Transactions Within Holding Company System; Certain Insurers as Party; Standards; Prior Approval; Transactions Entered Into by Domestic Insurers; Notification; Separate Transactions; Review by Commissioner; Total Investment Exceeding 10% of Corporation's Voting Securities - Mich. Comp. Laws Section 500.1341
Legal Research Home > Michigan Laws > Insurance Code Of 1956 > Transactions Within Holding Company System; Certain Insurers as Party; Standards; Prior Approval; Transactions Entered Into by Domestic Insurers; Notification; Separate Transactions; Review by Commissioner; Total Investment Exceeding 10% of Corporation's Voting Securities - Mich. Comp. Laws Section 500.1341
(1) Transactions within a holding company system to which an insurer domiciled in this state or any foreign insurer whose written insurance premium in this state for each of the most recent 3 years exceeds the premiums written in its state of domicile and whose written premium in this state was 20% or more of its total written premium in each of the most recent 3 years is a party or with respect to which the assets or liabilities of these insurers are affected are subject to all of the following standards:
(a) The terms shall be fair and reasonable.
(b) The charges or fees for services performed shall be reasonable.
(c) The expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied.
(d) The books, accounts, and records of each party shall be so maintained as to clearly and accurately disclose the precise nature and details of the transactions including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties.
(e) 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 so that the insurer continues to comply with section 403.
(2) The commissioner's prior approval shall be required for sales, purchases, exchanges, loans, extensions of credit, or investments, involving 5% or more of the insurer's assets at the immediately preceding year's end, between a domestic controlled insurer and any person in its holding company system.
(3) A domestic insurer and any person in its holding company system shall not enter into the following transactions with each other unless the insurer has notified the commissioner in writing of its intention to enter into the transaction at least 30 days, or a shorter period as the commissioner allows, prior to entering into the transaction and the commissioner has not disapproved it within that period:
(a) Sales, purchases, exchanges, loans, extensions of credit, or investments, provided the transaction is equal to or greater than the lesser of 3% of the insurer's assets or 25% of capital and surplus as of December 31 of the immediately preceding year.
(b) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit provided the transaction is equal to or greater than the lesser of 3% of the insurer's assets or 25% of capital and surplus as of December 31 of the immediately preceding year.
(c) Reinsurance treaties or agreements.
(d) Rendering of services on a regular systematic basis.
(e) Any material transactions, specified by regulation, that the commissioner determines may adversely affect the interests of the insurer's policyholders.
(4) Nothing contained in subsection (3) shall be considered to authorize or permit any transactions that, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law.
(5) A domestic insurer shall not enter into transactions that 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 otherwise occur. If the commissioner determines that the separate transactions were entered into over any relevant period for that purpose, he or she may exercise his or her authority under section 1371.
(6) In reviewing a transaction pursuant to subsection (2), the commissioner shall consider whether the transaction complies with the standards set forth in subsection (1) and whether it may otherwise adversely affect the interests of policyholders, creditors, or the public.
(7) The commissioner shall be notified within 30 days of any investment of the domestic insurer in any 1 corporation if the total investment in the corporation by the insurance holding company system exceeds 10% of the corporation's voting securities.
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Last modified: March 17, 2013