(1) A transaction within an insurance holding company system to which an insurer subject to registration is a party is subject to the following standards:
(a) The terms must be fair and reasonable.
(b) Charges or fees for services performed must be reasonable.
(c) Expenses incurred and payment received must be allocated to the insurer in conformity with customary insurance accounting practices consistently applied.
(d) The books, accounts and records of each party to the transaction must be so maintained as to disclose clearly and accurately the nature and details of the transaction, including accounting information necessary to support the reasonableness of the charges or fees to the respective parties.
(e) The combined capital and surplus of the insurer following any transaction with an affiliate or any shareholder dividend must be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs.
(2) A transaction described in this subsection that involves a domestic insurer and any person in its insurance holding company system may be entered into only if the insurer has notified the Director of the Department of Consumer and Business Services in writing not later than the 30th day before the transaction, or a shorter period allowed by the director, of its intention to enter into the transaction and if the director has not disapproved the transaction within the period. This subsection does not authorize or permit any transaction that, in the case of an insurer not a member of the same insurance holding company system, would be otherwise contrary to law. This subsection applies to the following transactions:
(a) Sales, purchases, exchanges, loans or extensions of credit, guarantees or investments, when the transactions equal or exceed the following:
(A) With respect to insurers not authorized to transact life insurance, the lesser of three percent of the insurer’s allowed assets or 25 percent of the insurer’s combined capital and surplus, each as of the 31st day of December immediately preceding.
(B) With respect to insurers authorized to transact life insurance, three percent of the insurer’s allowed assets, as of the 31st day of December immediately preceding.
(b) Loans or extensions of credit to any person who is not an affiliate, when the insurer makes the loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in any affiliate of the insurer making such loans or extensions of credit. This paragraph applies to such transactions that equal or exceed the following:
(A) With respect to insurers not authorized to transact life insurance, the lesser of three percent of the insurer’s allowed assets or 25 percent of the insurer’s combined capital and surplus, each as of the 31st day of December immediately preceding.
(B) With respect to insurers authorized to transact life insurance, three percent of the insurer’s allowed assets, as of the 31st day of December immediately preceding.
(c) Reinsurance agreements or modifications thereto in which the reinsurance premium or a change in the liabilities of the insurer equals or exceeds five percent of the insurer’s combined capital and surplus, as of the 31st day of December immediately preceding, including those agreements that may require as consideration the transfer of assets from an insurer to a nonaffiliate if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer.
(d) All management agreements, service contracts and all cost-sharing arrangements.
(e) Any material transactions, as specified by rule, that the director determines may adversely affect the interests of the policyholders of the insurer.
(3) A domestic insurer may not enter into one or more transactions during any 12-month period that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise.
(4) In reviewing a transaction pursuant to subsection (2) of this section, the director must consider whether the transaction complies with the standards set forth in subsection (1) of this section and whether the transaction may adversely affect the interests of policyholders.
(5) A domestic insurer shall notify the director not later than the 30th day after any investment of the domestic insurer in any one corporation if the total investment in the corporation by the insurance holding company system exceeds 10 percent of the voting securities of the corporation. [1993 c.447 §47]
Section: Previous 732.562 732.564 732.565 732.566 732.568 732.570 732.572 732.574 732.575 732.576 732.578 732.580 732.582 732.584 732.585 NextLast modified: August 7, 2008