I. Transactions Within a Holding Company System. (a) Transactions within a holding company system to which an insurer subject to registration is a party shall be subject to the following standards: (1) The terms shall be fair and reasonable. (2) Charges or fees for services performed shall be reasonable. (3) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied. (4) The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties. (5) The insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (b) The following transactions involving a domestic insurer and any person in its holding company system may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into such transaction at least 30 days prior to entering into the transaction, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within such period: (1) Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments, provided such transactions are equal to or exceed with respect to nonlife insurers, the lesser of 3 percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders; or with respect to life insurers, 3 percent of the insurer's admitted assets; each as of December 31, next preceding. (2) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit provided such transactions are equal to or exceed: (A) with respect to nonlife insurers, the lesser of 3 percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders; (B) with respect to life insurers, 3 percent of the insurer's admitted assets, each as of the 31st day of December, next preceding. (3) Reinsurance agreements or modifications thereto in which the reinsurance premium or a change in the insurer's liabilities equals or exceeds 5 percent of the insurer's surplus as regards policyholders, as of the December 31, next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a non-affiliate, if an agreement or understanding exists between the insurer and non-affiliate that any portion of such assets will be transferred to one or more affiliates of the insurer. (4) All management agreements, service contracts and all cost-sharing arrangements. (5) Any material transactions, specified by rule, which the commissioner determines may adversely affect the interests of the insurer's policyholders. Nothing in this chapter shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law. (c) A domestic insurer may not enter into transactions which are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. (d) The commissioner, in reviewing transactions pursuant to subparagraph I(b), shall consider whether the transactions comply with the standards of subparagraph I(a) and whether they may adversely affect the interests of policyholders. (e) The commissioner shall be notified within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation's voting securities. II. Dividends and Other Distributions. (a) No domestic insurer shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until: (1) Thirty days after the commissioner has received notice of the declaration thereof and has not within such period disapproved such payment; or (2) The commissioner shall have approved such payment within such 30-day period. (b) For the purposes of this paragraph, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds 10 percent of such insurer's surplus as regards policyholders as of the December 31, next preceding. (c) Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner's approval, and such a declaration shall confer no rights upon shareholders until: (1) The commissioner has approved the payment of such dividend or distribution; or (2) The commissioner has not disapproved such payment within the 30-day period referred to above. II-a. All Other Dividends and Distributions. No domestic insurer shall pay any dividend or make any distribution to its shareholders unless the insurer has notified the commissioner of such payment 15 days prior to the payment date. Such notice shall be kept confidential by the commissioner until the payment date of the dividend. The commissioner may order that a dividend not be paid if the commissioner finds that the insurer's surplus as regards policyholders following the payment to shareholders would be inadequate or could lead the insurer to a hazardous financial condition. III. Adequacy of Surplus. For purposes of this chapter in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered: (a) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writing, insurance in force and other appropriate criteria. (b) The extent to which the insurer's business is diversified among several lines of insurance. (c) The number and size of risks insured in each line of business. (d) The extent of the geographical dispersion of the insurer's insured risks. (e) The nature and extent of the insurer's reinsurance program. (f) The quality, diversification and liquidity of the insurer's investment portfolio. (g) The recent past and projected future trend in the size of the insurer's investment portfolio. (h) The surplus as regards policyholders maintained by other comparable insurers. (i) The adequacy of the insurer's reserves. (j) The quality and liquidity of investment in affiliates. The commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his judgment such investment so warrants.
I. Transactions Within a Holding Company System. (a) Transactions within a holding company system to which an insurer subject to registration is a party shall be subject to the following standards: (1) The terms shall be fair and reasonable. (2) Charges or fees for services performed shall be reasonable. (3) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied. (4) The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties. (5) The insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (b) The following transactions involving a domestic insurer and any person in its holding company system may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into such transaction at least 30 days prior to entering into the transaction, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within such period: (1) Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments, provided such transactions are equal to or exceed with respect to nonlife insurers, the lesser of 3 percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders; or with respect to life insurers, 3 percent of the insurer's admitted assets; each as of December 31, next preceding. (2) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit provided such transactions are equal to or exceed: (A) with respect to nonlife insurers, the lesser of 3 percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders; (B) with respect to life insurers, 3 percent of the insurer's admitted assets, each as of the 31st day of December, next preceding. (3) Reinsurance agreements or modifications thereto in which the reinsurance premium or a change in the insurer's liabilities equals or exceeds 5 percent of the insurer's surplus as regards policyholders, as of the December 31, next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a non-affiliate, if an agreement or understanding exists between the insurer and non-affiliate that any portion of such assets will be transferred to one or more affiliates of the insurer. (4) All management agreements, service contracts and all cost-sharing arrangements. (5) Any material transactions, specified by rule, which the commissioner determines may adversely affect the interests of the insurer's policyholders. Nothing in this chapter shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law. (c) A domestic insurer may not enter into transactions which are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. (d) The commissioner, in reviewing transactions pursuant to subparagraph I(b), shall consider whether the transactions comply with the standards of subparagraph I(a) and whether they may adversely affect the interests of policyholders. (e) The commissioner shall be notified within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation's voting securities. II. Dividends and Other Distributions. (a) No domestic insurer shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until: (1) Thirty days after the commissioner has received notice of the declaration thereof and has not within such period disapproved such payment; or (2) The commissioner shall have approved such payment within such 30-day period. (b) For the purposes of this paragraph, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds 10 percent of such insurer's surplus as regards policyholders as of the December 31, next preceding. (c) Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner's approval, and such a declaration shall confer no rights upon shareholders until: (1) The commissioner has approved the payment of such dividend or distribution; or (2) The commissioner has not disapproved such payment within the 30-day period referred to above. II-a. All Other Dividends and Distributions. No domestic insurer shall pay any dividend or make any distribution to its shareholders unless the insurer has notified the commissioner of such payment 15 days prior to the payment date. Such notice shall be kept confidential by the commissioner until the payment date of the dividend. The commissioner may order that a dividend not be paid if the commissioner finds that the insurer's surplus as regards policyholders following the payment to shareholders would be inadequate or could lead the insurer to a hazardous financial condition. III. Adequacy of Surplus. For purposes of this chapter in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered: (a) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writing, insurance in force and other appropriate criteria. (b) The extent to which the insurer's business is diversified among several lines of insurance. (c) The number and size of risks insured in each line of business. (d) The extent of the geographical dispersion of the insurer's insured risks. (e) The nature and extent of the insurer's reinsurance program. (f) The quality, diversification and liquidity of the insurer's investment portfolio. (g) The recent past and projected future trend in the size of the insurer's investment portfolio. (h) The surplus as regards policyholders maintained by other comparable insurers. (i) The adequacy of the insurer's reserves. (j) The quality and liquidity of investment in affiliates. The commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his judgment such investment so warrants.
I. Transactions Within a Holding Company System. (a) Transactions within a holding company system to which an insurer subject to registration is a party shall be subject to the following standards: (1) The terms shall be fair and reasonable. (2) Charges or fees for services performed shall be reasonable. (3) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied. (4) The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties. (5) The insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (b) The following transactions involving a domestic insurer and any person in its holding company system may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into such transaction at least 30 days prior to entering into the transaction, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within such period: (1) Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments, provided such transactions are equal to or exceed with respect to nonlife insurers, the lesser of 3 percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders; or with respect to life insurers, 3 percent of the insurer's admitted assets; each as of December 31, next preceding. (2) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit provided such transactions are equal to or exceed: (A) with respect to nonlife insurers, the lesser of 3 percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders; (B) with respect to life insurers, 3 percent of the insurer's admitted assets, each as of the 31st day of December, next preceding. (3) Reinsurance agreements or modifications thereto in which the reinsurance premium or a change in the insurer's liabilities equals or exceeds 5 percent of the insurer's surplus as regards policyholders, as of the December 31, next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a non-affiliate, if an agreement or understanding exists between the insurer and non-affiliate that any portion of such assets will be transferred to one or more affiliates of the insurer. (4) All management agreements, service contracts and all cost-sharing arrangements. (5) Any material transactions, specified by rule, which the commissioner determines may adversely affect the interests of the insurer's policyholders. Nothing in this chapter shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law. (c) A domestic insurer may not enter into transactions which are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. (d) The commissioner, in reviewing transactions pursuant to subparagraph I(b), shall consider whether the transactions comply with the standards of subparagraph I(a) and whether they may adversely affect the interests of policyholders. (e) The commissioner shall be notified within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation's voting securities. II. Dividends and Other Distributions. (a) No domestic insurer shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until: (1) Thirty days after the commissioner has received notice of the declaration thereof and has not within such period disapproved such payment; or (2) The commissioner shall have approved such payment within such 30-day period. (b) For the purposes of this paragraph, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds 10 percent of such insurer's surplus as regards policyholders as of the December 31, next preceding. (c) Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner's approval, and such a declaration shall confer no rights upon shareholders until: (1) The commissioner has approved the payment of such dividend or distribution; or (2) The commissioner has not disapproved such payment within the 30-day period referred to above. II-a. All Other Dividends and Distributions. No domestic insurer shall pay any dividend or make any distribution to its shareholders unless the insurer has notified the commissioner of such payment 15 days prior to the payment date. Such notice shall be kept confidential by the commissioner until the payment date of the dividend. The commissioner may order that a dividend not be paid if the commissioner finds that the insurer's surplus as regards policyholders following the payment to shareholders would be inadequate or could lead the insurer to a hazardous financial condition. III. Adequacy of Surplus. For purposes of this chapter in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered: (a) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writing, insurance in force and other appropriate criteria. (b) The extent to which the insurer's business is diversified among several lines of insurance. (c) The number and size of risks insured in each line of business. (d) The extent of the geographical dispersion of the insurer's insured risks. (e) The nature and extent of the insurer's reinsurance program. (f) The quality, diversification and liquidity of the insurer's investment portfolio. (g) The recent past and projected future trend in the size of the insurer's investment portfolio. (h) The surplus as regards policyholders maintained by other comparable insurers. (i) The adequacy of the insurer's reserves. (j) The quality and liquidity of investment in affiliates. The commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his judgment such investment so warrants.
