20-220.01. Hazardous financial condition; determination; order
A. The director may consider the following standards, either singly or a combination of two or more, in determining whether the continued operation of any insurer transacting an insurance business in this state may be deemed to be hazardous to its policyholders or creditors or the general public:
1. Adverse findings reported in financial condition and market conduct examination reports, audit reports and actuarial opinions, reports or summaries.
2. The national association of insurance commissioners insurance regulatory information system and its other financial analysis solvency tools and reports.
3. Whether the insurer has made adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the insurer, when considered in light of the assets held by the insurer with respect to the reserves and related actuarial items, including investment earnings on the assets, and the considerations anticipated to be received and retained under the policies and contracts.
4. The ability of an assuming reinsurer to perform and whether the insurer's reinsurance program provides sufficient protection for the insurer's remaining surplus after taking into account the insurer's cash flow and the classes of business written as well as the financial condition of the assuming reinsurer.
5. Whether the insurer's operating loss in the last twelve-month period or any shorter period of time, including net capital gain or loss, change in nonadmitted assets and cash dividends paid to shareholders, is greater than fifty per cent of the insurer's remaining surplus as regards policyholders in excess of the minimum required.
6. Whether the insurer's operating loss in the last twelve-month period or any shorter period of time, excluding net capital gains, is greater than twenty per cent of the insurer's remaining surplus as regards policyholders in excess of the minimum required.
7. Whether a reinsurer, an obligor or any entity within the insurer's insurance holding company system is insolvent, threatened with insolvency or delinquent in payment of its monetary or other obligations and that, in the director's opinion, may affect the insurer's solvency.
8. Contingent liabilities, pledges or guaranties that either individually or collectively involve a total amount that, in the director's opinion, may affect the insurer's solvency.
9. Whether any affiliate or controlling person of an insurer is delinquent in the transmitting to or payment of net premiums to the insurer.
10. The age and collectability of receivables.
11. Whether the management of an insurer, including officers, directors or other persons who directly or indirectly control the operation of the insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in the position.
12. Whether the management of an insurer has failed to respond to inquiries relative to the condition of the insurer or has furnished false and misleading information concerning an inquiry.
13. Whether the insurer has failed to meet financial and holding company filing requirements in the absence of a reason satisfactory to the director.
14. Whether the management of an insurer either has filed any false or misleading sworn financial statement, has released false or misleading financial statements to lending institutions or to the general public, has made a false or misleading entry or has omitted an entry of material amount in the insurer's books.
15. Whether the insurer has grown so rapidly and to an extent that the insurer lacks adequate financial and administrative capacity to meet its obligations in a timely manner.
16. Whether the insurer has experienced or will experience in the foreseeable future cash flow or liquidity problems.
17. Whether the management of an insurer has established reserves that do not comply with minimum standards established by state insurance laws, rules, statutory accounting standards, sound actuarial principles and standards of practice.
18. Whether the management of an insurer persistently engages in material under reserving that results in adverse development.
19. Whether transactions among affiliates, subsidiaries or controlling persons for which the insurer receives assets or capital gains, or both, do not provide sufficient value, liquidity or diversity to assure the insurer's ability to meet its outstanding obligations as they mature.
20. Any other finding determined by the director to be hazardous to the insurer's policyholders or creditors or the general public.
B. For the purposes of making a determination of an insurer's financial condition under this section, the director may:
1. Disregard any credit or amount receivable resulting from transactions with a reinsurer that is insolvent, impaired or otherwise subject to a delinquency proceeding.
2. Make appropriate adjustments including disallowance to asset values attributable to investments in or transactions with parents, subsidiaries or affiliates consistent with the accounting practices and procedures manual adopted by the national association of insurance commissioners, state laws and rules.
3. Refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor.
4. Increase the insurer's liability in an amount equal to any contingent liability, pledge or guarantee not otherwise included if there is a substantial risk that the insurer will be called on to meet the obligation undertaken within the next twelve-month period.
C. If the director determines that the continued operation of the insurer licensed to transact business in this state may be hazardous to its policyholders or creditors or the general public, in addition to any other action authorized by this title, the director may issue an order requiring the insurer to:
1. Reduce the total amount of present and potential liability for policy benefits by reinsurance.
2. Reduce, suspend or limit the volume of business being accepted or renewed.
3. Reduce general insurance and commission expenses by specified methods.
4. Increase the insurer's capital and surplus.
5. Suspend or limit the declaration and payment of dividends by an insurer to its stockholders or its policyholders.
6. File reports in a form acceptable to the director concerning the market value of an insurer's assets.
7. Limit or withdraw from certain investments or discontinue certain investment practices to the extent the director deems necessary.
8. Document the adequacy or premium rates in relation to the risks insured.
9. In addition to regular annual statements, file interim financial reports on the form adopted by the national association of insurance commissioners or in a format prescribed by the director.
10. Correct corporate governance practice deficiencies and adopt and use governance practices acceptable to the director.
11. Provide a business plan to the director in order to continue to transact business in this state.
12. Notwithstanding any other law limiting the frequency or amount of premium rate adjustments, adjust rates for any nonlife insurance product written by the insurer that the director considers necessary to improve the financial condition of the insurer.
D. A hearing demanded by an insurer aggrieved by an order of the director as prescribed by rule shall be closed to the public but the hearing shall be open to the public if requested according to section 20-164, subsection A.
E. This section does not limit or supersede any provision of this title or any other provision of law pertaining to the powers of the director or the regulation of the financial condition of insurers transacting insurance in this state.
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