents include government money market mutual funds and class one money market mutual funds defined by the Purposes and Procedures Manual of the SVO, or its successor publication.

     "Fixed charges" means interest on funded and unfunded debt, amortization of debt discount, and rentals for leased properties.

     "Institution" means corporations, joint-stock associations, and business trusts.

     "Net earnings available for fixed charges" means net income after deducting operating and maintenance expenses, taxes other than federal and state income taxes, depreciation, and depletion, but excluding extraordinary nonrecurring items of income or expense appearing in the regular financial statements of such institution.

     "Obligation" means bonds, debentures, notes, or other evidence of indebtedness.

     "Surplus as regards to policyholders" means the excess of the insurer's admitted assets over its liabilities.

     "SVO" means the Securities Valuation Office of the National Association of Insurance Commissioners.

     "Value" means fair value.  Market value is the best evidence of fair value.

     (b)  If net earnings are determined in reliance upon consolidated earnings statements of parent and subsidiary institutions:

     (1)  The net earnings shall be determined after provision for income taxes of subsidiaries and after proper allowance for minority stock interest, if any, and

     (2)  The required coverage of fixed charges shall be computed on a basis including fixed charges and preferred dividends of subsidiaries other than those payable by the subsidiaries to the parent corporation or to any other of the subsidiaries.

Except that if the minority common stock interest in the subsidiary corporation is substantial, the fixed charges and preferred dividends may be apportioned in accordance with regulations prescribed by the commissioner. [L 1987, c 347, pt of §2; am L 2008, c 142, §1]

 

     §431:6-102  Merged, reorganized institutions.  In applying the earnings test set forth in section 431:6-101 to any such institution, whether or not in legal existence during the whole of such five years next preceding the date of investment by the insurer, which has at any time during the five-year period acquired substantially all of the assets of any other institution or institutions by purchase, merger, consolidation, or otherwise, or has been reorganized pursuant to the bankruptcy law, the earnings of the predecessor or constituent institutions, or of the institution so reorganized, available for the interest and dividends for such portion of the five-year period as may have preceded the acquisition, or the reorganization, may be included in the earnings of the issuing, assuming, or guaranteeing institution for such portion of such period as may be determined in accordance with adjusted or pro forma consolidated earnings statements covering such portion of such period and giving effect to all stock or shares outstanding, and all fixed charges existing, immediately after the acquisition, or the reorganization. [L 1987, c 347, pt of §2]

 

     §431:6-103  Eligible investments; scope.  (a)  This article shall apply to domestic insurers only.  Insurers shall invest in or loan their funds on the security of, and shall hold as assets, only eligible investments as prescribed in this article.

     (b)  The eligibility of an investment shall be determined as of the date of its making or acquisition.

     (c)  Any limitation based upon the amount of the insurer's assets or surplus shall relate to assets or surplus as shown by the insurer's annual statement as of December 31 preceding date of investment. [L 1987, c 347, pt of §2; am L 2008, c 142, §2]

 

     §431:6-104  General qualifications.  (a)  Notwithstanding the provisions of section 431:6-321, no security or other investment shall be eligible for purchase or acquisition under this article unless it is interest bearing or interest accruing or income paying, is not then in default in any respect, and the insurer is entitled to receive for its exclusive account and benefit, the interest or income accruing thereon; except, that it may acquire real property and non-dividend paying securities as provided in this article.  An insurer's aggregate investment in non-dividend paying securities shall not exceed the greater of twenty-five per cent of its admitted assets or fifty per cent of its surplus as regards to policyholders as defined in section 431:6-101.

     (b)  No security shall be eligible for purchase at a price above its fair value.

     (c)  No provision of this article shall prohibit the acquisition by an insurer of other or additional securities or property if received as a dividend or as a lawful distribution of assets, or if acquired pursuant to a lawful and bona fide agreement of bulk reinsurance, merger, or consolidation.  Any investments so acquired which are not otherwise eligible under this article shall be disposed of pursuant to section 431:6-403 if personal property or securities, or pursuant to section 431:6-312 if real property. [L 1987, c 347, pt of §2; am L 2008, c 142, §3]

 

     §431:6-105  General limitations.  Except as otherwise expressly limited, an insurer shall not have at any time any combination of investments in or loans upon the security of the obligations, property, and securities of any one person aggregating an amount exceeding ten per cent of the insurer's assets.  This section shall not apply to investments in, or loans upon the security of general obligations of the government of the United States or of any state of the United States, nor to investments in foreign securities pursuant to section 431:6-313(a), nor include policy loans made pursuant to section 431:6-314. [L 1987, c 347, pt of §2]

 

     §431:6-106  Record of investments.  (a)  As to each investment or loan of the funds of a domestic insurer, a written record in permanent form showing the authorization thereof shall be made and signed by an officer of the insurer or by the chairperson of the committee authorizing the investment or loan.

     (b)  Investment records which document the security transactions are to be maintained in the insurer's principal office in this State. [L 1987, c 347, pt of §2; gen ch 1993]

 

PART II.  MANDATORY PROVISIONS

 

     §431:6-201  Required investments for capital and reserves.  (a)  An insurer shall invest and keep invested its funds aggregating in amounts, if a stock insurer, not less than sixty per cent of its minimum required capital, or if a mutual or reciprocal insurer, not less than sixty per cent of its required minimum surplus, in cash or investments eligible in accordance with section 431:6-301 (public obligations), and in mortgage loans on real property, pursuant to section 431:6-306.

     (b)  In addition to the investments required by subsection (a), an insurer shall maintain an amount aggregating not less than one hundred per cent of its reserves required by this code, in the following assets:  cash, premiums in course of collection, reinsurance recoverable on paid losses, or investments eligible in accordance with this article, including interest and dividends receivable on the investments. [L 1987, c 347, pt of §2 as superseded by c 348, §10; am L 2008, c 142, §4]

 

PART III.  PERMITTED INVESTMENTS

 

     §431:6-301  Public obligations.  (a)  An insurer may invest any of its funds in bonds or other evidences of debt, not in default as to principal or interest, which are valid and legally authorized obligations issued, assumed, or guaranteed by the United States or by any state thereof or by any possession of the United States or by any county, city, town, village, municipality, or district therein or by any political subdivision thereof or by any civil division or public instrumentality of one or more of the foregoing, if, by statutory or other legal requirements applicable thereto, such obligations are payable, as to both principal and interest:

     (1)  From taxes levied or required to be levied upon all taxable property or all taxable income within the jurisdiction of the governmental unit, or

     (2)  From adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment, but not including any obligation payable solely out of special assessments on properties benefited by local improvements unless adequate security is evidenced by the ratio of assessment to the value of the property or the obligation is additionally secured by an adequate guaranty fund required by law.

     (b)  In addition to the foregoing, an insurer may invest any of its funds in obligations issued or guaranteed by the Inter-American Development Bank, the International Bank for Reconstruction and Development, the Asian Development Bank or the African Development Bank. [L 1987, c 347, pt of §2; am L 1989, c 195, §16]

 

     §431:6-302  Corporate obligations.  An insurer may invest any of its funds in obligations other than those eligible for investment under section 431:6-306 if they are:

     (1)  Issued, assumed, or guaranteed by any solvent institution created or existing under the laws of the United States or of any state, or district thereof; and

     (2)  Filed with the SVO or are considered "filing exempt" by the Purposes and Procedures Manual of the SVO, or its successor publication. [L 1987, c 347, pt of §2; am L 2008, c 142, §5]

 

     §431:6-303  Preferred or guaranteed stocks or shares.  An insurer may invest any of its funds, in an aggregate amount not exceeding fifteen per cent of its assets, in preferred or guaranteed stocks or shares, other than common stocks, of solvent institutions existing under the laws of the United States or of any state, district, or territory thereof, if all of the prior obligations and prior preferred stocks, if any, of the institution at the date of acquisition by the insurer are:

     (1)  Eligible as investments under this article; and

     (2)  Filed with the SVO or are considered "filing exempt" by the Purposes and Procedures Manual of the SVO, or its successor publication. [L 1987, c 347, pt of §2; am L 2008, c 142, §6]

 

     §431:6-304  Trustees or receivers obligations.  An insurer may invest any of its funds, in an aggregate amount not exceeding two per cent of its assets, in certificates, notes or other obligations issued by trustees or receivers of institutions existing under the laws of the United States or of any state, district or territory thereof, which, or the assets of which, are being administered under the direction of any court having jurisdiction, if the obligation is adequately secured as to principal and interest. [L 1987, c 347, pt of §2]

 

     §431:6-305  Equipment trust obligations.  An insurer may invest any of its funds, in an aggregate amount not exceeding ten per cent of its assets, in equipment trust obligations or certificates which are adequately secured, or in other adequately secured instruments evidencing an interest in transportation equipment wholly or in part within the United States and the right to receive determined portions of rental, purchase, or other fixed obligatory payments for the use or purchase of such transportation equipment. [L 1987, c 347, pt of §2]

 

     §431:6-306  Mortgage loans and contracts.  An insurer may invest any of its funds in:

     (1)  (A)  Bonds or evidences of debt which are secured by first mortgages or deeds of trust on real property located in the United States or Guam which meet either of the following requirements:

               (i)  Improved, unencumbered real property; or

              (ii)  Unimproved, unencumbered real property, only where the real property is to be improved, and the bond or evidence of debt is secured by a first mortgage or deed of trust on the real property and the improvement to be made thereon.

          (B)  Security interests in connection therewith pursuant to section 431:6-310;

          (C)  The seller's equity in an agreement of sale in any such property, covering the entire balance due on a bona fide sale of such property, in an amount not to exceed $15,000 or the amount permissible under section 431:6-105, whichever is greater, in any one such agreement of sale, nor in any amount in excess of the following percentages of the actual sale price or fair value of the property, whichever is the smaller:

               (i)  If a dwelling primarily designed for single family occupancy and occupied by the purchaser under such contract, seventy-five per cent,

              (ii)  In all other cases, sixty-six and two-thirds per cent.

     (2)  Purchase money mortgages or like securities received by it upon the sale or exchange of real property acquired pursuant to section 431:6-311.

     (3)  Evidences of debt secured by mortgage or trust deed guaranteed or insured by an agency of the United States.

     (4)  Evidences of debt secured by first mortgages or deeds of trust upon leasehold estates, running for a term of not less than five years beyond the maturity of the loan as made or extended, in improved real property, otherwise unencumbered, and if the mortgagee is entitled to be subrogated to all the rights under the leasehold. [L 1987, c 347, pt of §2 as superseded by c 348, §11; am L 1988, c 330, §4]

 

     §431:6-307  Mortgage loan limited by property value.  (a)  No mortgage loan or investment therein upon any one parcel of real property shall exceed in amount at the time of acquisition:

     (1)  Eighty per cent of the fair value of the property if the property is a dwelling house primarily intended for occupancy by one family, and the loan is required to be amortized within not more than thirty years by payment of installments thereon, at regular intervals not less frequent than every three months; or

     (2)  Seventy-five per cent of the fair value of the property in all other cases.

     (b)  The extent to which a mortgage loan made under section 431:6-306(3) is guaranteed or insured by an agency of the United States, may be deducted before application of the limitations in subsection (a). [L 1987, c 347, pt of §2]

 

     §431:6-308  Encumbrance defined.  (a)  Real property shall not be deemed to be encumbered within the meaning of section 431:6-306 by reason of the existence of instruments reserving mineral, oil, timber, or similar rights, rights of way, sewer rights, rights in walls, nor by reason of any liens for taxes or assessments not yet due, or on account of liens not delinquent for community recreational facilities or for the maintenance of community facilities, nor by reason of building restrictions or other restrictive covenants common to the community in which the property is located, nor by liens for service and maintenance of water rights where not delinquent, nor when such real property is subject to lease under which rents or profits are reserved to the owner if in any event the security for the loan or investment is a first lien upon the real property.

     (b)  If under any of the exceptions set forth in subsection (a) there is any sum owing but not due or delinquent, the total amount of such sum shall be deducted from the amount which otherwise might be loaned on the property.

     The value of any mineral, oil, timber, or similar right reserved shall not be included in the fair value of the property. [L 1987, c 347, pt of §2]

 

     §431:6-309  Appraisal; insurance; limit.  (a)  The fair value of property shall be determined by appraisal by a competent appraiser at the time of the making or acquiring of a mortgage loan or investing in a contract for the deed thereon.

     (b)  Buildings and other improvements located on the mortgaged premises shall be kept insured for the benefit of the mortgagee against loss or damage from fire in an amount not less than the unpaid balance of the obligation, or the insurable value of the property, whichever is the lesser.

     (c)  An insurer shall not make or acquire a loan or loans upon the security of any one parcel of real property in an aggregate amount in excess of $250,000 or more than the amount permissible under section 431:6-105, whichever is the greater. [L 1987, c 347, pt of §2 as superseded by c 348, §12]

 

     §431:6-310  Security agreements.  (a)  In connection with a mortgage loan on the security of real property designed and used primarily for residential purposes only acquired pursuant to section 431:6-306, an insurer may loan or invest an amount not exceeding twenty per cent of the amount loaned or invested in the real property mortgage, on the security of a security agreement for a term of not more than five years representing a first and prior lien, except for taxes not then delinquent, on personal property constituting durable equipment owned by the mortgagor and kept and used in the mortgaged premises.

     (b)  The term durable equipment shall include only mechanical refrigerators, mechanical laundering machines, heating and cooking stoves and ranges, mechanical kitchen aids, vacuum cleaners, and fire extinguishing devices; and in addition, in the case of apartment houses and hotels, room furniture and furnishings.

     (c)  Prior to acquisition of a security agreement, items of property to be included shall be separately appraised by a competent appraiser and the fair market value thereof determined.  No such security agreement shall exceed in amount the same ratio of loan to the value of the property as is applicable to the companion mortgage loan on the real property. [L 1987, c 347, pt of §2; am L 2004, c 122, §19]

 

     §431:6-311  Real property owned.  (a)  An insurer other than a life insurer may own and invest, or have invested in its home office and branch office buildings, any of its funds in an aggregate amount not to exceed twenty per cent of its admitted assets unless approved by the commissioner, or if a mutual or reciprocal insurer, not to exceed twenty per cent of its admitted assets nor an amount as would reduce its surplus, exclusive of such investment, below the minimum required surplus for the class, or combination of classes, of insurance authorized, unless approved by the commissioner.  A life insurer may own and invest, or have invested in its home office building and branch office buildings, any of its funds in an aggregate amount not to exceed twenty per cent of its admitted assets, or fifty per cent of the excess of its admitted assets over its liabilities, other than capital stock if a stock life insurer, whichever is the lesser amount.  The home office or branch office buildings may be constructed upon leasehold estates.  However, if a life insurer has been licensed less than five years, a prior approval from the commissioner shall be required before investment may be made in home office or branch office buildings.

     (b)  An insurer may invest any of its funds, in an aggregate amount not exceeding ten per cent of its assets, in real property acquired for the production of income under the following terms and conditions:

     (1)  The investment in any single parcel of real estate shall not exceed five per cent of its admitted assets;

     (2)  The investment shall produce sufficient income to amortize any loan secured by a mortgage on the real property;

     (3)  If any improvements exist on or are to be constructed on the real property for lease to lessees, the improvements shall remain on the property during the period of the lease, with provisions when the improvements are put upon the property at the cost of the lessee that at the termination of the lease the ownership of the improvements, free of liens, shall vest in the owner of the real estate; and

     (4)  During the term of the lease the tenant shall pay all taxes and assessments levied on or against the real estate, including improvements, shall keep and maintain the improvements in good repair, and shall provide and maintain for the benefit of the lessor fire insurance on the improvements in an amount at least equal to the insurable value of the improvements, or at least equal to the amount invested by the lessor in the real estate, whichever is less.

     (c)  An insurer may invest any of its funds, in an aggregate amount not exceeding thirty per cent of its assets in real property including the realty set forth in subsections (a) and (b), for realty acquired for the purpose of leasing the same to any person for a period of not less than twenty years, or in real property already leased for an unexpired period of not less than fifteen years of an original period of not less than twenty years, under the following terms and conditions:

     (1)  The lessee, at the lessee's own cost, shall erect, or have already erected, thereon free of liens a building or other improvements costing an amount at least equal to the value of the real estate exclusive of improvements; but if the lease be entered into simultaneously with the purchase of the real estate, the lessor may agree to erect the improvements on the real estate;

     (2)  The improvements shall remain on the property during the period of the lease, with provisions when the improvements are put upon the property at the cost of the lessee that at the termination of the lease the ownership of the improvements, free of liens, shall vest in the owner of the real estate;

     (3)  The lessee, during the term of the lease, or the unexpired period of the lease if the property is bought subject to the lease, shall pay to the owner of the real estate rent in an amount as will enable the owner to amortize the investment at or before the normal termination of the lease, or at or before the end of fifty years should the lease, or the unexpired period of the lease, be for a longer period than fifty years; and

     (4)  During the term of the lease the tenant shall pay all taxes and assessments levied on or against the real estate, including improvements, shall keep and maintain the improvements in good repair, and shall provide and maintain for the benefit of the lessor fire insurance on the improvements in an amount at least equal to the insurable value of the improvements, or at least equal to the amount invested by the lessor in the real estate, whichever is less.

     (d)  Real property acquired pursuant to subsection (c) shall not be treated as an investment unless and until the required improvements have been constructed and the lease agreement entered into, and the amount to which the real property shall be treated as an investment shall not exceed the amount actually invested reduced each year in the amounts as will suffice to amortize completely the investment at the normal termination of the lease or at the end of fifty years should the term of the lease, or the unexpired period of the lease, be for a longer period than fifty years.

     (e)  An insurer may own real property acquired in satisfaction or on account of loans, mortgages, liens, judgments, or other debts previously owing to the insurer in the course of its business, and may invest or have invested in an aggregate amount not exceeding three per cent of its assets in other real property, and in the repair, alteration, furnishing, or improvement thereof, as follows only:

     (1)  Other real property requisite for its accommodation in the convenient transaction of its business if approved by the commissioner;

     (2)  Real property acquired by gift or devise;

     (3)  Real property acquired in exchange for real property owned by it.  If necessary in order to consummate an exchange, the insurer may put up cash in an amount not to exceed twenty per cent of the fair value of its real property to be so exchanged, in addition to the property;

     (4)  Real property acquired through a lawful merger or consolidation with it of another insurer and not required for the purposes specified in subsection (a) and subsection (c)(1); or

     (5)  Upon approval of the commissioner, in real property and equipment incident to real property, requisite or desirable for the protection or enhancement of the value of other real property owned by the insurer. [L 1987, c 347, pt of §2 as superseded by c 348, §13; am L 1996, c 65, §1]

 

     §431:6-312  Time limit for disposal.  (a)  Real property acquired by an insurer pursuant to section 431:6-311(e)(1) shall be disposed of within three years after it has ceased being necessary for the use of the insurer in the transaction of its business.  Real property acquired by an insurer pursuant to such loans, mortgages, liens, judgments, or other debts, or pursuant to paragraphs (2), (3), (4), and (5) of section 431:6-311(e) shall be disposed of within three years after date of acquisition.  The time for any such disposal shall be extended by the commissioner for a definite additional period or periods upon application and reasonable showing that forced sale of the property would be against the best interests of the insurer.

     (b)  Any such real property held by the insurer without the commissioner's consent beyond the time permitted for its disposal shall not be carried or allowed as an asset. [L 1987, c 347, pt of §2; am L 2004, c 122, §20]

 

     §431:6-313  Foreign securities.  (a)  An insurer authorized to transact insurance in a foreign country may invest any of its funds, in an aggregate amount not exceeding its deposit and reserve obligations incurred in such country, in securities of or in such country possessing characteristics and of a quality similar to those required pursuant to this article for investments in the United States.

     (b)  An insurer may invest any of its funds, in an aggregate amount not exceeding fifteen per cent of its assets, in addition to any amount permitted pursuant to subsection (a), in obligations of the governments of the Dominion of Canada, or of Canadian provinces, or municipalities, and in obligations of Canadian corporations, which have not been in default during the five years next preceding date of acquisition, and which are otherwise of equal quality to like United States public or corporate securities as prescribed in this article.

     (c)  In addition to investments permitted under subsections (a) and (b), an insurer may acquire foreign investments, including American Depository Receipts, or engage in investment practices with persons of or in foreign jurisdictions of substantially the same types as those permitted under this article; provided that:

     (1)  The aggregate amount of foreign investments then held by the insurer under this subsection shall not exceed twenty per cent of its admitted assets; and

     (2)  The aggregate amount of foreign investments then held by the insurer under this subsection in a single foreign jurisdiction shall not exceed ten per cent of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or three per cent of its admitted assets as to any other foreign jurisdiction.

     (d)  Investments acquired under this section shall be aggregated with investments of the same types made under all other sections of this article, and in a similar manner, for the purposes of determining compliance with limitations, if any, contained in the other sections. [L 1987, c 347, pt of §2; am L 2008, c 142, §7]

 

     §431:6-314  Policy loans.  An insurer may loan upon a life insurance policy, as collateral security, any sum not exceeding the cash surrender value of the policy. [L 1987, c 347, pt of §2]

 

     §431:6-315  Banks, savings and loan associations, credit unions, and financial services loan companies.  (a)  An insurer may invest or deposit any of its funds in checking or savings accounts, under separate certificates of deposit, or in any other form in solvent banks or trust companies.

     (b)  An insurer may invest any of its funds in shares or savings accounts in solvent savings and loan associations that are insured by the Federal Deposit Insurance Corporation.

     (c)  An insurer may deposit any of its funds in shares or share draft accounts in solvent state chartered credit unions or federally chartered credit unions.

     (d)  An insurer may invest or deposit any of its funds in savings accounts, in certificates of deposit, or in any other form in solvent financial services loan companies that are insured by the Federal Deposit Insurance Corporation. [L 1987, c 347, pt of §2; am L 1993, c 107, §2]

 

     §431:6-316  Insurance stocks.  (a)  An insurer other than a life insurer may invest a portion of its surplus funds in an aggregate amount not exceeding fifty per cent of its surplus over its capital stock and other liabilities, or thirty-five per cent of its capital funds, whichever is greater, in the stocks of other insurers organized and existing under the laws of the states of the United States.  Indirect or proportionate interests in insurance stocks held by an insurer through any intermediate subsidiary or subsidiaries shall be included in applying the limitations provided in subsections (a), (b) and (c).

     (b)  A life insurer may invest in such insurance stocks in an aggregate amount not exceeding the smaller of the following amounts:  Five per cent of its assets or twenty-five per cent of its surplus over its capital stock and other liabilities, or of surplus over its required minimum surplus if a mutual life insurer.

     (c)  No such insurance stock shall be eligible as an investment unless it meets the qualifications for stocks of other corporations as set forth in section 431:6-317.

     (d)  The limitations on investment in insurance stocks set forth in this article shall not apply to stocks acquired under a plan for merger of the insurers which has been approved by the commissioner or to shares received as stock dividends upon shares already owned. [L 1987, c 347, pt of §2]

 

     §431:6-317  Common stocks.  (a)  To meet the requirements under section 431:6-201, an insurer may invest any of its funds in common shares of stock that are filed with the SVO or are considered "filing exempt" by the Purposes and Procedures Manual of the SVO, or its successor publication; provided that an insurer's amount of investment in common stocks and in non-dividend paying stocks made pursuant to this section and in common trust funds, mutual funds, and exchange traded funds made pursuant to section 431:6-322 shall not exceed the greater of twenty-five per cent of its admitted assets or one hundred per cent of its surplus as regards to policyholders as defined in section 431:6-101.

     (b)  An insurer may invest any of its funds in common shares of stock in solvent United States corporations after satisfying the requirements under section 431:6-201.

     (c)  An insurer's aggregate amount of investment in non-dividend paying stocks shall be subject to the limitations in section 431:6-104. [L 1987, c 347, pt of §2; am L 2008, c 142, §8; am L 2009, c 77, §4]

 

 

     §431:6-318  Collateral loans.  An insurer is permitted to loan its funds upon the pledge of securities or evidences of debt eligible for investment under this article.  As at date made, no such loan shall exceed in amount ninety per cent of the fair value of the collateral pledged, except that loans upon pledge of United States government bonds may be equal to the fair value of the bonds pledged and that loans on life insurance policies may equal the cash surrender value of the policy as provided in section 431:6-314.  The amount so loaned shall be included in the maximum percentage of funds permitted to be invested in the kinds of securities for evidences of debt pledged or permitted by section 431:6-105. [L 1987, c 347, pt of §2]

 

     §431:6-319  Miscellaneous investments.  (a)  An insurer may loan or invest its funds in an aggregate amount not exceeding the lesser of the following sums:  Five per cent of its assets or fifty per cent of its surplus over its capital and other liabilities, or, if a mutual or reciprocal insurer, fifty per cent of its surplus over the minimum required surplus, in kinds of loans or investments not otherwise specifically made eligible for investment and not specifically prohibited or made ineligible by this or other provisions of this article.

     (b)  No such loan or investment shall be represented by:

     (1)  Any item described in section 431:5-202;

     (2)  Any loan or investment of a kind specifically made eligible under any other provision of this code; or

     (3)  Any loan, investment, or assets theretofore acquired or held by the insurer under any other category of loans or investments.

     (c)  No one investment or loan shall exceed the amount specified in subsection (a) or one per cent of insurer's assets, whichever is the lesser.

     (d)  The insurer shall keep a separate record of all investments acquired under this section. [L 1987, c 347, pt of §2]

 

     §431:6-320  Special consent investments.  Upon approval of the commissioner and in compliance with section 431:6-104, an insurer may make any investment or kind of investment or exchange of assets otherwise prohibited or not eligible under this article.  The commissioner's order of approval, if granted, shall specify whether any part of the investment may be credited to required minimum capital or surplus investment, or to investment of reserves. [L 1987, c 347, pt of §2]

 

     §431:6-321  Hedging transactions.  (a)  A domestic insurer may effect or maintain bona fide hedging transactions pertaining to securities otherwise eligible for investment under this part including, but not limited to:

     (1)  Financial futures contracts, warrants, options, calls, and other rights to purchase, and

     (2)  Puts and other rights to require another person to purchase the securities.

     (b)  The contracts, options, calls, puts, and rights shall be traded on a commodity exchange regulated under the Commodity Exchange Act, as amended, on a securities exchange, or on an over-the-counter market regulated under the Securities Exchange Act of 1934, as amended.

     (c)  For purposes of this section, a bona fide hedging transaction means a purchase or sale of a contract, warrant, option, call, put, or right entered into for the purpose of:

     (1)  Minimizing interest rate risks in respect to interest obligations on insurance policies or contracts supported by securities held by the insurer, or

     (2)  Offsetting changes in the market values or yield rates of securities held by the insurer. [L 1987, c 349, §3]

 

     §431:6-322  Common trust funds; mutual funds; and exchange traded funds.  (a)  For purposes of this section:

     "Common trust funds" means a fund maintained by a bank exclusively for the collective investment and reinvestment of moneys contributed by the bank in its capacity as a trustee, executor, administrator, guardian, or custodian of accounts as defined in section 584 of the Internal Revenue Code of 1986, as amended.

     "Exchange traded fund" means a security that tracks an index, commodity, or basket of assets similar to an index fund, is registered with the federal Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and is traded on a public exchange.

     "Mutual funds" means an investment company that is registered with the federal Securities and Exchange Commission under the Investment Company Act of 1940 (15 United States Code section 80a-1, et seq.), as amended.

     (b)  To meet the requirements under section 431:6-201, an insurer may invest in common trust funds, mutual funds, and exchange traded funds; provided that an insurer's amount of investment made pursuant to this section and in common stocks made pursuant to section 431:6-317(a) shall not exceed the greater of twenty-five per cent of its admitted assets or one hundred per cent of its surplus as regards to policyholders as defined in section 431:6-101.  This limitation shall not apply to investments approved on the "Mutual Funds List" from the Purposes and Procedures Manual of the SVO, or its successor publication.

     (c)  An insurer may invest any of its funds in common trust funds, mutual funds, and exchange traded funds after satisfying the requirements of section 431:6-201. [L 1987, c 349, §4; am L 2008, c 142, §9; am L 2009, c 11, §5 and c 77, §5]

 

 

     §431:6-323  Separate accounts.  (a)  A life insurer, after adoption of a resolution by its board of directors and certification thereof to the commissioner, may allocate to one or more separate accounts, in accordance with the terms of a written agreement or a contract on a variable basis, amounts which are paid to the insurer, in connection with a pension, retirement or profit sharing plan, or in connection with a contract on a variable basis, whether on an individual or group basis, and which amounts are to be applied to purchase retirement benefits in fixed or in variable dollar amounts, or both, or to provide benefits in accordance with a contract on a variable basis.

     The income, if any, and gains or losses realized or unrealized on each account may be credited to or charged against the amount allocated to the account in accordance with the agreement, without regard to the other income, gains or losses of the insurer.  The commissioner may prescribe reasonable limitations on charges against and permissible deductions from the investment experience credited to life insurance contracts on a variable basis.  Notwithstanding any other provision in the insurer's articles of incorporation or in this code, the amounts allocated to the accounts and accumulations thereon may be invested and reinvested in any class of loans and investments specified in the agreement, or, with respect to life insurance contracts on a variable basis, as prescribed by the commissioner, and the loans and investments shall not be considered in applying any limitation in this article.  The commissioner, with respect to separate accounts for life insurance on a variable basis, may establish reasonable standards for procedures to be used in changing investment policy and provisions to safeguard the rights of insured persons and beneficiaries.

     (b)  Contract on a variable basis means a contract issued by an insurer providing for the dollar amount of benefits or other contractual payments or values thereunder to vary so as to reflect investment results of a segregated portfolio of investments or of a designated account in which amounts received in connection with the contract have been placed and other contracts as may be approved by the commissioner.

     (c)  Notwithstanding any other provision of law, a life insurer, if necessary to comply with the Investment Company Act of 1940, with respect to any account or any portion thereof, may:

     (1)  Exercise the voting rights of the stock or shares or interest in accordance with instructions from the persons having the beneficial interests in the account ratably according to their respective interests in the account, or

     (2)  Establish a committee for the account, the members of which may be directors or officers or other employees of the insurer, persons having no relationship to the insurer, or any combination thereof, who may be elected to membership by the vote of the persons having the beneficial interests in the account ratably according to their respective interests in the account.  The committee alone, in conjunction with others, or by delegation to the insurer or any other person, as investment manager or investment adviser, may authorize purchases and sales of investments for the account if, as long as the life insurer or any subsidiary or affiliate of the life insurer is the investment manager or investment adviser of the account, the investments of the account are eligible under this section.  If compliance with the Investment Company Act of 1940 involves only a portion of the account, the insurer may establish a committee for only that portion, and its members may be elected by the vote of the persons having the beneficial interests in the portion.  A committee for only a portion of the account may be given the further power to require the subdivision of the account into two accounts so that the portion of the account with respect to which the committee is acting shall constitute a separate account.  If the committee so requires, the insurer shall segregate, from the account being so subdivided, a portion of each asset held with respect to the reserve liabilities of the account.  That portion shall be in the same proportion to the total of the asset as the reserve liability for the portion of the account with respect to which the committee is acting bears to the total reserve liability of the account; and notwithstanding any other provision of law, the assets so segregated shall be transferred to a separate account with respect to which the committee shall act.

     (d)  The investments and liabilities of the account shall at all times be clearly identifiable and distinguishable from the other investments and liabilities of the insurer.  A sale, transfer, or exchange of investments shall not be made between any of the separate accounts or between any other investment account of the company and one or more of the separate accounts, except for the purpose of:

     (1)  Conducting the business of the account in accordance with subsections (a) and (c); or

     (2)  Making adjustments necessitated by the contract for mortality experience adjustment, and then only if the transfers are made by a transfer of cash or by a transfer of securities having a valuation that can readily be determined in the marketplace.  The commissioner may require for domestic life insurers that a transfer of cash or investments from a separate account or accounts to the company be approved in advance of the transfer.  The commissioner may prescribe reasonable limitations on charges against and permissible deductions from separate accounts for life insurance contracts on a variable basis.

     (e)  As used in this section, Investment Company Act of 1940 means the Act of Congress approved August 22, 1940, entitled Investment Company Act of 1940 as amended from time to time, or any similar statute enacted in substitution therefor.

     (f)  The commissioner may adopt rules pursuant to chapter 91. [L 1987, c 349, §5; am L 2004, c 122, §21]

 

     §431:6-324  Subsidiaries.  (a)  Any domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries subject to the limitations of this section.

     (b)  In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under all other sections of this article, a domestic insurer also may do one or more of the following:

     (1)  Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts that do not exceed the lesser of ten per cent of the insurer's assets or fifty per cent of the insurer's surplus as regards policyholders.  However, after the investments, the insurer's surplus as regards policyholders shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.  In calculating the amount of the investments, investments in domestic or foreign insurance subsidiaries shall be excluded, and there shall be included:

          (A)  Total net moneys or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary, whether represented by the purchase of capital stock or issuance of other securities; and

          (B)  All amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus, of a subsidiary subsequent to its acquisition or formation;

     (2)  If the insurer's total liabilities, as calculated for  National Association of Insurance Commissioners' annual statement purposes, are less than ten per cent of assets, invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries.  However, after the investment the insurer's surplus as regards policyholders, considering the investment as if it were a disallowed asset, shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs;

     (3)  Invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries; provided that each subsidiary agrees to limit its investments in any asset so that the investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in paragraph (1) or in this article applicable to the insurer.  For the purpose of this subsection, the total investment of the insurer shall include:

          (A)  Any direct investment by the insurer in an asset; and

          (B)  The insurer's proportionate share of any investment of an asset by any subsidiary of the insurer, which shall be calculated by multiplying the amount of the subsidiary's investment by the percentage of the insurer's ownership of the subsidiary;

     (4)  With the approval of the commissioner, invest any amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries; provided that after the investment, the insurer's surplus as regards policyholders shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs; or

     (5)  Invest any amount in the common stock, preferred stock, debt obligations, or other securities of any subsidiary exclusively engaged in holding title to, or holding title to and managing or developing real or personal property, if after considering as a disallowed asset so much of the investment as is represented by subsidiary assets, which if held directly by the insurer would be considered as a disallowed asset, the insurer's surplus as regards policyholders shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

     (c)  Investments in common stock, preferred stock, debt obligations, or other securities of subsidiaries made pursuant to subsection (b) shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in this article applicable to the investment of insurers.

     (d)  Whether any investment pursuant to subsection (b) meets the applicable requirements is to be determined immediately after the investment is made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the date they were made.

     (e)  If an insurer ceases to control a subsidiary, it shall dispose of any investment therein made pursuant to this section within three years from the time of the cessation of control or within such further times as the commissioner may prescribe, unless at any time after the investment has been made, the investment has met the requirements for investment under any other section of this article, and the insurer has notified the commissioner thereof.

     (f)  In addition to the above subsection, any insurer acquiring or disposing of any subsidiary, must also comply with article 11 of this code. [L 1987, c 349, §6; am L 1993, c 205, §10; am L 2004, c 122, §22]

 

PART IV.  PROHIBITED INVESTMENTS AND LIMITATIONS

 

     §431:6-401  Prohibited investments.  In addition to investments excluded under other provisions of this article, an insurer shall not, except with the commissioner's approval in advance, invest in or loan its funds upon the security of, or hold:

     (1)  Issued shares of its own capital stock, except for the purpose of mutualization in accordance with section 431:4-502.

     (2)  Any investment or loan ineligible under section 431:6-105.

     (3)  Securities issued by an insolvent corporation.

     (4)  Any investment or security which is found by the commissioner to be designed to evade any prohibition of this article. [L 1987, c 347, pt of §2]

 

     §431:6-402  Securities underwriting; agreements to withhold or to repurchase.  No insurer shall:

     (1)  Participate in the underwriting of the marketing of securities in advance of their issuance or enter into any transaction for such underwriting for the account of such insurer jointly with any other person; or

     (2)  Enter into any agreement to withhold from sale any of its property, or to repurchase any property sold by it. [L 1987, c 347, pt of §2]

 

     §431:6-403  Disposal of ineligible property and securities.  (a)  Any personal property or securities lawfully acquired by an insurer, which it could not otherwise have invested in or loaned its funds upon at the time of the acquisition, shall be disposed of by the insurer within three years from date of acquisition, unless within such period the security has attained the standard for eligibility.  The commissioner, upon application and reasonable showing that forced sale of any such property or security would be against the best interests of the insurer, may extend the disposal period for an additional reasonable time.

     (b)  While any such property or security remains so ineligible, it shall not be allowed as an asset of the insurer.

     (c)  Any ineligible property or security acquired contrary to this article by an insurer shall be disposed of forthwith; for failure so to do within sixty days after order of the commissioner requiring such disposal, the commissioner may revoke or suspend the insurer's certificate of authority.

     (d)  For the purposes of subsection (c), an investment otherwise eligible shall not be deemed ineligible for the reason that it is in excess of the amount permitted under this article to be invested in the category of investments to which it belongs; any such excess investment shall be disposed of within the time prescribed in subsection (a). [L 1987, c 347, pt of §2]

 

     §431:6-404  Authorization of investments.  No investment, loan, sale, or exchange, except a loan upon a life insurance policy, shall be made by any domestic insurer unless authorized or approved by its board of directors or by a committee charged by the board of directors, or the bylaws with the duty of making such investment, loan, sale, or exchange.  The minutes of any such committee shall be recorded and reports shall be submitted to the board of directors for approval or disapproval. [L 1987, c 347, pt of §2]

 

PART V.  INVESTMENT OF FOREIGN AND ALIEN INSURERS

 

     §431:6-501  Investments of foreign, alien insurers.  The investments of a foreign or alien insurer shall be as permitted by the laws of its domicile, but shall be of a quality substantially as high as those required by this article for similar funds of like domestic insurers. [L 1987, c 347, pt of §2]

 

[PART VI.  INVESTMENT POOLS]

 

     §431:6-601  Insurer investment pools.  (a)  For purposes of this section:

     "Business entity" means a corporation, limited liability company, association, partnership, joint stock company, joint venture, mutual fund trust, or other similar form of business organization, whether organized for-profit or not-for-profit.

     "Class one money market mutual funds" means a mutual fund that at all times qualifies for investment using the bond class one reserve factor under the Purposes and Procedures of the SVO or any successor publication.

     "Government money market mutual fund" means a money market mutual fund that at all times:

     (1)  Invests only in obligations issued, guaranteed, or insured by the government of the United States or collateralized repurchase agreements composed of these obligations; and

     (2)  Qualifies for investment without a reserve under the Purposes and Procedures of the SVO or any successor publication.

     "Money market mutual fund" means a mutual fund that meets the conditions of 17 Code of Federal Regulations part 270.2a-7, under the Investment Company Act of 1940 (15 United States Code section 80a-1 et seq.), as amended, or renumbered.

     "Obligation" means a bond, note, debenture, trust certificate, including equipment certificate, production payment, negotiable bank certificate of deposit, bankers' acceptance, credit tenant loan, loan secured by financing net leases and other evidence of indebtedness for the payment of money (or participation, certificates, or other evidence of an interest in any of the foregoing), whether constituting a general obligation of the issuer or payable only out of certain revenues or certain funds pledged or otherwise dedicated for payment.

     "Qualified bank" means a national bank, state bank, or trust company that at all times is no less than adequately capitalized as determined by the standards adopted by the United States banking regulators and that is either regulated by state banking laws or is a member of the Federal Reserve System.

     "Repurchase transaction" means a transaction in which an insurer purchases securities from a business entity that is obligated to repurchase the purchased securities or equivalent securities from the insurer at a specified price, either within a specified period of time or upon demand.

     "Reverse repurchase transaction" means a transaction in which an insurer sells securities to a business entity and is obligated to repurchase the sold securities or equivalent securities from the business entity at a specified price, either within a specified period of time or upon demand.

     "Securities lending transaction" means a transaction in which securities are loaned by an insurer to a business entity that is obligated to return the loans, securities, or equivalent securities to the insurer, either within a specified period of time or upon demand.

     (b)  An insurer may acquire investments in investment pools that:

     (1)  Invest only in:

          (A)  Obligations that are rated 1 or 2 by the SVO or have an equivalent of an SVO 1 or 2 rating (or, in the absence of a 1 or 2 rating or equivalent rating, the issuer has outstanding obligations with an SVO 1 or 2 or equivalent rating) by a nationally-recognized statistical rating organization recognized by the SVO and have:

               (i)  A remaining maturity of three hundred ninety-seven days or less or a put that entitles the holder to receive the principal amount of the obligation which put may be exercised through maturity at specified intervals not exceeding three hundred ninety-seven days; or

              (ii)  A remaining maturity of three years or less and a floating interest rate that resets no less frequently than quarterly on the basis of a current short-term index (federal funds, prime rate, treasury bills, London InterBank Offered Rate or commercial paper) and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;

          (B)  Government money market mutual funds or class one money market mutual funds; or

          (C)  Securities lending, repurchase, and reverse repurchase transactions that meet all the requirements of section 431:6-318; or

     (2)  Invest only in investments which an insurer may acquire under this article, if the insurer's proportionate interest in the amount invested in these investments does not exceed the applicable limits of this article.

     (c)  For an investment in an investment pool to be qualified under this article, the investment pool shall not:

     (1)  Acquire securities issued, assumed, guaranteed, or insured by the insurer or an affiliate of the insurer;

     (2)  Borrow or incur an indebtedness for borrowed money, except for securities lending and reverse repurchase transactions that meet the requirements of this article; or

     (3)  Permit the aggregate value of securities then loaned or sold to, purchased from or invested in any one business entity under this section to exceed ten per cent of the total assets of the investment pool.

     (d)  The limitations of sections 431:6-105 and 431:6-402 shall not apply to an insurer's investment in an investment pool; however, an insurer shall not acquire an investment in an investment pool under this section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this section:

     (1)  In any one investment pool would exceed ten per cent of its admitted assets;

     (2)  In all investment pools investing in investments permitted under subsection (b)(2) would exceed twenty-five per cent of its admitted assets; or

     (3)  In all investment pools would exceed thirty-five per cent of its admitted assets.

     (e)  For an investment in an investment pool to be qualified under this section, the manager of the investment pool shall:

     (1)  Be organized under the laws of the United States or a state and designated as the pool manager in a pooling agreement;

     (2)  Be the insurer, an affiliated insurer, or a business entity affiliated with the insurer, a qualified bank, a business entity registered under the Investment Advisers Act of 1940 (15 U.S.C. §80a-1 et seq.), as amended, or, in the case of a reciprocal insurer or interinsurance exchange, its attorney-in-fact, or in the case of a United States branch of an alien insurer, its United States manager or affiliates or subsidiaries of its United States manager;

     (3)  Compile and maintain detailed accounting records setting forth:

          (A)  The cash receipts and disbursements reflecting each participant's proportionate investment in the investment pool;

          (B)  A complete description of all underlying assets of the investment pool (including amount, interest rate, maturity date (if any), and other appropriate designations); and

          (C)  Other records that on a daily basis, allow third parties to verify each participant's investment in the investment pool; and

     (4)  Maintain the assets of the investment pool in one or more accounts, in the name of or on behalf of the investment pool, under a custody agreement with a qualified bank.  The custody agreement shall:

          (A)  State and recognize the claims and rights of each participant;

          (B)  Acknowledge that the underlying assets of the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its investments in the investment pool; and

          (C)  Contain an agreement that the underlying assets of the investment pool shall not be commingled with the general assets of the custodian qualified bank or any other person.

     (f)  The pooling agreement for each investment pool shall be in writing and shall provide that:

     (1)  An insurer and its affiliated insurers or, in the case of an investment pool investing solely in investments permitted under subsection (b)(1), the insurer and its subsidiaries, affiliates, or any pension or profit sharing plan of the insurer, its subsidiaries and affiliates or, in the case of a United States branch of an alien insurer, affiliates or subsidiaries of its United States manager, at all times, shall hold one hundred per cent of the interests in the investment pool;

     (2)  The underlying assets of the investment pool shall not be commingled with the general assets of the pool manager or any other person;

     (3)  In proportion to the aggregate amount of each pool participant's interest in the investment pool:

          (A)  Each participant owns an undivided interest in the underlying assets of the investment pool; and

          (B)  The underlying assets of the investment pool are held solely for the benefit of each participant;

     (4)  A participant, or in the event of the participant's insolvency, bankruptcy, or receivership, its trustee, receiver, or other successor-in-interest, may withdraw all or any portion of its investment from the pool under the terms of the pooling agreement;

     (5)  Withdrawals may be made on demand without penalty or other assessment on any business day, but settlement of funds shall occur within a reasonable and customary period thereafter not to exceed five business days.  Distributions under this paragraph shall be calculated in each case net of all then applicable fees and expenses of the investment pool.  The pooling agreement shall provide that the pool manager shall distribute to a participant, at the discretion of the pool manager:

          (A)  In cash, the then fair market value of the participant's pro rata share of each underlying asset of the investment pool;

          (B)  In kind, a pro rata share of each underlying asset; or

          (C)  In a combination of cash and in kind distributions, a pro rata share in each underlying asset; and

     (6)  The pool manager shall make the records of the investment pool available for inspection by the commissioner.

     (g)  The investment pool authorized under these provisions shall be a business entity.

     (h)  Transactions between the pool and its participants shall not be subject to section 431:11-106.  Investment activities of pools and transactions between pools and participants shall be reported annually in the registration statement required by section 431:11-105. [L 1997, c 233, pt of §1; am L 2004, c 122, §23; am L 2008, c 142, §10]

 

     [§431:6-602]  Securities lending, repurchase, reverse repurchase, and dollar roll; investment pools.  (a)  For purposes of this section, "business entity" includes a sole proprietorship, corporation, limited liability company, association, partnership, joint stock company, joint venture, mutual fund, trust, joint tenancy, or other similar form of business organization, whether organized for-profit or not-for-profit.

     (b)  This section is applicable to investment pools under section 431:6-601.

     (c)  An insurer may enter into securities lending, repurchase, reverse repurchase, and dollar roll transactions with business entities, subject to the requirements of this section.

     (d)  The board of directors shall adopt a written plan which shall include at least the following:

     (1)  A description of how cash received will be invested or used for general corporate purposes of the insurer;

     (2)  Operational procedures to manage interest rate risk, counterparty default risk, the conditions under which proceeds from reverse repurchase transactions may be used in the ordinary course of business and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction; and

     (3)  The extent to which the insurer may engage in these transactions.

     (e)  The insurer shall enter into a written agreement for all transactions authorized in this section other than dollar roll transactions.  The written agreement shall require that each transaction terminate no more than one year from its inception or upon the earlier demand of the insurer.  The agreement shall be with the business entity counterparty, but for securities lending transactions, the agreement may be with an agent acting on behalf of the insurer, if the agent is a qualified business entity, and if the agreement:

     (1)  Requires the agent to enter into separate agreements with each counterparty that are consistent with the requirements of this section; and

     (2)  Prohibits securities lending transactions under the agreement with the agent or its affiliates.

     (f)  Cash received in a transaction under this section shall be invested in accordance with section 431:6-601, and in a manner that recognizes the liquidity needs of the transaction or used by the insurer for its general corporate purposes.  For so long as the transaction remains outstanding, the insurer, its agent, or custodian shall maintain acceptable collateral received in a transaction under this section, either physically or through the book entry systems of the Federal Reserve, Depository Trust Company, Participants Trust Company, or other securities depositories approved by the commissioner.

     (g)  In a securities lending transaction, the insurer shall receive acceptable collateral having a market value as of the transaction date, at least equal to one hundred two per cent of the market value of the securities loaned by the insurer in the transaction as of that date.  If at any time the market value of the acceptable collateral is less than the market value of the loaned securities, the business entity counterparty shall be obligated to deliver additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral then held in connection with the transaction, at least equals one hundred two per cent of the market value of the loaned securities.

     (h)  In a reverse repurchase transaction, other than a dollar roll transaction, the insurer shall receive acceptable collateral having a market value as of the transaction date at least equal to ninety-five per cent of the market value of the securities transferred by the insurer in the transaction as of that date.  If at any time the market value of the acceptable collateral is less than ninety-five per cent of the market value of the securities so transferred, the business entity counterparty shall be obligated to deliver additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral then held in connection with the transaction, at least equals ninety-five per cent of the market value of the transferred securities.

     (i)  In a dollar roll transaction, the insurer shall receive cash in the amount at least equal to the market value of the securities transferred by the insurer in the transaction as of the transaction date.

     (j)  In a repurchase transaction, the insurer shall receive as acceptable collateral transferred securities having a market value at least equal to one hundred two per cent of the purchase price paid by the insurer for the securities.  If at any time the market value of the acceptable collateral is less than one hundred per cent of the purchase price paid by the insurer, the business entity counterparty shall be obligated to provide additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral then held in connection with the transaction, at least equals one hundred two per cent of the purchase price.  Securities acquired by an insurer in a repurchase transaction shall not be sold in a reverse repurchase transaction, loaned in a securities lending transaction, or otherwise pledged. [L 1997, c 233, pt of §1]

 

ARTICLE 7

FEES, TAXES AND DEPOSITS

 

PART I.  FEES

 

     §431:7-101  Fees.  (a)  The commissioner shall collect, in advance, the following fees:

     (1)  Certificate of authority: 

          (A). Application for a certificate of authority...$900

          (B). Issuance of certificate of authority ........$600

     (2)  Organization of domestic insurers and affiliated corporations:

          (A). Application for a solicitation permit......... $1,500

          (B). Issuance of solicitation permit........... $150

     (3)  Producer's license:

          (A). Issuance, regular license........... $50

          (B). Issuance, temporary license........... $50

     (4)  Nonresident producer's license:  Issuance..... $75

     (5)  Independent adjuster's license:  Issuance..... $75

     (6)  Public adjuster's license:  Issuance............... $75

     (7)  Claims adjuster's limited license:  Issuance..... $75

     (8)  Independent bill reviewer's license:

          Issuance............... $80

     (9)  Limited producer's license:  Issuance..... $60

    (10)  Managing general agent's license:  Issuance..... $75

    (11)  Reinsurance intermediary's license:

          Issuance............... $75

    (12)  Surplus lines broker's license:  Issuance.... $150

    (13)  Service contract provider's registration:

          Issuance............... $75

    (14)  Approved course provider certificate:

          Issuance.............. $100

    (15)  Approved continuing education course certificate:  Issuance. $30

    (16)  Vehicle protection product warrantor's registration: Issuance............... $75

    (17)  Criminal history record check; fingerprinting:  For each criminal history record check and fingerprinting check, a fee to be established by the commissioner.

    (18)  Limited line motor vehicle rental company producer's license:  Issuance.. $1,000

    (19)  Legal service plan certificate of authority:

          Issuance before July 1, 2014 $1,000

          Issuance on or after July 1, 2014............... $500

    (20)  Life settlement provider's license:

          Issuance before July 1, 2014 $150

          Issuance on or after July 1, 2014................ $75

    (21)  Life settlement broker's license:

          Issuance before July 1, 2014 $150

          Issuance on or after July 1, 2014................ $75

    (22)  Examination for license:  For each examination, a fee to be established by the commissioner.

     (b)  The fees for services of the department of commerce and consumer affairs subsequent to the issuance of a certificate of authority, license, or other certificate are as follows:

     (1)  $600 per year for all services (including extension of the certificate of authority) for an authorized insurer;

     (2)  $50 per year for all services (including extension of the license) for a regularly licensed producer;

     (3)  $75 per year for all services (including extension of the license) for a regularly licensed nonresident producer;

     (4)  $45 per year for all services (including extension of the license) for a regularly licensed independent adjuster;

     (5)  $45 per year for all services (including extension of the license) for a regularly licensed public adjuster;

     (6)  $45 per year for all services (including extension of the license) for a claims adjuster's limited license;

     (7)  $60 per year for all services (including extension of the license) for a regularly licensed independent bill reviewer;

     (8)  $45 per year for all services (including extension of the license) for a producer's limited license;

     (9)  $75 per year for all services (including extension of the license) for a regularly licensed managing general agent;

    (10)  $75 per year for all services (including extension of the license) for a regularly licensed reinsurance intermediary;

    (11)  $45 per year for all services (including extension of the license) for a licensed surplus lines broker;

    (12)  $75 per year for all services (including renewal of registration) for a service contract provider;

    (13)  $65 per year for all services (including extension of the certificate) for an approved course provider;

    (14)  $20 per year for all services (including extension of the certificate) for an approved continuing education course;

    (15)  $75 per year for all services (including renewal of registration) for a vehicle protection product warrantor;

    (16)  A fee to be established by the commissioner for each criminal history record check and fingerprinting;

    (17)  $600 per year for all services (including extension of the license) for a regularly licensed limited line motor vehicle rental company producer;

    (18)  $1,000 per year for all services provided before July 1, 2014, (including extension of the certificate) for an authorized legal service plan;

    (19)  $500 per year for all services provided on or after July 1, 2014, (including extension of the certificate) for an authorized legal service plan;

    (20)  $1,200 per year for all services (including extension of the license) for a regularly licensed life settlement provider; and

    (21)  $150 per year for all services (including extension of the license) for a regularly licensed life settlement broker.

     The services referred to in paragraphs (1) to (21) shall not include services in connection with examinations, investigations, hearings, appeals, and deposits with a depository other than the department of commerce and consumer affairs.

     (c)  The commissioner shall notify the holder of a certificate of authority issued under article 3 by written notice at least thirty days prior to the extension date of the certificate of authority, license, or other certificate.  If the fee is not paid before or on the extension date, the fee shall be increased by a penalty in the amount of fifty per cent of the fee.  The commissioner shall provide notice in writing of the delinquency of extension and the imposition of the authorized penalty.  If the fee and the penalty are not paid within thirty days immediately following the date of notice of delinquency, the commissioner may revoke, suspend, or inactivate the certificate of authority, license, or other certificate, and may not reissue, remove the suspension of, or reactivate the certificate of authority, license, or other certificate until the fee and penalty have been paid.

     (d)  Failure to pay the fee before or on the extension date for a license or other certificate issued under article 9 or 9A shall cause the automatic inactivation of the license or certificate effective as of the extension date.

     (e)  All fees and penalties shall be deposited to the credit of the compliance resolution fund. [L 1987, c 347, pt of §2; am L 1993, c 205, §11; am L 1997, c 234, §1; am L 1999, c 163, §3; am L 2000, c 221, §4 and c 288, §5; am L 2001, c 128, §1; am L 2002, c 39, §11, c 155, §12, and c 237, §2; am L 2004, c 122, §24; am L 2007, c 214, §1; am L 2008, c 177, §§2, 7; am L 2009, c 11, §18 and c 77, §§15, 20; am L 2010, c 59, §§4, 5, 7(3); am L 2011, c 81, §4 and c 186, §8; am L 2012, c 256, §2; am L 2015, c 63, §6]

 

Cross References

 

  Service contract providers, see chapter 481X.

 

 

PART II.  TAXES

 

     §431:7-201  Annual and monthly tax statements.  [Section effective until December 31, 2016.  For section effective January 1, 2017, see below.]  (a)  Each authorized insurer shall file with the commissioner annually, on or before March 1 in each year, a statement signed by a duly authorized person on its behalf, setting forth the total business transacted, and the amount of gross premiums reported by the insurer, pursuant to section 431:7-202, during the year ending on the preceding December 31, from all risks or property resident, situated, or located within this State, together with such other information as may be required by the commissioner to determine the taxability of premiums.  The term "gross premiums" as used in this part shall not include consideration paid for annuities.

     (b)  Each authorized insurer shall file with the commissioner monthly, on or before the twentieth day of the calendar month following the month in which the taxes accrue, a statement signed by a duly authorized person on its behalf, setting forth the total business transacted and the amount of gross premiums reported by the insurer, pursuant to section 431:7-202, during the month from all risks or property resident, situated, or located within this State, together with other information as may be required by the commissioner to determine the taxability of premiums.

     (c)  Any insurer failing or refusing to file the annual tax statement on or before March 1, or the monthly statement on or before the twentieth day of the calendar month following the month in which the taxes accrue, shall be liable for a fine in an amount not less than $100 and not more than $500 for each day of delinquency. [L 1987, c 347, pt of §2; am L 1995, c 232, §13; am L 1998, c 202, §1; am L 2003, c 212, §41; am L 2010, c 22, §10]

 

     §431:7-201  Annual and monthly tax statements.  [Section effective January 1, 2017.  For section effective until December 31, 2016, see above.]  (a)  Each authorized insurer shall electronically file with the commissioner annually, on or before March 1 in each year, a statement signed by a duly authorized person on its behalf, setting forth the total business transacted, and the amount of gross premiums reported by the insurer, pursuant to section 431:7-202, during the year ending on the preceding December 31, from all risks or property resident, situated, or located within this State, together with such other information as may be required by the commissioner to determine the taxability of premiums.  The term "gross premiums" as used in this part shall not include consideration paid for annuities.

     (b)  Each authorized insurer shall electronically file with the commissioner monthly, on or before the twentieth day of the calendar month following the month in which the taxes accrue, a statement signed by a duly authorized person on its behalf, setting forth the total business transacted and the amount of gross premiums reported by the insurer, pursuant to section 431:7-202, during the month from all risks or property resident, situated, or located within this State, together with other information as may be required by the commissioner to determine the taxability of premiums.

     (c)  Any insurer failing or refusing to electronically file the annual tax statement on or before March 1, or the monthly statement on or before the twentieth day of the calendar month following the month in which the taxes accrue, shall be liable for a fine in an amount not less than $100 and not more than $500 for each day of delinquency. [L 1987, c 347, pt of §2; am L 1995, c 232, §13; am L 1998, c 202, §1; am L 2003, c 212, §41; am L 2010, c 22, §10; am L 2016, c 141, §3]

 

 

     §431:7-202  Taxation.  (a)  Each authorized insurer, except with respect to all life insurance contracts, ocean marine insurance contracts, and real property title insurance contracts, shall pay to the director of finance through the commissioner a tax of 4.265 per cent on the gross premiums written from all risks or property resident, situated, or located within this State, during the year ending on the preceding December 31, less return premiums (but not including dividends paid or credited to policyholders), and less any reinsurance accepted (the tax upon such business being payable by the direct writing insurer).

     All premiums written, procured, or received in the State shall be presumed to have been from risks or property resident, situated, or located within the State.  This presumption may be rebutted as to any premium:

     (1)  By showing that it has been properly allocated or apportioned and reported as a taxable premium of another state or other appropriate taxing authority; or

     (2)  By facts as to the residence, situation, or location of the risks or property, conclusively showing the nontaxability of the premium.

     (b)  Each authorized insurer, with respect to life insurance contracts, shall pay to the director of finance through the commissioner a tax of 2.75 per cent on the gross premiums received from all risks resident within this State, during the year ending on the preceding December 31, less return premiums, dividends paid or credited to policyholders, and reinsurance accepted (the tax upon such business being payable by the direct writing insurer).

     The tax also shall apply to premiums for insurance written on individuals residing outside the State unless the direct writing insurer shall show the payment of a comparable tax to another appropriate taxing authority.  Such showing may be required as to any premium written, procured, or received in the State.

     (c)  Each authorized insurer shall, with respect to all ocean marine insurance contracts written within the State, during the year ending on the preceding December 31, pay to the director of finance through the commissioner a tax of .8775 per cent on its gross underwriting profit.  The gross underwriting profit shall be ascertained by deducting from the net premiums (i.e., gross premiums less all return premiums and premiums for reinsurance ceded) on such ocean marine insurance contracts, the net losses paid (i.e., gross losses paid less salvage and recoveries on reinsurance ceded) during such year under such contracts.  In the case of an insurer issuing participating contracts, the gross underwriting profit shall not include, for computation of the tax prescribed by this subsection, the amount refunded, or paid as participation dividends, by such insurer to the holders of such contracts.

     (d)  Each authorized insurer, with respect to real property title insurance contracts written on real property situated within this State during the year ending on the preceding December 31, shall pay to the director of finance through the commissioner a tax of 4.265 per cent of the amount of the risk premium actually received by the authorized insurer for the provision of such insurance.  The amount of the risk premium received by the authorized insurer for the provision of real property title insurance shall be an amount equal to the amount actually received by the authorized insurer solely for the provision of real property title insurance coverage in accordance with the underwriting agreement or contract between the authorized insurer and the underwritten title company.

     (e)  No return premium shall be deductible unless the original gross premium, or an adjustment thereof, in an amount equal to or in excess of the return premium, has been concurrently or previously reported as taxable under this section or a prior similar law of the State.

     (f)  [Subsection effective until December 31, 2016.  For subsection effective January 1, 2017, see below.]  The taxes imposed by subsections (a), (b), (c), and (d) shall be paid monthly.  The monthly tax shall be due and payable on or before the twentieth day of the calendar month following the month in which it accrues, coinciding with the filing of the statement provided for in section 431:7-201.

     In addition to the monthly tax and monthly tax statement, the annual tax shall be due and payable on or before March 1 coinciding with the filing of the statement provided for in section 431:7-201.

     All amounts paid under this subsection, other than fines, shall be allowed as a credit on the annual tax imposed by subsections (a), (b), (c), and (d).

     If the total amount of installment payments for any calendar year exceeds the amount of annual tax for that year, the excess shall be treated as an overpayment of the annual tax and be allowed as a refund under section 431:7-203.

     Any insurer failing or refusing to pay the required taxes above stated when due and payable shall be liable for a fine of $500 or ten per cent of the tax due, whichever is greater; plus interest at a rate of twelve per cent per annum on the delinquent taxes.  The taxes may be collected by distraint, or the taxes, fine, and interest may be recovered by an action to be instituted by the commissioner in the name of this State, in any court of competent jurisdiction.  The commissioner may suspend the certificate of authority of the delinquent insurer until the taxes, fine, and interest, should any be imposed, are fully paid.

     (f)  [Subsection effective January 1, 2017.  For subsection effective until December 31, 2016, see above.]  The taxes imposed by subsections (a), (b), (c), and (d) shall be paid monthly.  The monthly tax shall be due and payable by electronic payment via the Automated Clearing House debit or credit payment system on or before the twentieth day of the calendar month following the month in which it accrues, coinciding with the filing of the statement provided for in section 431:7-201.

     In addition to the monthly tax and monthly tax statement, the annual tax shall be due and payable by electronic payment via the Automated Clearing House debit or credit payment system on or before March 1 coinciding with the filing of the statement provided for in section 431:7-201.

     All amounts paid under this subsection, other than fines, shall be allowed as a credit on the annual tax imposed by subsections (a), (b), (c), and (d).

     If the total amount of installment payments for any calendar year exceeds the amount of annual tax for that year, the excess shall be treated as an overpayment of the annual tax and be allowed as a refund under section 431:7-203.

     Any insurer failing or refusing to pay the required taxes above stated when due and payable shall be liable for a fine of $500 or ten per cent of the tax due, whichever is greater; plus interest at a rate of twelve per cent per annum on the delinquent taxes.  The taxes may be collected by distraint, or the taxes, fine, and interest may be recovered by an action to be instituted by the commissioner in the name of this State, in any court of competent jurisdiction.  The commissioner may suspend the certificate of authority of the delinquent insurer until the taxes, fine, and interest, should any be imposed, are fully paid.

     As used in this subsection, "Automated Clearing House debit or credit payment system" means the network for the interbank clearing of electronic payments for participating depository financial institutions.

     (g)  In establishing the prepayment amount of an insurer who has acquired the business of another insurer, the amount of tax liability of the acquiring insurer for the preceding calendar year shall be deemed to include the amount of tax liability of the acquired insurer for that year. [L 1987, c 347, pt of §2; am L 1992, c 236, §6; am L 1994, c 160, §1; am L 1995, c 232, §14; am L 1998, c 202, §2; am L 2003, c 212, §42; am L 2010, c 22, §11; am L 2016, c 141, §4]

 

Case Notes

 

  Cited:  676 F. Supp. 2d 1006 (2009).

 

 

     [§431:7-202.5]  Additions to taxes for noncompliance or evasion; interest on underpayments and overpayments.  The provisions of section 231-39 shall apply to taxes under this article. [L 1992, c 236, §2]

 

     §431:7-203  Administrative refunds.  (a)  If any person has paid to the commissioner any tax, fee, or other charge in error or in excess of that which the person is lawfully obligated to pay under this code, the commissioner, upon written request made by the person to the commissioner within the time set forth in section 431:7-204.6, shall authorize a refund thereof out of the compliance resolution fund, except that a tax refund shall be payable out of the general fund, by submitting a voucher therefor to the comptroller subject to the following limitations:

     (1)  No recourse may be had except under section 40-35 or by appeal for refunds of taxes paid pursuant to an assessment by the commissioner; provided that if the assessment by the commissioner contains clerical errors, transposition of figures, typographical errors, and errors in calculation or if there is an illegal or erroneous assessment because the assessment is not in accordance with this code, the refund procedures in subsection (a) shall apply; and

     (2)  No refund or overpayment credit shall be made unless the original payment of the tax was due to the law having been interpreted or applied with respect to the taxpayer concerned differently than with respect to taxpayers generally.

     As to all tax payments for which a refund or credit is not authorized by this subsection (including, without prejudice to the generality of the foregoing, cases of unconstitutionality), the remedies provided by appeal or under section 40-35 are exclusive.

     (b)  Where a taxpayer is entitled to a refund, the taxpayer, at the taxpayer's election, may apply the amount of the refund as an overpayment credit to taxes subsequently accruing under this code.

     (c)  This subsection shall apply to a refund for an overpayment of tax.

     (1)  If the tax return as filed by a taxpayer shows the amount already paid, whether or not on the basis of installments, exceeds the amount determined to be the correct amount of the tax due, and the taxpayer requests a refund of the overpayment, the amount of overpayment together with interest, if any, shall be refunded in the manner provided in subsection (a).  The interest shall be allowed and paid at the rate of two-thirds of one per cent for each calendar month or fraction thereof, beginning with the first calendar day after the due date of the return or, if the return is filed after the prescribed due date, the first month following the month the return is received, and continuing until the date that the commissioner approves the refund voucher.  If the commissioner approves the refund voucher within ninety days from the due date or the date the return is received, whichever is later, and the comptroller of the State sends the taxpayer a refund warrant within forty-five days from the date of the commissioner's approval, no interest on the overpayment will be allowed or paid.  However, if either the commissioner or the comptroller exceeds the time allowed herein, interest will be computed from the first calendar day after the due date of the return or from the first month following the month the return is received by the commissioner if the return is filed after the prescribed due date, until the date that the comptroller sends the refund warrant to the taxpayer.

     (2)  If any overpayment of taxes results or arises from

          (A)  The taxpayer filing an amended return, or from

          (B)  A determination made by the commissioner and such overpayment is not shown on the original return as filed by the taxpayer, interest on the overpayment shall be allowed and paid from the first calendar day after the due date of the original return or, if the original return is filed after the prescribed due date, the first month following the month the return is received, to the date that the commissioner signs the refund voucher.  If the comptroller does not send the refund warrant to the taxpayer within forty-five days after the commissioner's approval, interest will continue until the date that the comptroller sends the refund warrant to the taxpayer.

     (3)  In the case of credit, interest shall be allowed and paid from the first calendar day after the due date of the return, the first month following the month the return is received by the commissioner, or the date of payment, whichever is later, to the date the credit is taken; provided that the commissioner may make a refund of any credit to a taxpayer where the taxpayer has no underpayment against which to apply the credit. [L 1987, c 347, pt of §2; am L 1992, c 236, §7; am L 1999, c 163, §15; am L 2000, c 162, §1 and c 182, §6; am L 2002, c 39, §12]

 

Case Notes

 

  As agencies may not pass upon the constitutionality of statutes, had insurers initially brought a claim under this section, insurance commissioner, as an administrative officer, would have been powerless to declare fees imposed on insurers pursuant to this section unconstitutional or to provide a refund on that basis; thus, as there were no remedies for insurers' constitutional claims under this section, circuit court did not lack subject matter jurisdiction by virtue of insurers' failure to exhaust their administrative remedies under this section.  120 H. 51, 201 P.3d 564 (2008).

  Where subsection (a) did not establish a true available administrative remedy for challenging the constitutionality of the insurance division's assessments against insurers, trial court did not err in rejecting State's failure-to-exhaust defense.  117 H. 454 (App.), 184 P.3d 769 (2008).

 

 

     §431:7-204  In lieu provision.  As to insurers, the taxes and fees imposed by section 431:7-201 to section 431:7-204, and the fees imposed by this code, when paid shall be in settlement of and in lieu of all demands for taxes, licenses, or fees of every character imposed by the laws of this State, the ordinances or other laws, rules, or regulations of any county of this State, except:

     (1)  As expressly otherwise provided;

     (2)  Taxes on real property;

     (3)  Taxes on the purchase, use, or ownership of tangible personal property; and

     (4)  Taxes on gross income, gross proceeds, gross rental, or gross rental proceeds under chapter 237 or 237D.

Nothing in this section shall be deemed to exempt insurers from liability for withholding taxes payable by their employees and paying the same to the proper collection officers, or from keeping such records, and making such returns and reports, as may be required in the case of other persons enjoying tax exemption. [L 1987, c 347, pt of §2; am L 1991, c 286, §4]

 

     §431:7-204.5  Appeals.  Notwithstanding section 431:2-308, any person aggrieved by any assessment of the tax for any month or any year may appeal from the assessment in the manner and within the time and in all other respects as provided in section 235-114. [L 1992, c 236, §3; am L 2004, c 123, §12]

 

Note

 

  The 2004 amendment applies to tax appeals filed on or after July 1, 2004.  L 2004, c 123, §14.

 

     §431:7-204.6  Limitation period for assessment, levy, collection, or refund.  (a)  The amount of insurance taxes imposed by this chapter shall be assessed or levied within three years after the annual return was filed, or within three years of the due date prescribed for the filing of the return, whichever is later, and no proceeding in court without assessment for the collection of any taxes shall be begun after the expiration of the period.  Where the assessment of the tax imposed by this chapter has been made within the period of limitation applicable thereto, the tax may be collected by levy or by a proceeding in court under chapter 231; provided that the levy is made or the proceeding was begun within fifteen years after the assessment of the tax.  For any tax that has been assessed prior to July 1, 2009, the levy or proceeding shall be barred after June 30, 2024.

     Notwithstanding any other provision to the contrary in this section, the limitation on collection after assessment in this section shall be suspended for the period:

     (1)  The taxpayer agrees to suspend the period;

     (2)  The assets of the taxpayer are in control or custody of a court in any proceeding before any court of the United States or any state, and for six months thereafter;

     (3)  An offer in compromise under section 231-3(10) is pending; and

     (4)  During which the taxpayer is outside the State if the period of absence is for a continuous period of at least six months; provided that if at the time of the taxpayer's return to the State the period of limitations on collection after assessment would expire before the expiration of six months from the date of the taxpayer's return, the period shall not expire before the expiration of the six months.

     In the case of a false or fraudulent return with intent to evade the insurance taxes, or of a failure to file the annual return, the insurance taxes may be assessed or levied at any time; provided that the burden of proof with respect to the issues of falsity or fraud and intent to evade tax shall be upon the State.

     (b)  In the case of a false or fraudulent return with intent to evade tax, or of a failure to file the annual return, the tax may be assessed or levied at any time.

     (c)  Where, before the expiration of the period prescribed in subsection (a) or (d), both the commissioner and the taxpayer have consented in writing to the assessment or levy of the tax after the date fixed by subsection (a) or the credit or refund of the tax after the date fixed by subsection (d), the tax may be assessed or levied, or the overpayment, if any, may be credited or refunded, at any time prior to the expiration of the period agreed upon.  The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

     (d)  No credit or refund shall be allowed for any tax imposed by this chapter, unless a claim for such credit or refund shall be filed as follows:

     (1)  If an annual return is timely filed, or is filed within three years after the date prescribed for filing the annual return, then the credit or refund shall be claimed within three years after the date the annual return was filed or the date prescribed for filing the annual return, whichever is later.

     (2)  If an annual return is not filed, or is filed more than three years after the date prescribed for filing the annual return, a claim for credit or refund shall be filed within:

          (A)  Three years after payment of the tax; or

          (B)  Three years after the date prescribed for the filing of the annual return, whichever is later.

Paragraphs (1) and (2) are mutually exclusive.  The limitation shall not apply to a credit or refund pursuant to an appeal provided for by section 431:7-204.5, or to a payment under protest as provided in section 40-35. [L 1992, c 236, §4; am L 2009, c 166, §14]

 

Note

 

  Applicability of L 2009, c 166.  L 2009, c 166, §27.

 

 

     §431:7-205  Reports to department of taxation.  The commissioner shall promptly report to the department of taxation all amounts of taxes collected under section 431:7-201 to section 431:7-204 and section 431:8-315 and all amounts of refunds of such taxes made under section 431:7-203. [L 1987, c 347, pt of §2]

 

     §431:7-206  Domestic company credit for retaliatory taxes paid other states.  If by the laws of any state other than this State, or by the action of any public official of another state, any insurer or company, as defined in section 431:1-202, organized or domiciled in this State, shall be required to pay taxes for the privilege of doing business in the other state, and the amounts are imposed or assessed so that the taxes which are or would be imposed against Hawaii domestic insurance companies are greater than those taxes required of insurers organized or domiciled in the other state, to the extent the amounts are legally due to the other states, an insurer or company organized or domiciled in this State may claim a credit against the tax payable pursuant to this article of a sum not to exceed one hundred per cent of the amount.  The credit shall not be greater than the tax payable pursuant to this article during the taxable year.  All claims for the tax credit under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit. [L 1987, c 348, §14; am L 2009, c 77, §6]

 

 

     §431:7-207  Tax credit to facilitate regulatory oversight.  (a)  Each authorized insurer that meets the requirements of subsection (b) may claim a tax credit under this section against the tax imposed by section 431:7-202(a) or (b) for the taxable year for which the credit is properly claimed.  The tax credit shall be an amount equal to one per cent of the premiums taxed by section 431:7-202(a) and (b).

     (b)  An insurer may claim the credit only if, at all times during the taxable year, the insurer:

     (1)  Maintains in Hawaii books and records required by the commissioner sufficient to conduct the examination authorized by section 431:2-302;

     (2)  Employs in Hawaii personnel knowledgeable about the insurer's financial operations and who are authorized to represent the insurer in all matters pertaining to examination; and

     (3)  Maintains in Hawaii a customer service center with employees authorized to promptly adjust, settle, and pay claims and to promptly answer all questions from customers regarding their insurance policies.

     (c)  The commissioner shall prepare the forms necessary to claim a credit under this section, may require proof of the claim for the tax credit, and may adopt rules pursuant to chapter 91.

     (d)  All claims for the tax credit under this section, including any amended claims, must be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (e)  The tax credit allowed by subsection (a) may be claimed on the interim returns required by section [431:7-202(f)]. [L 1992, c 236, §5; am L 1994, c 160, §2]

 

     [§431:7-208]  Low-income housing, insurance premium tax credit.  The low-income housing tax credit provided under section 235-110.8 shall be operative for this chapter and may be claimed against the tax imposed under section 431:7-202. [L 1999, c 24, §1]

 

     §431:7-209  High technology business investment tax credit.  (a)  The high technology business investment tax credit provided under section 235-110.9 shall be operative for this chapter on July 1, 1999.

     (b)  For investments made on or after May 1, 2009, this section shall be subject to section 235-109.5. [L 1999, c 178, §27; am L 2009, c 178, §7]

 

Revision Note

 

  "July 1, 1999" substituted for "the effective date of this Act".

  The 2009 amendment applies to investments made, renovation costs incurred, or eligible depreciable tangible property placed in service on or after May 1, 2009.  L 2009, c 178, §10.

 

 

PART III.  DEPOSITS

 

     §431:7-301  Deposits of insurers.  (a)  The director of finance shall accept, when made through the commissioner, deposits of securities or funds by insurers as follows:

     (1)  Deposits in amount as required to be made as prerequisite to a certificate of authority to transact insurance in this State.

     (2)  Deposits of insurers in amount as required to be made by the laws of other states as prerequisites for authority to transact insurance in such other states.

     (3)  Deposits in other additional amounts permitted to be made by this part.

     (b)  This part shall apply to the deposits listed in this section unless expressly inconsistent with the provisions of article 3 of this code, in which case the provisions of article 3 shall prevail. [L 1987, c 347, pt of §2; am L 1989, c 207, §5]

 

     §431:7-302  Purpose of deposit.  Each deposit shall be held by the director of finance in trust for the protection of all policyholders, obligees, or creditors in the United States of the insurer making it. [L 1987, c 347, pt of §2]

 

     §431:7-303  Securities eligible for deposit.  All deposits shall consist of cash or other assets comprised of securities which are eligible for the investment of the funds of insurers under section 431:6-301 representing public obligations, and section 431:6-302 representing corporate obligations. [L 1987, c 347, pt of §2; am L 1989, c 195, §17]

 

     §431:7-304  Record and receipt.  (a)  The director of finance shall keep a record in permanent form of all such funds and securities.

     (b)  The director of finance shall deliver to the insurer a receipt for all funds and securities so deposited by it. [L 1987, c 347, pt of §2]

 

     §431:7-305  Transfer of securities.  (a)  No transfer of any funds or security so held on deposit, whether voluntary or by operation of law, shall be valid unless approved in writing by the commissioner and countersigned by the director of finance or by the director's authorized deputy or agent, or unless expressly provided elsewhere in this code.

     (b)  A statement of each such transfer shall be entered on the records of the director, showing the name of the insurer from whose deposit the transfer is made, the name of the transferee, the par value of securities having par value, and the asset value of other securities as at last recent valuation. [L 1987, c 347, pt of §2]

 

     §431:7-306  Director may designate depositary.  At the request of an insurer, the director of finance may designate any solvent trust company or other solvent financial institution having trust powers, domiciled in the United States, as the director's depositary to receive and hold any such deposit.  Any deposit so held shall be at the expense of the insurer. [L 1987, c 347, pt of §2]

 

     §431:7-307  Responsibility for deposits.  This State shall be responsible for the safekeeping and return of all funds and securities deposited pursuant to section 431:7-301 to section [431:7-311] with the director of finance.  The insurer shall be responsible for the safekeeping and return of all funds and securities deposited pursuant to section 431:7-306. [L 1987, c 347, pt of §2]

 

     §431:7-308  Dividends and substitutions.  While solvent and complying with this part, an insurer shall be entitled:

     (1)  To collect and receive interest and dividends accruing on the securities so held on deposit for its account, and

     (2)  From time to time to exchange and substitute for any of such securities, other securities eligible for deposit and of at least equal value. [L 1987, c 347, pt of §2]

 

     §431:7-309  Release of deposit.  (a)  Any required deposit or portion thereof shall be released in these instances only:

     (1)  Upon extinguishment of all liabilities or portion thereof, of the insurer for the security of which the deposit is held, by reinsurance contract or otherwise.

     (2)  If any such deposit or portion thereof is no longer required under this part.

     (3)  Upon proper order of a court of competent jurisdiction the deposit or portion thereof shall be released to the receiver, conservator, rehabilitator, or liquidator of the insurer for whose account the deposit is held.

     (b)  No such release shall be made except on application to and written order of the commissioner made upon proof satisfactory to the commissioner of the existence of one of such grounds therefor.  The commissioner shall not have any personal liability for any such release of any deposit or part thereof so made by the commissioner in good faith.

     (c)  All releases of deposits or any part thereof shall be made to the person then entitled thereto upon proof of title satisfactory to the commissioner. [L 1987, c 347, pt of §2]

 

     §431:7-310  Voluntary excess deposit.  An insurer may deposit and maintain on deposit with the director of finance through the commissioner funds and eligible securities in amount exceeding its required deposit under this part by not more than $100,000 for the purpose of absorbing fluctuations in the value of securities held in its required deposit, and to facilitate the exchange and substitution of such required securities.  During the solvency of the insurer, any such excess deposit, or any part thereof, shall be released to it upon its request.  During the insolvency of the insurer, such excess deposit shall be released only as provided in section 431:7-309. [L 1987, c 347, pt of §2]

 

     §431:7-311  Not subject to levy.  No judgment creditor or other claimant of an insurer shall levy upon any deposit held pursuant to this article or upon any part hereof. [L 1987, c 347, pt of §2]

 

ARTICLE 8

UNAUTHORIZED INSURERS AND SURPLUS LINES

 

 

Cross References

 

  Insurance policies issued to construction professionals, see §431:1-217.

 

PART I.  GENERAL PROVISIONS

 

     §431:8-101  Scope.  This article shall apply to the placement of insurance in insurers not authorized to transact insurance in the state in which the subject resident is located or in which the insurance contract will be performed. [L 1987, c 347, pt of §2; am L 2011, c 68, §4]

 

 

     §431:8-102  Definitions.  As used in this article:

     "Approved continuing education course" means a course approved by the commissioner following receipt of recommendations from insurance professionals.

     "Approved course provider" means an individual or entity that is approved to offer continuing education courses pursuant to article 9A.

     "Authorized insurer" means an insurer holding a valid certificate of authority to transact an insurance business in the state in which the subject resident is located or in which the insurance contract will be performed.

     "Business entity" means an association, corporation, individual, limited liability company, limited liability partnership, partnership, person, or other legal entity.

     "Credit hour" means the value assigned to an approved continuing education course that is equivalent to at least fifty minutes of classroom instruction.

     "Exempt commercial purchaser" means any person purchasing commercial insurance which, at the time of placement, employs or retains a qualified risk manager to negotiate insurance coverage; and has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding twelve months.  The person shall possess a net worth in excess of $20,000,000; generate annual revenues in excess of $50,000,000; employ more than five hundred full-time or full-time equivalent employees per individual insured or be a member of an affiliated group employing more than 1,000 employees in the aggregate; be a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000; or be a municipality with a population in excess of 50,000 persons.  Effective January 1, 2015, and every five years thereafter, the amount of net worth, annual revenues, and budgeted expenditures shall be adjusted to reflect the percentage change for that five-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the federal Department of Labor.

     "Home state" means, with respect to an insured, the state in which an insured maintains the insured's principal place of business or, in the case of an individual, the state in which the individual maintains the individual's principal residence; provided that if one hundred per cent of the insured risk is located out of the state where the insured maintains the insured's principal place of business or the state where the individual maintains the principal residence, the home state shall be the state where the greatest percentage of the insured's taxable premium for that insurance contract is allocated.

     "Home state" means, with respect to an insured, the state in which an insured maintains the insured's principal place of business or, in the case of a surplus lines broker, the state in which the surplus lines broker maintains the surplus lines broker's principal residence or principal place of business and is licensed to act as a surplus lines broker; provided that if one hundred per cent of the insured risk is located out of the state where the insured maintains the insured's principal place of business or the state where the individual maintains the principal residence, the home state shall be the state where the greatest percentage of the insured's taxable premium for that insurance contract is allocated.

     "Home state of affiliated group" means the home state of the member of the affiliated group that has the largest percentage of premium attributed to it under an insurance contract that has more than one insured from the affiliated group listed as named insureds on a single unauthorized insurance contract.

     "Home state of group insurance" means the home state of the group policyholder who pays one hundred per cent of the premium from the policyholder's own funds.  When the group policyholder does not pay one hundred per cent of the premium from the policyholder's own funds, the term "home state of group insurance" means the home state of the group member.

     "Inactive" means that the authority of a license issued by the commissioner is not in effect.

     "Independently procured insurance" means insurance obtained by an insured directly from an unauthorized insurer as permitted by the laws of the insured's home state.

     "Individual" means a natural person or a business entity.

     "License" means a document issued by the commissioner authorizing a person to act as a surplus lines broker as specified in the document.  The license itself shall not create any authority, actual, apparent, or inherent, in the holder to represent or commit an insurer.

     "Licensee" means a surplus lines broker licensed under this article.

     "Multi-state risk" means a risk covered by an unauthorized insurer with insured exposures in more than one state.

     "Principal place of business" means, with respect to determining the home state of the insured:

     (1)  The state where the insured maintains the insured's headquarters and where the insured's high-level officers direct, control, and coordinate the business activities;

     (2)  If the insured's high-level officers direct, control, and coordinate the business activities in more than one state, the state in which the greatest percentage of the insured's taxable premium for that insurance contract is allocated; or

     (3)  If the insured maintains the insured's headquarters or the insured's high-level officers direct, control, and coordinate the business activities outside any state, the state in which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.

     "Principal residence" means, with respect to determining the home state of the individual insured:

     (1)  The state where the individual insured resides for the greatest number of days during a calendar year; or

     (2)  If the insured's principal residence is located outside any state, the state in which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.

     "Single state risk" means a risk with insured exposures in only one state.

     "Surplus lines broker" means any person licensed under section 431:8-310 to place insurance on risks resident, located, or to be performed in this State with unauthorized insurers.

     "Surplus lines insurance" means any property and casualty insurance on risks procured from or placed with an unauthorized insurer under the laws of the insured's home state.  Surplus lines insurance, when this State is the home state of the insured, shall be in accordance with part III of this article.

     "Unauthorized insurer" means an insurer not holding a valid certificate of authority to transact an insurance business in the state in which the subject resident is located or in which the insurance contract will be performed. [L 1987, c 347, pt of §2; am L 1989, c 195, §18; am L 2002, c 155, §13; am L 2011, c 68, §5; am L 2011, c 68, §5; am L 2012, c 66, §3]

 

 

PART II.  UNAUTHORIZED INSURERS

 

     §431:8-201  Transacting insurance business without certificate of authority prohibited.  It shall be unlawful for any insurer to transact an insurance business in this State, as defined in section 431:1-215, without a certificate of authority; provided that this section shall not apply to:

     (1)  The lawful transaction of surplus lines insurance;

     (2)  The lawful transaction of reinsurance by insurers;

     (3)  Transactions in this State involving a policy lawfully solicited, written, and delivered outside of this State covering only subjects of insurance not resident, located, or expressly to be performed in this State at the time of issuance, and subsequent to the issuance of the policy;

     (4)  Attorneys acting in the ordinary relation of attorney and client in the adjustment of claims or losses;

     (5)  Transactions in this State involving group life and group accident and health or sickness or blanket accident and health or sickness insurance or group annuities where the master policy of the groups was lawfully issued in and delivered pursuant to the laws of a state in which the insurer was authorized to do an insurance business;

     (6)  Transactions in this State involving any policy of insurance or annuity contract issued prior to July 1, 1988;

     (7)  Transactions in this State involving ocean marine insurance; and

     (8)  Transactions of contracts of insurance for property and casualty multi-state risks; provided that the producer is licensed to sell, solicit, or negotiate that insurance in the home state of the insured. [L 1987, c 347, pt of §2; am L 1989, c 195, §19; am L 2003, c 212, §43; am L 2011, c 68, §6]

 

 

     §431:8-202  Acting for or aiding unauthorized insurer prohibited.  (a)  No person shall directly or indirectly act as producer for, or otherwise represent or aid on behalf of another, any unauthorized insurer in the solicitation, negotiation, procurement, or effectuation of insurance, or renewals thereof, or forwarding of applications, or delivery of policies or contracts or inspection of risks, or fixing of rates, or investigation or adjustment of claims or losses, or collection or forwarding of premiums, or in any other manner represent or assist an unauthorized insurer in the transaction of an insurance business.

     (b)  This section does not apply to:

     (1)  Transactions for which a certificate of authority to do business is not required of an insurer under the insurance laws of this State; and

     (2)  The property and operation of aircraft engaged in interstate or foreign commerce. [L 1987, c 347, pt of §2; am L 1989, c 195, §20; am L 2002, c 155, §14; am L 2006, c 154, §4]

 

     §431:8-203  Validity of contracts illegally effectuated.  A contract of insurance effectuated by an unauthorized insurer in violation of this article shall be voidable except at the instance of the insurer. [L 1987, c 347, pt of §2]

 

     §431:8-204  Liability of person assisting unauthorized insurer.  In the event of failure of any such unauthorized insurer to pay any claim or loss within the provisions of such insurance contract, any person who assisted or in any manner aided directly or indirectly in the procurement of such insurance contract and who knew or should have known the transaction was illegal shall be liable to the insured for the full amount of the claim or loss in the manner provided by the provisions of the insurance contract. [L 1987, c 347, pt of §2]

 

     §431:8-205  Insurance independently procured; duty to report and pay tax.  (a)  Nothing in this part shall prohibit a person from independently procuring, continuing, or renewing insurance from an insurer which is not authorized to transact insurance in this State.

     (b)  Each insured who in this State, before July 1, 2011, procures, continues, or renews surplus lines insurance on a risk located or to be performed in whole in this State, other than insurance procured through a surplus lines broker pursuant to part III of this article shall file within sixty days after the date the insurance was procured, continued, or renewed, a written report with the commissioner.  Each insured who in this State, after June 30, 2011, procures, continues, or renews surplus lines insurance for which this State is the home state of the insured, other than insurance procured through a surplus lines broker pursuant to part III of this article shall file within forty-five days after the end of the calendar quarter in which the insurance was procured, continued, or renewed, a written report with the commissioner.  The report shall be on forms prescribed by the commissioner, showing:

     (1)  The name and address of the insured or insureds;

     (2)  The name and address of the insurer;

     (3)  The subject of the insurance;

     (4)  A general description of the coverage;

     (5)  The itemized amount of premiums, taxes, and fees currently charged for each state;

     (6)  The policy number, effective date of the policy, and home state of the insured; and

     (7)  Other additional, pertinent information requested by the commissioner.

     (c)  Gross premiums charged for the surplus lines insurance allocable to this State, less any return premiums, are subject to a tax at the rate of 4.68 per cent.  At the time of filing the report required in subsection (b) for insurance procured, continued, or renewed before July 1, 2011, the insured shall pay the tax to the commissioner.  At the time of filing the report required in subsection (b) for insurance procured, continued, or renewed after June 30, 2011, if this State is the home state of the insured, the insured shall pay the tax and fees of this State and all other states to the director of finance, through the commissioner.  If this State is not the home state of the insured, the insured shall pay the tax and fees of this State to the home state of the insured.

     As used in this subsection, "gross premiums" means the amount of the policy or coverage premium charged by the insurer in consideration for the insurance contract.  Any charges for policy, survey, inspection, service, or similar fees or other charges added by the broker shall not be considered part of gross premiums.

     (d)  If an independently procured policy covers risks or exposures only partially located or to be performed in this State, the tax payable shall be computed on the portion of the premium properly attributable to the risks or exposures located or to be performed in this State.

     (e)  Delinquent taxes shall bear interest at the rate of ten per cent per annum.

     (f)  This section does not abrogate or modify, and shall not be construed or deemed to abrogate or modify, any provision of section 431:8-202 or any other provision of this code.

     (g)  This section shall not apply to life insurance, accident and health or sickness insurance, or annuities. [L 1987, c 348, §15; am L 1989, c 195, §21; am L 2003, c 212, §44; am L 2006, c 154, §5; am L 2011, c 68, §7]

 

 

     §431:8-206  Commissioner may enjoin unauthorized insurers.  Whenever the commissioner believes, from evidence satisfactory to the commissioner, that any insurer is violating or about to violate the provisions of section 431:8-201, the commissioner may bring an action in accordance with the commissioner's injunctive authority under article 2. [L 1987, c 347, pt of §2]

 

     §431:8-207  Legal process against unauthorized insurer; how service of process made.  (a)  Any act of transacting an insurance business in this State by any unauthorized insurer is equivalent to and shall constitute an irrevocable appointment by such insurer, binding upon the insurer, the insurer's personal representative, or successor in interest if a corporation, of the commissioner or the commissioner's successor in office, to be the true and lawful attorney of the insurer upon whom may be served all lawful process in any action, suit, or proceeding in any court by the commissioner or by the State or others, and upon whom may be served any notice, order, pleading, or process in any proceeding before the commissioner, and which arises out of transacting an insurance business in this State by such insurer.  Any act of transacting an insurance business in this State by any unauthorized insurer shall be acknowledgement of its agreement that such service of process is of the same legal force and validity as personal service of process in this State upon the insurer.

     (b)  Service of process in an action or proceeding shall be made in accordance with section 431:2-206.  Service is sufficient if:

     (1)  Notice of service and a copy of the court process or the notice, order, pleading, or process in the administrative proceeding are sent within ten days by registered mail by the plaintiff or the plaintiff's attorney in the court proceeding, or by the commissioner in the administrative proceeding, to the defendant or defendant's agent or representative at the defendant's last known principal place of business;

     (2)  The defendant's receipt, or receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and an affidavit of the plaintiff or the plaintiff's attorney in a court proceeding, or of the commissioner in an administrative proceeding, are filed with the clerk of the court in which the proceeding is pending or with the commissioner in administrative proceedings, on or before the date the defendant is required to appear or respond, or within any further time as the court or commissioner may allow.

     (c)  No plaintiff shall be entitled to a judgment or a determination by default in any court or administrative proceeding in which process is served under this section until the expiration of forty days from the date of filing of the affidavit of compliance.

     (d)  Nothing in this section shall limit or affect the right to serve any process, notice, order, or demand upon any person or insurer in any other manner now or hereafter permitted by law. [L 1987, c 347, pt of §2; am L 2006, c 154, §6]

 

     §431:8-208  Defense of action by unauthorized insurer; bond.  (a)  Before any unauthorized insurer files or causes to be filed any pleading in any court action, suit, or proceeding, or any notice, order, pleading, or process in an administrative proceeding before the commissioner, instituted against such person or insurer by service made as provided in section 431:8-207, such insurer shall either:

     (1)  Deposit with the clerk of the court in which such action, suit, or proceeding is pending, or with the commissioner in administrative proceedings, cash or securities, or file a bond with good and sufficient sureties to be approved by the court or commissioner, in an amount fixed by the court or commissioner sufficient to secure the payment of any final judgment which may be rendered in such action or administrative proceeding, or

     (2)  Procure a certificate of authority to transact insurance in this State.

     (b)  The commissioner, in any administrative proceeding in which service is made as provided in section 431:8-207, may in the commissioner's discretion order such postponement as may be necessary to afford the defendant reasonable opportunity to comply with the provisions of subsection (a) and to defend such action.

     (c)  Nothing in subsection (a) shall be construed to prevent an unauthorized insurer from filing a motion to quash a writ or to set aside service made in the manner provided in section 431:8-207 on the ground that the unauthorized insurer has not transacted any insurance business in this State. [L 1987, c 347, pt of §2; am L 2003, c 212, §45; am L 2004, c 122, §25]

 

     §431:8-209  Attorney's fees.  In an action against an unauthorized insurer upon a contract of insurance issued or delivered to a person in this State, if the insurer has failed for thirty days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and it appears to the court that the refusal was vexatious and without reasonable cause, the court may allow to the plaintiff reasonable attorney's fees and include the fees in any judgment that may be rendered in the action.  The fee shall not exceed twelve and one-half per cent of the amount that the court or jury finds the plaintiff is entitled to recover against the insurer, but in no event shall the fee be less than $25.  Failure of an insurer to defend any such action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause. [L 1987, c 347, pt of §2; am L 2006, c 154, §7]

 

     §431:8-210  Advertising prohibited.  (a)  No publication published in this State, or radio or television broadcaster, or any other agency or means for the dissemination of information operated or located in this State shall publish, broadcast, or otherwise disseminate within this State, advertising for or on behalf of any insurer not then authorized to transact insurance in this State.

     (b)  This section does not apply to publications published in this State principally for circulation in the continental United States, wherein advertising by or on behalf of an unauthorized insurer is not directed expressly toward residents or subjects of insurance in this State. [L 1987, c 347, pt of §2]

 

     §431:8-211  Penalties.  (a)  Any person, other than an insured, who represents or aids an unauthorized insurer in violation of this part may be subject to a fine not in excess of $1,000.

     (b)  Any unauthorized insurer who transacts any unauthorized act of an insurance business as set forth in this part may be fined not more than $10,000. [L 1987, c 347, pt of §2; am L 1989, c 207, §6; am L 2006, c 154, §8]

 

 

PART III.  SURPLUS LINES INSURANCE

 

     §431:8-300  Exemptions from surplus lines law.  This part shall not apply to reinsurance or to the following insurance when placed by a licensed producer of this State:

     (1)  Ocean marine insurance;

     (2)  Insurance on subjects located, resident, or to be performed wholly outside this State, or on vehicles or aircraft owned and principally garaged outside this State; or

     (3)  Insurance of aircraft or cargo of such aircraft, or against liability, other than workers' compensation and employer's liability, arising out of the ownership, maintenance, or use of such aircraft. [L 1989, c 195, §2; am L 2002, c 155, §15]

 

     §431:8-301  Insurance placed with unauthorized insurer permitted.  (a)  In addition to section 431:8-205, insurance may be procured from an unauthorized insurer; provided that:

     (1)  The insurance is procured through a surplus lines broker licensed in the insured's home state;

     (2)  The full amount or kind of insurance cannot be obtained from insurers who are authorized to do business in this State; provided that a diligent search is made among the insurers who are authorized to transact and are actually writing the particular kind and class of insurance in this State each time the insurance is placed or renewed;

     (3)  The surplus lines insurance procured is in addition to or in excess of the amount and coverage which can be procured from the authorized insurers; and

     (4)  The insurance is not procured at a rate lower than the lowest rate that is generally acceptable to authorized insurers transacting that kind of business and providing insurance affording substantially the same protection.

     (b)  A surplus lines broker is not required to make a due diligence search to determine whether the full amount or type of insurance can be obtained from authorized insurers when the broker is seeking to procure or place unauthorized insurance for an exempt commercial purchaser; provided that:

     (1)  The broker procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that the insurance may or may not be available from the admitted market which may provide greater protection with more regulatory oversight; and

     (2)  The exempt commercial purchaser has subsequently requested in writing for the broker to procure or place the insurance from an unauthorized insurer. [L 1987, c 347, pt of §2; am L 2011, c 68, §8]

 

Revision Note

 

  Subsection designation deleted.

 

 

     §431:8-302  Surplus lines insurers.  (a)  No surplus lines broker shall, either knowingly or without reasonable investigation of the financial condition and general reputation of the insurer, place insurance with a financially unsound insurer or with an insurer engaging in an unfair practice.

     (b)  A surplus lines broker may place surplus lines insurance only with insurers who are authorized to write that type of insurance in the insurer's domiciliary state.

     (c)  A surplus lines broker shall not place coverage with an unauthorized insurer unless, at the time of placement, the surplus lines broker has determined that:

     (1)  The unauthorized insurer has capital and surplus or its equivalent under the laws of its domiciliary state that equal the greater of the minimum capital requirement of this State or a minimum of $15,000,000; provided that:

          (A)  Minimum capital requirements may be satisfied by the insurer's possessing less than the minimum capital and surplus upon an affirmative finding of acceptability by the commissioner;

          (B)  A finding of acceptability pursuant to subparagraph (A) shall be based upon factors such as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability, and company record and reputation within the industry; and

          (C)  The commissioner shall not make an affirmative finding of acceptability pursuant to subparagraph (A) if the unauthorized insurer's capital and surplus is less than $4,500,000; or

     (2)  For an insurer not domiciled in the United States or its territories, the insurer shall be listed on the Quarterly Listing of Alien Insurers maintained by the National Association of Insurance Commissioners International Insurers Department; provided that:

          (A)  If an alien insurer is not in the Quarterly Listing of Alien Insurers, the surplus lines broker shall maintain in the broker's office evidence of the financial responsibility of the insurer; and

          (B)  Evidence satisfactory to the commissioner that the insurer maintains in the United States an irrevocable trust fund in either a national bank or a member of the Federal Reserve System in an amount of not less than $5,400,000 consisting of cash, securities, letters of credit, or of investments of substantially the same character and quality as those which are eligible investments for the capital and statutory reserves of authorized insurers writing like kinds of insurance in this State, for the protection of all its policyholders in the United States, shall constitute prima facie evidence of the financial responsibility of the insurer.

     (d)  The commissioner is authorized to enter into a cooperative agreement or interstate agreement or compact to establish additional and alternative nationwide uniform eligibility requirements that shall be applicable to unauthorized insurers domiciled in another state. [L 1987, c 347, pt of §2; am L 1993, c 205, §12; am L 2000, c 182, §7; am L 2011, c 68, §9]

 

 

     §§431:8-303, 304  REPEALED.  L 1989, c 207, §16.

 

     §431:8-305  Evidence of insurance; changes; penalties.  (a)  Upon placing surplus lines insurance, the surplus lines broker shall as soon as reasonably possible deliver to the insured the policy or, if the policy is not available, the surplus lines broker's certificate, cover note, binder, or other evidence of insurance.  Any confirmation of insurance shall be executed by the surplus lines broker and shall show:

     (1)  The policy number, effective date, home state, and a description and location of the subject of the insurance;

     (2)  A general description of the coverages, including any material limitations other than those in standard forms;

     (3)  The premium and rate charged, itemized by each state;

     (4)  The taxes and fees to be collected from the insured, itemized by each state;

     (5)  The name and address of the insured;

     (6)  The name and address of the insurer;

     (7)  If the direct risk is assumed by more than one insurer, the certificate shall state the name and address and proportion of the entire direct risk assumed by each insurer; and

     (8)  The name of the surplus lines broker and such broker's license number.

     (b)  No surplus lines broker shall issue or deliver any evidence of insurance or purport to insure, or represent that insurance has or will be written by any unauthorized insurer, unless the broker has authority from the insurer to cause the risk to be insured, or has received information from the insurer in the regular course of business that such insurance has been granted.

     (c)  If after delivery of the evidence of insurance there is any change in the identity of the insurers, or the proportion of the risk assumed by any insurer, or any other material change in coverage as stated in the original evidence of insurance, the surplus lines broker shall as soon as reasonably possible issue and deliver to the insured a substitute for, or endorsement of the original document, accurately showing the current status of the coverage and the insurer's responsibility thereunder.

     (d)  As soon as reasonably possible after the placement of any such insurance, the surplus lines broker shall procure from the insurer its policy or, if not available, a certificate of insurance and deliver it to the insured to replace any evidence of insurance initially issued to the insured.

     (e)  Any surplus lines broker who fails to comply with the requirements of this section shall be subject to the penalties provided in section 431:8-320. [L 1987, c 347, pt of §2; am L 2011, c 68, §10]

 

 

     §431:8-306  Signature of broker and special endorsement of surplus lines policy.  Every insurance contract procured and delivered as a surplus lines coverage pursuant to this part, including any evidence of insurance other than a policy, shall:

     (1)  Bear the name and address of the surplus lines broker who procured it, and

     (2)  Have stamped or written conspicuously upon the first page of the contract the following:

          "This insurance contract is issued by an insurer which is not licensed by the State of Hawaii and is not subject to its regulation or examination.  If the insurer is found insolvent, claims under this contract are not covered by any guaranty fund of the State of Hawaii." [L 1987, c 347, pt of §2]

 

     §431:8-307  Broker's duty to notify insured.  No contract of insurance placed by a surplus lines broker under this part and no premium charged therefor shall be due and payable until the surplus lines broker, when business is originated by a surplus lines broker, or the producer, when business is referred to a surplus lines broker from a licensed producer, has notified the insured in writing that:

     (1)  The insurer with which the surplus lines broker placed the insurance is not licensed by this State and is not subject to its supervision; and

     (2)  In the event of the insolvency of the surplus lines insurer, losses will not be paid by any of the State's insurance guaranty funds.

A copy of the notice shall be maintained by the broker with the records of the contract and available for examination.

     Nothing in this section shall nullify any agreement by any insurer to provide insurance. [L 1987, c 347, pt of §2; am L 2002, c 155, §16; am L 2003, c 212, §46]

 

     §431:8-308  Surplus lines insurance valid.  Insurance contracts procured as surplus lines coverage from unauthorized insurers shall be fully valid and enforceable as to all parties, and shall be given recognition in all matters and respects to the same effect as like contracts issued by authorized insurers. [L 1987, c 347, pt of §2]

 

     §431:8-309  Effect of payment to surplus lines broker.  Payment of a premium to a surplus lines broker acting for a person other than the surplus lines broker in negotiating, continuing, or reviewing any policy of insurance under this part shall be deemed to be payment to the insurer, notwithstanding whatever conditions or stipulations may be inserted in the policy or contract. [L 1987, c 347, pt of §2]

 

     §431:8-310  Surplus lines broker license required; application and qualifications for license.  (a)  No person shall procure any contract of surplus lines insurance with an unauthorized insurer unless the person is licensed as a surplus lines broker.

     (b)  A person applying for a surplus lines broker license shall apply to the commissioner on the uniform application and declare under penalty of denial, suspension, or revocation of the license that the statements made in the application are true, accurate, and complete to the best of the applicant's knowledge and belief.  Before approving the application, the commissioner shall find that the applicant:

     (1)  Is at least eighteen years of age;

     (2)  Has not committed any act that is a ground for a licensure sanction set forth in section 431:8-317;

     (3)  Has paid the applicable fees set forth in section 431:7-101;

     (4)  Has passed, within the two years immediately preceding the date of the application or issuance of the license, whichever is later, the applicable examination; and

     (5)  Has submitted a full set of fingerprints, including a scanned file from a hard copy fingerprint, for the commissioner to obtain and receive national and state criminal history records checks from the Federal Bureau of Investigation and the Hawaii criminal justice data center, pursuant to section 846-2.7.

     (c)  The commissioner may require any documents reasonably necessary to verify the information contained in an application.

     (d)  The commissioner shall issue a surplus lines broker license to any producer licensed under article 9A, except producers licensed under section 431:9A-107(a)(1), (2), or (5), when the producer has:

     (1)  Remitted the annual license fee to the commissioner as provided in article 7; and

     (2)  Submitted a completed license application on a form furnished by the commissioner.

     (e)  A surplus lines broker license shall be inactivated if the licensee fails to pay any required fee or penalty.  A surplus lines broker who allows the surplus lines broker's license to become inactive for nonpayment of the renewal fee may reinstate that license without the necessity of a written examination; provided that the surplus lines broker:

     (1)  Pays the fee and a penalty in the amount of fifty per cent of the then unpaid fees within twenty-four months from the inactivation date; and

     (2)  Is in compliance with all requirements of chapter 431.

The license shall automatically expire if the surplus lines broker does not reinstate the surplus lines broker's license within the twenty-four month period.

     (f)  Business entities shall be eligible to be surplus lines brokers, upon meeting the following conditions:

     (1)  The business entity licensee shall list individuals within the business entity who have satisfied all requirements of this part to become surplus lines brokers;

     (2)  Only those individuals listed on the business entity's license shall transact surplus lines business; and

     (3)  A natural person licensed as a surplus lines broker shall be identified as the business entity's designated representative.

     (g)  Licensing procedure, duration, and related matters shall be governed by article 7. [L 1987, c 347, pt of §2; am L 1993, c 205, §13; am L 2002, c 155, §17; am L 2004, c 122, §26; am L 2006, c 154, §9; am L 2009, c 77, §7; am L 2012, c 66, §4]

 

 

     §431:8-311  Compensation.  A licensed surplus lines broker may accept and place surplus lines business from any producer licensed in this State for the class of insurance involved, and may compensate the producer therefor. [L 1987, c 347, pt of §2; am L 2002, c 155, §18]

 

     §431:8-312  Records of surplus lines broker.  (a)  Each licensed surplus lines broker shall keep in the broker's office in this State a full and true record of each surplus lines contract placed by the broker including a copy of the policy, certificate, cover note, or other evidence of insurance including, as applicable:

     (1)  Amount of the insurance and perils insured;

     (2)  Brief description of the property insured and its location;

     (3)  Gross premium, taxes, and fees charged, itemized by each state;

     (4)  Any return premium, taxes, and fees paid, itemized by each state;

     (5)  Rate of premium charged upon the several items of property;

     (6)  Effective date of the contract and its terms;

     (7)  Name, address, and home state of the insured;

     (8)  Name and address of the insurer;

     (9)  Amount of tax and other sums to be collected from the insured, itemized by each state; and

    (10)  Any additional information required by the commissioner.

     (b)  For each contract of insurance placed by a surplus lines broker, the broker shall maintain a written statement as to the diligent efforts by the surplus lines broker or the producer to place the insurance with authorized insurers.

     (c)  The record of each contract shall be kept open at all reasonable times to examination by the commissioner without notice for a period not less than five years following the termination of the contract. [L 1987, c 347, pt of §2; am L 1989, c 207, §7; am L 2002, c 155, §19; am L 2011, c 68, §11]

 

 

     §431:8-313  Surplus lines broker's reports to commissioner.  (a)  Each surplus lines broker shall file with the commissioner on or before March 15, 2011, a verified statement of all surplus lines insurance transacted during 2010.  Each surplus lines broker shall file with the commissioner on or before September 15, 2011, a verified statement of all surplus lines insurance transacted after December 31, 2010, and before July 1, 2011.  After June 30, 2011, each surplus lines broker shall file with the commissioner within forty-five days of the end of each calendar quarter a verified statement of all surplus lines insurance transacted during the calendar quarter as follows:

     (1)  The statement for the quarter ending March 31 shall be filed on or before May 15;

     (2)  The statement for the quarter ending June 30 shall be filed on or before August 15;

     (3)  The statement for the quarter ending September 30 shall be filed on or before November 15; and

     (4)  The statement for the quarter ending December 31 shall be filed on or before February 15.

     (b)  The statement shall be on forms as prescribed and furnished by the commissioner and shall show:

     (1)  Gross amount of premiums for each kind of insurance transacted;

     (2)  Aggregate gross premiums charged, itemized by each state;

     (3)  Aggregate of returned premiums paid to insureds, itemized by each state;

     (4)  Aggregate of net premiums and fees, itemized by each state;

     (5)  Amount of aggregate remitted taxes and fees, itemized by each state; and

     (6)  Additional information as required by the commissioner. [L 1987, c 347, pt of §2; am L 2003, c 212, §47; am L 2011, c 68, §12]

 

 

     §431:8-314  Surplus lines advisory organizations.  (a)  An advisory surplus lines organization of surplus lines brokers may be formed to:

     (1)  Facilitate and encourage compliance by its members with the laws of this State and the rules and regulations of the commissioner relative to surplus lines insurance;

     (2)  Provide means for the examination, which shall remain confidential, of all surplus lines coverage written by its members to determine whether such coverages comply with such laws and regulations;

     (3)  Communicate with organizations of admitted insurers with respect to the proper use of the surplus lines market; and

     (4)  Receive and disseminate to its members information relative to surplus lines coverages.

     (b)  Every such advisory organization shall file with the commissioner:

     (1)  A copy of its constitution, its articles of agreement or association or its certificate of incorporation;

     (2)  A copy of its bylaws, rules and regulations governing its activities;

     (3)  A current list of its members;

     (4)  The name and address of its authorized resident agent upon whom notices or orders of the commissioner or processes issued at the commissioner's direction may be served, and

     (5)  An agreement that the commissioner may examine such advisory organization in accordance with the provisions of subsection (c).

     (c)  The commissioner shall, at least once in every five years, make or cause to be made an examination of each such advisory organization.  The reasonable cost of any such examination shall be paid by the advisory organization upon presentation to it by the commissioner of a detailed account of each cost.  The officers, managers, agents, and employees of such advisory organization may be examined at any time, under oath, and shall exhibit all books, records, accounts, documents, or agreements governing its method of operation.  The commissioner shall furnish two copies of the examination report to the advisory organization examined and shall notify such organization that it may, within twenty days thereof, request a hearing on the report or on any facts or recommendations therein.  If the commissioner finds such advisory organization or any of its members to be in violation of this part, the commissioner may issue an order requiring the discontinuance of such violation. [L 1987, c 347, pt of §2]

 

     §431:8-315  Tax on surplus lines.  (a)  On or before March 15, 2011, each surplus lines broker shall pay to the director of finance, through the commissioner, a premium tax on surplus lines insurance transacted by the broker during 2010.  On or before September 15, 2011, each surplus lines broker shall pay to the director of finance, through the commissioner, a premium tax on surplus lines insurance transacted by the broker after December 31, 2010, and before July 1, 2011.  After June 30, 2011, within forty-five days after the end of each calendar quarter, each surplus lines broker shall pay to the director of finance, through the commissioner, a premium tax on surplus lines insurance transacted by the broker during the calendar quarter for insurance for which this State is the home state of the insured.  The tax rate shall be in the amount of 4.68 per cent of gross premiums, less return premiums, on surplus lines insurance allocated to this State.  The tax rate and fees of other states shall be applied to the gross premiums, less return premiums, allocated to those states.

     As used in this subsection, "gross premiums" means the amount of the policy or coverage premium charged by the insurer in consideration for the insurance contract.  Any charges for policy, survey, inspection, service, or similar fees or other charges added by the broker shall not be considered part of gross premiums.

     (b)  The commissioner shall collect the taxes and fees on independently procured surplus lines insurance and from surplus lines licensees and disburse to the other states the funds earned by each state; provided that the other state has a reciprocal allocation and disbursement procedure for the benefit of this State.  To the extent that other states, where portions of the properties, risks, or exposures reside, have failed to establish a reciprocal allocation and disbursement procedure with this State, the net premium tax collected shall be retained by this State.

     (c)  If a surplus lines policy covers risks or exposures only partially resident in this State, the tax payable shall be computed upon the proportion of the premium which is properly allocable to the risks or exposures located in this State.  The taxes and fees payable to this State on policies that cover risks and exposures only partially resident in this State shall be remitted on the quarterly schedule established by subsection (a) to the home state of the insured for disbursement to this State.

     (d)  The tax on any portion of the premium unearned at the termination of the insurance contract shall be returned to the policyholder.

     (e)  The commissioner may:

     (1)  Enter into a cooperative agreement, reciprocal agreement, or compact with other states to facilitate and provide for the collection, allocation, and disbursement of premium taxes attributable to the placement of surplus lines insurance;

     (2)  Provide for uniform methods of allocation and reporting among surplus lines insurance risk classifications;

     (3)  Conform to the requirements of the federal Nonadmitted and Reinsurance Reform Act of 2010;

     (4)  Share information among states relating to surplus lines insurance premium taxes; and

     (5)  Utilize a method adopted in cooperation with other states to allocate risk and compute the tax due on the portion of premium attributable to each risk classification and to each state where properties, risks, or exposures are located.

     The commissioner shall assess the insured for the cost of the cooperative agreement, reciprocal agreement, or compact to collect and distribute the premium taxes.  Upon application of the insured, the commissioner shall refund the insured for excess payments of taxes received by the State that are the result of the statewide tax rate. [L 1987, c 347, pt of §2; am L 2003, c 212, §48; am L 2006, c 154, §10; am L 2011, c 68, §13]

 

Revision Note

 

  The paragraph defining "gross premiums" was moved from subsection (b) to subsection (a) pursuant to §23G-15.

 

 

     §431:8-316  Penalty for failure to file statement or remit tax.  (a)  If any surplus lines broker fails to:

     (1)  File statements required by section 431:8-313; or

     (2)  Pay the premium tax required by section 431:8-315 when the tax is due,

the surplus lines broker may be liable for a fine of up to $25 for each day of delinquency.

     (b)  The commissioner may:

     (1)  Collect the premium tax required by section 431:8-315 by distraint;

     (2)  Recover the premium tax required by section 431:8-315 and fine for failure to pay the premium tax by instituting an action in any court of competent jurisdiction; or

     (3)  Recover the fine for failure to file the statements required by section 431:8-313 by instituting an action in any court of competent jurisdiction. [L 1987, c 347, pt of §2; am L 2003, c 212, §49; am L 2006, c 154, §11; am L 2011, c 68, §14]

 

 

     §431:8-317  License denial, nonrenewal, suspension, or revocation.  (a)  The commissioner may deny, place on probation, suspend, revoke, or refuse to issue or renew any surplus lines broker's license and may levy a civil penalty in accordance with articles 2 and 3, or any combination of these actions, for any cause specified in any other provision of this chapter, or for any of the following causes:

     (1)  Failure to file statements required by section 431:8-313 or to pay the tax required by section 431:8-315;

     (2)  Failure to keep records or to allow the commissioner to examine the surplus lines broker's records as provided in this article;

     (3)  Removal of office accounts and records from this State during the period in which the accounts are required to be maintained under this article;

     (4)  Any of the causes for which a producer's license may be suspended or revoked under article 9A;

     (5)  Any cause for which issuance of the license could have been refused had it then existed and been known to the commissioner;

     (6)  Wilful violation or knowing participation in the violation of any provision of this code;

     (7)  Obtaining or attempting to obtain a license under this chapter through wilful misrepresentation or fraud, or failure to pass any examination required by section 431:8-324;

     (8)  Misappropriation, conversion to the licensee's own use, or illegally withholding moneys required to be held in a fiduciary capacity;

     (9)  Material misrepresentation with intent to deceive of the terms or effect of any insurance contract, or engagement or intent to engage in any fraudulent transaction;

    (10)  Commission of any unfair practice or fraud as defined in article 13;

    (11)  Conduct of affairs under a license issued pursuant to this chapter in a manner that causes injury and loss to the public;

    (12)  The issuance or purported issuance of any binder as to any insurer named in the binder if the licensee is not authorized to bind the insurer; or

    (13)  Dealing or attempting to deal with insurance or exercising powers relative to insurance outside the scope of the licensee's license.

     (b)  The license of any business entity may be d