Senate Bill No. 351
(By Senators Minard and Helmick)
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[Introduced March 10, 1993; referred to the Committee
on Banking and Insurance; and then to the Committee on
Finance.]
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A BILL to repeal sections five and five-a, article three, chapter
thirty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; to amend and reenact section
nine, article two of said chapter; to amend and reenact
sections one and five-b, article three of said chapter; to
amend and reenact sections fifteen and fifteen-a, article
four of said chapter; to amend and reenact section four,
article twenty-four of said chapter; to amend and reenact
section six, article twenty-five of said chapter; to amend
and reenact section two, article twenty-seven of said
chapter; to further amend said article by adding thereto a
new section, designated section fourteen; to amend and
reenact section eleven, article thirty-one of said chapter;
to amend and reenact section four, article thirty-four-a of
said chapter; to amend and reenact article thirty-six of
said chapter; and to further amend said chapter by adding
thereto a new article, designated article thirty-eight, all
relating to insurance; insurance commissioner; examination
of insurers, agents, brokers and solicitors; access to
books, records, etc.; licensing, fees and taxation of
insurers; license required; capital and surplus
requirements; general provisions; reinsurance; credit for
reinsurance; hospital service corporations, medical service
corporations, dental service corporations and health service
corporations; exemptions; applicability of insurance laws;
health care corporations; supervision and regulation by
insurance commissioner; exemption from insurance laws;
insurance holding company systems; definitions; regulatory
authority; captive insurance; reinsurance; risk retention
act; risk retention groups not chartered in this state;
notice and registration requirements of purchasing groups;
standards and commissioner's authority for companies deemed
to be in hazardous financial condition; commissioner's
authority; business transacted with producer-controlled
property/casualty insurer act; short title; definitions;
applicability; minimum standards; disclosure; penalties;
effective date; reinsurance intermediary act; short title;
definitions; licensure; required contract provisions
reinsurance intermediary-brokers; books and records
reinsurance intermediary-brokers; duties of insurers
utilizing the services of a reinsurance intermediary-broker;
required contract provisions reinsurance intermediary-managers; prohibited acts; duties of reinsurers utilizing
the services of a reinsurance intermediary-manager;
examination authority; penalties and liabilities; regulatory
authority; and effective date.
Be it enacted by the Legislature of West Virginia:
That sections five and five-a, article three, chapter
thirty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, be repealed; that section nine,
article two of said chapter be amended and reenacted; that
sections one and five-b, article three of said chapter be amended
and reenacted; that sections fifteen and fifteen-a, article four
of said chapter be amended and reenacted; that section four,
article twenty-four of said chapter be amended and reenacted;
that section six, article twenty-five of said chapter be amended
and reenacted; that section two, article twenty-seven of said
chapter be amended and reenacted; that said article be further
amended by adding thereto a new section, designated section
fourteen; that section eleven, article thirty-one of said chapter
be amended and reenacted; that section four, article
thirty-four-a of said chapter be amended and reenacted; that
article thirty-six of said chapter be amended and reenacted; and
that said chapter be further amended by adding thereto a new
article, designated article thirty-eight, all to read as follows:
ARTICLE 2. INSURANCE COMMISSIONER.
§33-2-9. Examination of insurers, agents, brokers and
solicitors; access to books, records, etc.
(a) The purpose of this section 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 section are intended to enable the commissioner to adopt
a flexible system of examinations which directs resources as may
be deemed appropriate and necessary for the administration of the
insurance and insurance related laws of this state.
(b)(1) The commissioner, the commissioner's deputies, other
employees, appointed examiners or other appointed individuals who
are not employees of the department of insurance, may conduct an
examination under this section of any company as often as the
commissioner in his or her sole discretion deems appropriate.
The commissioner, the commissioner's deputies, other employees,
appointed examiners or other appointed individuals who are not
employees of the department of insurance, shall at least once
every three years visit each domestic insurer and thoroughly
examine its financial condition and methods of doing business and
ascertain whether it has complied with all the laws and
regulations of this state. The commissioner, the commissioner's
deputies, other employees, appointed examiners or other appointed
individuals who are not employees of the department of insurance,
shall at a minimum conduct an examination of every foreign or
alien insurer licensed in this state not less frequently than
once every five years. The examination of an alien insurer maybe limited to its United States business. In scheduling and
determining the nature, scope and frequency of the examinations,
the commissioner may 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. The commissioner may
examine the affairs of any insurer applying for a license to
transact any insurance business in this state.
(2) For purposes of completing an examination of any company
under this section, the commissioner may examine or investigate
any person, or the business of any person, in so far as the
examination or investigation is, in the sole discretion of the
commissioner, necessary or material to the examination of the
company.
(3) In lieu of an examination under this section of any
foreign or alien insurer licensed in this state, the commissioner
may accept an examination report on the company as prepared by
the insurance department for the company's state of domicile or
port-of-entry state until the first day of January, one thousand
nine hundred ninety-four. Thereafter, such reports may only be
accepted if:
(A) The insurance department was at the time of the
examination accredited under the national association ofinsurance commissioners' financial regulation standards and
accreditation program; or
(B) The examination is performed under the supervision of an
accredited insurance department or with the participation of one
or more examiners who are employed by such an accredited state
insurance department and who, after a review of the examination
work papers and report, state under oath that the examination was
performed in a manner consistent with the standards and
procedures required by their insurance department;
(C) The commissioner may also cause to be examined at such
times as he or she deems necessary the books, records, papers,
documents, correspondence and methods of doing business of any
agent, broker, excess lines broker or solicitor licensed by this
state. For these purposes the commissioner, the commissioner's
deputies, other employees, appointed examiners or other appointed
individuals who are not employees of the department of insurance
shall have free access to all books, records, papers, documents
and correspondence of all the agents, brokers, excess lines
brokers and solicitors wherever the books, records, papers,
documents and records are situate. The commissioner may revoke
the license of any agent, broker, excess lines broker or
solicitor who refuses to submit to such examination;
(D) In addition to conducting an examination, the
commissioner, the commissioner's deputies, other employees,
appointed examiners or other individuals appointed by the
commissioner who are not employees of the department of insurancemay, as the commissioner deems necessary, analyze or review any
phase of the operations or methods of doing business of an
insurer, agent, broker, excess lines broker, solicitor or other
individual or corporation transacting or attempting to transact
an insurance business in the state of West Virginia. The
commissioner may use the full resources provided by this section
in carrying out these responsibilities, including any personnel
and equipment provided by this section as the commissioner deems
necessary.
(c)(1) 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 examiner
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 any
other guidelines or procedures as the commissioner may deem
appropriate.
(2) Every company or person from whom information is sought,
its officers, directors and agents must provide to the examiners
appointed under subdivision (1) 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 must facilitate the
examination and aid in the examination so far 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, revocation, refusal 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 proceedings for suspension, revocation,
refusal, or nonrenewal of any license or authority shall be
conducted pursuant to section eleven, article two of this
chapter.
(3) The commissioner, the commissioner's deputies, other
employees, appointed examiners, or other appointed individuals
who are not employees of the department of insurance shall have
the power to issue subpoenas, to administer oaths and to examine
under oath any person as to any matter pertinent to the
examination, analysis or review. The subpoenas shall be enforced
pursuant to the provisions of section six, article two of this
chapter.
(4) When making an examination, analysis or review under
this section, 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 which is the subject of the
examination, analysis or review.
(5) Nothing contained in this section may be construed to
limit the commissioner's authority to terminate or suspend any
examination, analysis or review in order to pursue other legal or
regulatory action pursuant to the insurance laws of this state.
The commissioner, the commissioner's deputies, other employees,
appointed examiners or other appointed individuals who are not
employees of the department of insurance may at any time testify
and offer other proper evidence as to information secured during
the course of an examination, analysis or review, whether or not
a written report of the examination has at that time either been
made, served or filed in the commissioner's office.
(6) Nothing contained in this section may 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, analysis or review in the furtherance of any legal
or regulatory action which the commissioner may, in his or her
sole discretion, deem appropriate. An examination report, when
filed, shall be admissible in evidence in any action or
proceeding brought by the commissioner against an insurance
company, its officers or agents and shall be prima facie evidence
of the facts stated therein.
(d)(1) All examination reports shall be comprised of only
facts appearing upon the books, records or other documents of the
company, its agents or other persons examined or as ascertainedfrom the testimony of its officers or agents or other persons
examined concerning its affairs and any conclusions and
recommendations the examiners find reasonably warranted from the
facts.
(2) No later than sixty days following completion of the
examination, the examiner in charge shall file with the
commissioner a verified written report of examination under oath.
Upon receipt of the verified report, the commissioner shall
transmit the report to the company examined, together with a
notice which shall afford the company examined a reasonable
opportunity of not more than ten days to make a written
submission or rebuttal with respect to any matters contained in
the examination report.
(3) 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:
(A) Adopting the examination report as filed or with
modification or corrections. If the examination report reveals
that the company is operating in violation of any law, rule or
prior order of the commissioner, the commissioner may order the
company to take any action the commissioner considers necessary
and appropriate to cure such violation; or
(B) Rejecting the examination report with directions to the
examiners to reopen the examination for purposes of obtainingadditional data, documentation or information and refiling
pursuant to subdivision (2) above; or
(C) Calling for an investigatory hearing with no less than
twenty days notice to the company for purposes of obtaining
additional documentation, data, information and testimony.
(4)(A) All orders entered pursuant to paragraph (A),
subdivision (3) of this subsection 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 section fourteen, article two of this
chapter and shall be served upon the company by certified mail,
together with a copy of the adopted examination report. Within
thirty days of the issuance of the adopted report, the company
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.
(B) Any hearing conducted under paragraph (C), subdivision
(3) of this subsection by the commissioner or the commissioner's
authorized representative shall be conducted as a nonadversarial
confidential investigatory proceeding as 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 by the written submission or rebuttal of thecompany. Within twenty days of the conclusion of any such
hearing, the commissioner shall enter an order pursuant to
paragraph (A), subdivision (3) of this subsection.
(i) The commissioner may not appoint an examiner as an
authorized representative to conduct the hearing. The hearing
shall proceed expeditiously with discovery by the company limited
to the examiner's workpapers which 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 commissioner, the company 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.
Nothing contained in this section shall require the
commissioner to disclose any information or records which would
indicate or show the existence or content of any investigation or
activity of a criminal justice agency.
(ii) The hearing shall proceed with the commissioner or the
commissioner's representative posing questions to the persons
subpoenaed. Thereafter the company and the department may
present testimony relevant to the investigation. Cross
examination may be conducted only by the commissioner or the
commissioner's representative. The company and the commissioner
shall be permitted to make closing statements and may berepresented by counsel of their choice.
(5)(A) Upon the adoption of the examination report under
paragraph (A), subdivision (3) of this subsection, the
commissioner may continue to hold the content of the examination
report as private and confidential information for a period of
ninety days except to the extent provided in subdivision (6),
subsection (c) of this section. Thereafter, the commissioner may
open the report for public inspection so long as no court of
competent jurisdiction has stayed its publication.
(B) Nothing contained in this section may 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 or the results of any
analysis or review to the insurance department of this or any
other 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 the agency or office receiving the report or matters
relating thereto agrees in writing to hold it confidential and in
a manner consistent with this section.
(C) In the event the commissioner determines that regulatory
action is appropriate as a result of any examination, analysis or
review, he or she may initiate any proceedings or actions as
provided by law.
(6) 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,analysis or review made under this section must be given
confidential treatment and are not subject to subpoena and may
not be made public by the commissioner or any other person,
except to the extent provided in subdivision (5) of this section.
Access may also be granted to the national association of
insurance commissioners. The parties must agree in writing prior
to receiving the information to provide to it the same
confidential treatment as required by this section, unless the
prior written consent of the company to which it pertains has
been obtained.
(e) 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 section. 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.
Notwithstanding the requirements of this subsection, the
commissioner may retain from time to time, on an individualbasis, qualified actuaries, certified public accountants or other
similar individuals who are independently practicing their
professions, even though these persons may from time to time be
similarly employed or retained by persons subject to examination
under this section.
(f) Personnel conducting examinations, analyses or reviews
of either a domestic, foreign or alien insurer shall be
compensated for each day worked at a rate set by the
commissioner. The personnel shall also be reimbursed for their
travel and living expenses at the rate set by the commissioner.
Other individuals who are not employees of the department of
insurance shall all be compensated for their work, travel and
living expenses at rates approved by the commissioner, or as
otherwise provided by law. As used in this section the costs of
an examination, analysis or review means:
(1) The entire compensation for each day worked by all
personnel, including those who are not employees of the
department of insurance, the conduct of such examination,
analysis or review calculated as hereinbefore provided;
(2) Travel and living expenses of all personnel, including
those who are not employees of the department of insurance,
directly engaged in the conduct of the examination, analysis or
review calculated at the rates as hereinbefore provided for;
(3) All other incidental expenses incurred by or on behalf
of the personnel in the conduct of any authorized examination,
analysis or review. All insurers subject to the provisions ofthis section of the code shall annually pay to the commissioner
on or before the first day of July, one thousand nine hundred
ninety-one and every first day of July thereafter an examination
assessment fee of eight hundred dollars. Four hundred fifty
dollars of this fee shall be paid to the treasurer of the state
to the credit of a special revolving fund to be known as the
"Commissioner's Examination Revolving Fund" which is hereby
established and three hundred fifty dollars shall be paid to the
treasurer of the state. The commissioner may at his discretion,
upon notice to the insurers subject to this section, increase
this examination assessment fee or levy an additional examination
assessment fee of two hundred fifty dollars. In no event may the
total examination assessment fee including any additional
examination assessment fee levied exceed one thousand five
hundred dollars per insurer in any calendar year. The moneys
collected by the commissioner from an increase or additional
examination assessment fee shall be paid to the treasurer of the
state to be credited to the "Commissioner's Examination Revolving
Fund." Any funds expended or obligated by the commissioner from
the "Commissioner's Examination Revolving Fund" may be expended
or obligated solely for defrayment of the costs of examinations,
analyses or reviews of the financial affairs and business
practices of insurance companies, agents, brokers, excess lines
brokers, solicitors or other individuals or corporations
transacting or attempting to transact an insurance business in
this state made by the commissioner pursuant to this section orfor the purchase of equipment and supplies, travel, education and
training for the commissioner's deputies, other employees and
appointed examiners necessary for the commissioner to fulfill the
statutory obligations created by this section. The commissioner
may require other individuals who are not employees of the
department of insurance who have been appointed by the
commissioner to conduct or participate in the examination,
analysis or review of insurers, agents, brokers, excess lines
brokers, solicitors or other individuals or corporations
transacting or attempting to transact an insurance business in
this state to bill and receive payments directly from the
entities or individuals being examined, analyzed or reviewed for
their work, travel and living expenses as previously provided for
in this section. For purposes of this section, "insurance
company" includes any domestic or foreign stock company, mutual
company, mutual protective association, farmers mutual fire
companies, fraternal benefit society, reciprocal or inter-
insurance exchange, nonprofit medical care corporation,
nonprofit health care corporation, nonprofit hospital service
association, nonprofit dental care corporation, health
maintenance organization, captive insurance company, risk
retention group or other insurer, regardless of the type of
coverage written, benefits provided or guarantees made by each.
(g)(1) No cause of action may arise nor may any liability be
imposed against the commissioner, the commissioner's deputies,
other employees, appointed examiners or other appointedindividuals who are not employees of the department of insurance
for any statements made or conduct performed in good faith while
carrying out the provisions of this section.
(2) No cause of action may arise, nor may any liability be
imposed against any person for the act of communicating or
delivering information or data to the commissioner or the
commissioner's deputies, other employees, appointed examiners or
other appointed individuals who are not employees of the
department of insurance pursuant to an examination, analysis or
review made under this section, if the act of communication or
delivery was performed in good faith and without fraudulent
intent or the intent to deceive.
(3) A person identified in subdivision (1) of this section
is entitled to an award of attorney's fees and costs if he or she
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 provisions of this section and the party
bringing the action was not substantially justified in doing so.
For 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.
(4) This subsection does not abrogate or modify in any way
any constitutional immunity or common law or statutory privilege
or immunity heretofore enjoyed by any person identified in
subdivision (1) of this section.
ARTICLE 3. LICENSING, FEES AND TAXATION OF INSURERS.
§33-3-1. License required.
(a) No person may act as an insurer and no insurer may
transact insurance in West Virginia except as authorized by a
valid license issued by the commissioner, except as to such
transactions as are expressly otherwise provided for in this
chapter.
(b) No
such license may be required for an insurer, formerly
holding a valid license, to enable it to investigate and settle
losses under its policies lawfully written in West Virginia while
such the license was in effect, or to liquidate such assets and
liabilities of the insurer
(other than the collection of new
premiums) as may have resulted from its former authorized
operations in West Virginia:
Provided,
That nothing herein
allows an insurer to issue new policies or renew policies of
insurance or collect premiums on those policies unless the
insurer is authorized by a valid license issued by the
commissioner, except as to the transactions that are otherwise
provided for in this chapter.
(c) An insurer not transacting new insurance business in
West Virginia but continuing collection of collecting premiums on
and servicing of policies remaining in force as to residents of
or risks located in West Virginia, and where the policies were
originally issued on nonresidents of or risks located outside of
this state, is transacting insurance in West Virginia for the
purpose of premium and annuity tax requirements but is not
required to have a license therefor.
(d) A domestic insurer or a foreign insurer from offices or
by personnel or facilities located in this state shall not
solicit insurance applications or otherwise transact insurance in
another state or country unless it holds a subsisting license
granted to it by the commissioner authorizing it to transact the
same kind or kinds of insurance in this state.
(e) Any officer, director, agent, representative or employee
of any insurer who willfully authorizes, negotiates, makes or
issues any insurance contract in violation of this section is
guilty of a misdemeanor, and, upon conviction thereof, shall be
fined not more than ten thousand dollars, or imprisoned in the
county jail not more than one year, or both fined and imprisoned.
§33-3-5b. Capital and surplus requirements.
(a) No insurer shall hereafter be licensed to transact the
business of insurance in the state of West Virginia unless it has
fully paid in capital stock, if a stock insurer, or surplus, if
a mutual insurer, of at least one million dollars. In addition,
each such insurer shall have and maintain additional surplus
funds of at least one million dollars:
Provided,
That insurers
duly licensed to transact insurance in West Virginia prior to the
effective date of this section whose capital and surplus
requirements are increased by virtue of this section shall have
until the first day of January, one thousand nine hundred ninety-
three, to meet such increased requirements. Such capital and
surplus shall be unencumbered.
(b) The commissioner, may for the protection of thepolicyholders and the general public of this state, require an
insurer to maintain funds in excess of the amounts required by
subsection (a) of this section, due to the amount, kind or
combination of kinds of insurance transacted by the insurer. Any
additional amounts required shall be based upon all the kinds of
insurance transacted by the insurer in all areas in which it
operates or proposes to operate, whether or not only a portion of
the kinds of insurance are to be transacted in this state.
Failure of an insurer to maintain funds as ordered by the
commissioner is grounds for suspension, revocation, refusal or
nonrenewal of the insurer's license.
(c) An order issued pursuant to the provisions of this
section is subject to review pursuant to applicable state
administrative proceedings under article two of this chapter.
ARTICLE 4. GENERAL PROVISIONS.
§33-4-15. Reinsurance.
(a) An insurer shall reinsure its risks, or any part
thereof, only in solvent insurers having surplus to policyholders
not less in amount than the paid-in capital required under this
chapter of a stock insurer licensed to transact like kinds of
insurance complying with the capital and surplus requirements of
section five-b, article three of this chapter.
(b) Credit for reinsurance shall be governed by the
provisions of sections fifteen-a and fifteen-b of this article.
Credit shall not be allowed unless the reinsurance is payable by
the assuming insurer on the basis of the liability of the cedinginsurer under the contracts reinsured without diminution because
of the insolvency of the ceding insurer nor unless under the
reinsurance contract the liability for the reinsurance is assumed
by the assuming insurer or insurers as of the same effective
date.
(c) Any licensed insurer may accept reinsurance for the same
kinds of insurance and within the same limits as it is authorized
to transact direct insurance.
(d) An A licensed insurer may not reinsure all or
substantially all of its risks on property or lives located in
West Virginia, or substantially all of a major class thereof,
unless the reinsurance agreement be filed with and approved by
the commissioner with another insurer by an assumption
reinsurance agreement:
Provided,
That the agreement shall not
become effective unless filed in advance with and approved in
writing by the commissioner.
(e) The commissioner shall approve such agreement within a
reasonable time after the filing unless he or she finds that it
is inequitable to the licensed insurer, its owners or its
policyholders or would substantially reduce the protection or
service to its policyholders. If the commissioner does not
approve the agreement, he or she shall so notify the insurer in
writing specifying his or her reasons therefor.
(f) "Assumption reinsurance agreement" means any contract
which both: (1) Transfers insurance obligations and/or risks of
existing or in-force contracts of insurance from a transferringinsurer to an assuming insurer; and (2) is intended to effect a
novation of the transferred contract of insurance with the result
that the assuming insurer becomes directly liable to the
policyholders of the transferring insurer and the transferring
insurer's insurance obligations and/or risks under the contracts
are extinguished.
(g) A filing may not be made pursuant to this section unless
the reinsurance agreement is certified under oath by responsible
officers of the reinsurer and the reinsured to contain the entire
agreement between the parties to the reinsurance agreement.
(h) The commissioner may promulgate reasonable rules
pursuant to chapter twenty-nine-a of this code for the
implementation and administration of the provisions of this
section to include, but not be limited to, the type of assumption
agreements subject to the provisions of this section, their
content and the standards the commissioner may utilize in
reviewing the agreements.
(i) Any insurer subject to this section is also subject to
the provisions of article thirty-eight of this chapter.
§33-4-15a. Credit for reinsurance.
(a) For purposes of this section, an "accredited reinsurer"
is one which:
(1) Has filed an application for accreditation and received
a letter of accreditation from the commissioner;
(2) Is licensed to transact insurance or reinsurance in at
least one of the fifty states of the United States or theDistrict of Columbia or, in the case of a United States branch of
an alien assuming insurer, is entered through and licensed to
transact insurance or reinsurance in at least one of the fifty
states of the United States or the District of Columbia;
(3) Has filed with the application a certified statement
that the company submits to this state's jurisdiction and that
the company will comply with the laws, rules and regulations of
the state of West Virginia;
(4) Has filed with the application a certified statement
that the company submits to the examination authority granted the
commissioner by section nine, article two of this chapter and
will pay all examination costs and fees as required by that
section;
(5) Has filed with the application a copy of its most recent
annual statement in a form consistent with the requirements of
subdivision (8) of this subsection and a copy of its last audited
financial statement;
(6) Has filed any other information the commissioner
requests to determine that the company qualifies for
accreditation under this section;
(7) Has remitted the applicable processing fee with its
application for accreditation;
(8) Files with the commissioner after initial accreditation
on or before the first day of March of each year a true statement
of its financial condition, transactions and affairs as of the
preceding thirty-first day of December. Such The statement shallbe on the appropriate national association of insurance
commissioners annual statement blank; shall be prepared in
accordance with the national association of insurance
commissioners annual statement instructions; and shall follow the
accounting practices and procedures prescribed by the national
association of insurance commissioners accounting practices and
procedures manual as amended. Such The statement shall be
accompanied by the applicable annual statement filing fee. The
commissioner may grant extensions of time for filing of this
annual statement upon application by the accredited reinsurer;
and
(9) Files with the commissioner after initial accreditation
by the first day of June of each year a copy of its audited
financial statement for the period ending the preceding thirty-
first day of December.
(b) If the commissioner determines that the assuming insurer
has failed to continue to meet any of these qualifications, he or
she may upon written notice and hearing, as prescribed by section
thirteen, article two of this chapter, revoke an assuming
insurer's accreditation. Credit shall not be allowed to a ceding
insurer if the assuming insurers' accreditation has been revoked
by the commissioner after notice and hearing.
(c) Credit for reinsurance shall be allowed a domestic
ceding insurer or any foreign or alien insurer transacting
insurance in West Virginia that is domiciled in a jurisdiction
that employs standards regarding credit for reinsurance that arenot substantially similar to those applicable under this article
as either an asset or a deduction from liability on account of
reinsurance ceded only when the reinsurer meets one of the
following requirements:
(1) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer which is licensed to transact insurance or
reinsurance in this state.
(2) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer which is accredited as a reinsurer in this
state prior to the thirty-first day of December of the year for
which the ceding insurer is claiming a credit for reinsurance to
the effective date of the reinsurance contract.
(3) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer which is domiciled and licensed in, or in the
case of a United States branch of an alien assuming insurer, is
entered through one of the fifty states of the United States or
the District of Columbia and which employs standards regarding
credit for reinsurance substantially similar to those applicable
under this statute, and the ceding insurer provides evidence
suitable to the commissioner that the assuming insurer:
(A) Maintains a surplus as regards policyholders in an
amount not less than twenty million dollars:
Provided,
That the
requirements of this paragraph do not apply to reinsurance ceded
and assumed pursuant to pooling arrangements among insurers in
the same holding company system; and
(B) The ceding insurer provides the commissioner with acertified statement from the assuming insurer that the assuming
insurer submits to the authority of this state to examine its
books and records granted the commissioner by section nine,
article two of this chapter and will pay all examination costs
and fees as required by that section; and
(C) The reinsurer complies with the provisions of
subdivision (6), subsection (c) herein.
(4) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer which maintains a trust fund as required by
subsection (d) herein in a qualified United States financial
institution, as defined by this section, for the payment of the
valid claims of its United States policyholders and ceding
insurers, their assigns and successors in interest, and complies
with the provisions of subdivision (6) herein.
(5) Credit shall be allowed when the reinsurance is ceded to
an assuming insurer not meeting the requirements of subdivisions
(1) through (4), subsection (c) of this section, but only with
respect to the insurance of risks located in jurisdictions where
such reinsurance is required by applicable law or regulation of
that jurisdiction.
(6) If the assuming insurer is not licensed or accredited to
transact insurance or reinsurance in this state, the credit
permitted by subdivisions (3) and (4) of this subsection shall
not be allowed unless the assuming insurer agrees in the
reinsurance agreements:
(A) That in the event of the failure of the assuming insurerto 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 such court
jurisdiction, and shall abide by the final decision of such court
or of any appellate court in the event of an appeal; and
(B) To designate the secretary of state 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 company. Such Process shall be served upon the secretary
of state, or accepted by him or her, in the same manner as
provided for service of process upon unlicensed insurers under
section thirteen of this article:
Provided,
That this provision
is not intended to conflict with or override the obligation of
the parties to a reinsurance agreement to arbitrate their
disputes, if such an obligation is created in the agreement.
(d) Whenever an assuming insurer establishes a trust fund
for the payment of claims pursuant to the provisions of this
section, the following requirements shall apply:
(1) 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 to
enable the commissioner to determine the sufficiency of the trust
fund. In the case of a single assuming insurer, the trust shallconsist of a trusteed account representing the assuming insurer's
liabilities attributable to business written in the United States
and, in addition, the assuming insurer shall maintain a trusteed
surplus of not less than twenty million dollars. In the case of
a group of individual unincorporated underwriters, the trust
shall consist of a trusteed account representing the group's
liabilities attributable to business written in the United States
and, in addition, the group shall maintain a trusteed surplus of
which one hundred million dollars shall be held jointly for the
benefit of United States ceding insurers of any member of the
group. Such The group shall make available to the commissioner
an annual certification of the solvency of each underwriter by
the group's domiciliary regulator and its independent public
accountants.
(2) In the case of a group of incorporated insurers under
common administration which complies with the filing requirements
contained in the previous paragraph; which has continuously
transacted an insurance business outside the United States for at
least three years immediately prior to making application for
accreditation; which submits to this state's authority to examine
its books and records and bears the expense of the examination;
and which has aggregate policyholders' surplus of ten billion
dollars, the trust shall be in an amount equal to the group's
several liabilities attributable to business ceded by United
States ceding insurers to any member of the group pursuant to
reinsurance contracts issued in the name of such the group. Thegroup shall also maintain a joint trusteed surplus of which one
hundred million dollars shall be held jointly for the benefit of
United States ceding insurers of any member of the group as
additional security for any such liabilities. Each member of
such the group shall make available to the commissioner an annual
certification of the member's solvency by the member's
domiciliary regulator and its independent public accountant
accountants.
(3) Any trust that is subject to the provisions of this
section shall be established in a form approved by the
commissioner. 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 the trustees of the trust
for its United States policyholders and 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 described herein shall remain in effect
for as long as the assuming insurer shall have outstanding
obligations due under the reinsurance agreements subject to the
trust.
(4) No later than the twenty-eighth day of February of each
year the trustees of the trust shall report to the commissioner
in writing setting forth the balance of the trust and listing the
trust's investments at the preceding year's end. The trustees
shall certify the date of termination of the trust, if soplanned, or certify that the trust shall not expire prior to the
next following December thirty-first.
(e) A reduction from liability for the reinsurance ceded by
a ceding insurer subject to the requirements of this article to
an assuming insurer not meeting the requirements of subsection
(c) of this section shall be allowed in an amount not exceeding
the liabilities carried by the ceding insurer. Such 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 such the assuming
insurer as security for the payment of obligations thereunder:
Provided,
That such the 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 by this
section. Such The security may be in the form of:
(1) Cash;
(2) Securities listed by the securities valuation office of
the national association of insurance commissioners and
qualifying as admitted assets; or
(3) Clean, irrevocable, unconditional letters of credit,
issued or confirmed by a qualified United States financial
institution, as defined by this section, no later than the
thirty-first day of December of the year for which filing is
being made, and in the possession of the ceding company on or
before the filing date of its annual statement:
Provided,
Thatletters 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.
(f) For purposes of this section, a "qualified United States
financial institution" means an institution that:
(1) Is organized or licensed under the laws of the United
States or any state thereof;
(2) Is regulated, supervised and examined by United States
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 the 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.
(g) A "qualified United States financial institution" means,
for purposes of those provisions of this law specifying those
institutions that are eligible to act as a fiduciary of a trust,
an institution that:
(1) Is organized or, in the case of a United States branch
or agency office of a foreign banking organization, licensedunder 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.
(h) The provisions of this section shall apply to all
cessions on or after the first day of January, one thousand nine
hundred ninety-three.
ARTICLE 24. HOSPITAL SERVICE CORPORATIONS, MEDICAL SERVICE
CORPORATIONS, DENTAL SERVICE CORPORATIONS AND HEALTH SERVICE
CORPORATIONS.
§33-24-4. Exemptions; applicability of insurance laws.
Every such corporation defined in section two of this
article is hereby declared to be a scientific, nonprofit
institution and as such exempt from the payment of all property
and other taxes. Every such corporation, to the same extent such
the provisions are applicable to insurers transacting similar
kinds of insurance and not inconsistent with the provisions of
this article, shall be governed by and be subject to the
provisions as hereinbelow indicated, of the following articles of
this chapter: Article two (insurance commissioner), except that
under section nine of article two examinations shall be conducted
at least once every four years, article four (general provisions)
except that section sixteen of article four shall not be
applicable thereto, article six, section thirty-four (fee for
form and rate filing), article six-c (guaranteed loss ratio),article seven (assets and liabilities), article eleven (unfair
trade practices), article twelve (agents, brokers and solicitors)
except that the agent's license fee shall be five dollars,
section fourteen, article fifteen (individual accident and
sickness insurance), article fifteen-a (long-term care
insurance), section three-a, article sixteen (mental illness),
section three-c, article sixteen (group accident and sickness
insurance), section three-d, article sixteen (medicare supplement
insurance), section three-f, article sixteen (treatment of
temporomandibular joint disorder and craniomandibular disorder),
article sixteen-a (group health insurance conversion), article
sixteen-c (small employer group policies), article sixteen-d
(marketing and rate practices for small employers), article
twenty-six-a (West Virginia life and health insurance guaranty
association act), after the first day of October, one thousand
nine hundred ninety-one, article twenty-seven (insurance holding
company systems), article twenty-eight (individual accident and
sickness insurance minimum standards), article thirty-three
(annual audited financial report), article thirty-four
(administrative supervision), article thirty-four-a, (standards
and commissioner's authority for companies deemed to be in
hazardous financial condition), article thirty-five (criminal
sanctions for failure to report impairment) and article thirty-
seven (managing general agents); and no other provision of this
chapter may apply to such these corporations unless specifically
made applicable by the provisions of this article. If, however,any such the corporation is converted into a corporation
organized for a pecuniary profit, or if it transacts business
without having obtained a license as required by section five of
this article, it shall thereupon forfeit its right to these
exemptions.
ARTICLE 25. HEALTH CARE CORPORATIONS.
§33-25-6. Supervision and regulation by insurance commissioner;
exemption from insurance laws.
Corporations organized under this article shall be are
subject to supervision and regulation of the insurance
commissioner. Such The corporations organized under this
article, to the same extent such these provisions are applicable
to insurers transacting similar kinds of insurance and not
inconsistent with the provisions of this article, shall be
governed by and be subject to the provisions as hereinbelow
indicated, of the following articles of this chapter: Article
four (general provisions) except that section sixteen of article
four shall not be applicable thereto, article six-c (guaranteed
loss ratio), article seven (assets and liabilities), article
eight (investments), article ten (rehabilitation and
liquidation), section fourteen, article fifteen (individual
accident and sickness insurance), article sixteen-a (group health
insurance conversion), article sixteen-c (small employer group
policies), article sixteen-d (marketing and rate practices for
small employers), article twenty-six-a (West Virginia life and
health insurance guaranty association act), article twenty-seven(insurance holding company systems), article thirty-three (annual
audited financial report), article thirty-four-a (standards and
commissioner's authority for companies deemed to be in hazardous
financial condition), article thirty-five (criminal sanctions for
failure to report impairment) and article thirty-seven (managing
general agents); and no other provision of this chapter may apply
to such these corporations unless specifically made applicable by
the provisions of this article.
ARTICLE 27. INSURANCE HOLDING COMPANY SYSTEMS.
§33-27-2. Definitions.
As used in this article:
(a) An "affiliate" of, or person "affiliated" with, a
specific person, is a person that, directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is
under common control with, the person specified.
(b) "Commissioner" means the insurance commissioner, his or
her deputies, or the insurance department, as appropriate.
(c) "Control" (including the terms "controlling,"
"controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract other
than a commercial contract for goods or nonmanagement services,
or otherwise, unless the power is the result of an official
position with or corporate office held by the person. Control
shall be presumed to exist if any person, directly or indirectly,owns, controls, holds with the power to vote, or holds proxies
representing ten percent or more of the voting securities of any
other person or controls or appoints a majority of the board of
directors, voting members or similar governing body of any other
person. This presumption may be rebutted by a showing made in
the manner provided by subsection (b)(i) (l), section four of
this article that control does not exist in fact. The
commissioner may determine, after furnishing all persons in
interest notice and opportunity to be heard and making specific
findings of fact to support such the determination, that control
exists in fact, notwithstanding the absence of a presumption to
that effect.
(d) "Insurance holding company system" consists of two or
more affiliated persons, one or more of which is an insurer.
(e) "Insurer" means any person or persons or corporation,
partnership or company authorized by the laws of this state to
transact the business of insurance in this state, except that it
shall not include 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.
(f) A "person" is an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization, any other legal entity or any
combination of the foregoing acting in concert, but does not
include any securities broker performing no more than the usualand customary broker's function and holding less than twenty
percent of the voting securities of an insurance company or of
any person which controls an insurance company.
(g) A "security holder" of a specified person is one who
owns any security of such person, including common stock,
preferred stock, debt obligations and any other security
convertible into or evidencing the right to acquire any of the
foregoing.
(h) A "subsidiary" of a specified person is an affiliate
controlled by such person directly or indirectly through one or
more intermediaries.
(i) "Voting security" includes any security convertible into
or evidencing a right to acquire a voting security.
§33-27-14. Regulatory authority.
The insurance commissioner shall promulgate rules pursuant
to the provisions of chapter twenty-nine-a of this code setting
forth procedural requirements necessary to implement the
provisions of this article and specifying the reporting forms
required by this article prior to the first day of August, one
thousand nine hundred and ninety-three.
ARTICLE 31. CAPTIVE INSURANCE.
§33-31-11. Reinsurance.
(a) Any captive insurance company may provide reinsurance,
as required in section fifteen, article four of this chapter, on
risks ceded by any other insurer. A captive insurance company may
procure reinsurance or issue policies of reinsurance to otherlicensed insurers transacting like kinds of insurance, pursuant
to the provisions of section fifteen, article four of this
chapter.
(b) Any captive insurance company may take credit for
reserves on risks ceded to a reinsurer: Provided, That no
captive insurance company may reinsure a risk or part thereof
with reinsurers not complying with the provisions of section
seventeen, article four of this chapter.
ARTICLE 32. RISK RETENTION ACT.
§33-32-4. Risk retention groups not chartered in this state.
(a) Risk retention groups chartered in states other than
this state and seeking to do business as a risk retention group
in this state must observe and abide by the laws of this state.
(b) Before offering insurance in this state, a risk
retention group shall submit the following information to the
commissioner on a form prescribed by the national association of
insurance commissioners:
(1) A statement identifying the state or states in which the
risk retention group is chartered and licensed as a liability
insurance company, date of chartering, its principal place of
business, and such any other information including information on
its membership, as the commissioner of this state may require to
verify that the risk retention group is qualified under this
article;
(2) A copy of its plan of operations or a feasibility study
and revisions of such plan or study submitted to its state ofdomicile:
Provided,
That the provision relating to the
submission of a plan of operation or a feasibility study shall
not apply with respect to any line or classification of liability
insurance which (i) was defined in the federal product liability
risk retention act of 1981 before the twenty-seventh day of
October, one thousand nine hundred eighty-six, and (ii) was
offered before such that date by any risk retention group which
had been chartered and operating for not less than three years
before such date;
(3) A statement of registration which designates the
commissioner as its agent for the purpose of receiving service of
legal documents or process; and
(4) A risk retention group that has been chartered and
operating in any state and has previously filed an annual
financial statement as required by this section with its state of
domicile, must submit a copy of the most recent annual statement
with the registration form required by this subsection.
(c) The risk retention group shall submit a copy of any
revision to its plan of operation or feasibility study required
by section three of this article at the same time that the
revision is submitted to the commissioner of its chartering
state.
(d) A risk retention group shall not commence offering
insurance in this state prior to receiving a certificate of
registration from the commissioner.
(e) Any risk retention group doing business registered inthis state shall submit to the commissioner:
(1) Annually a copy of the group's financial statement
submitted to its state of domicile, which shall be certified by
an independent public accountant and contain a statement of
opinion on loss and loss adjustment expense reserves made by a
member of the American academy of actuaries or a qualified loss
reserve specialist (under criteria established by the national
association of insurance commissioners);
(2) A copy of each examination of the risk retention group
as certified by the commissioner or public official conducting
the examination;
(3) Upon request by the commissioner, a copy of any audit
performed with respect to the risk retention group; and
(4) Such Any information as may be required to verify its
continuing qualification as a risk retention group under this
article.
(f) The commissioner shall promulgate rules pursuant to the
provisions of chapter twenty-nine-a of this code regarding all
fees to be submitted with the filings required by this section.
§33-32-17. Notice and registration requirements of purchasing
groups.
(a) A purchasing group which intends to do business in this
state shall, prior to doing business, furnish notice to the
commissioner which shall on forms prescribed by the national
association of insurance commissioners which shall:
(1) Identify the state in which the group is domiciled;
(2) Identify all other states in which the group intends to
do business;
(3) Specify the lines and classifications of liability
insurance which the purchasing group intends to purchase;
(4) Identify the insurance company or companies from which
the group intends to purchase its insurance and the domicile of
such company;
(5) Specify the method by which, and the person or persons,
if any, through whom insurance will be offered to its members
whose risks are resident or located in this state;
(6) Identify the principal place of business of the groups;
and
(7) Provide such any other information as may be required by
the commissioner to verify that the purchasing group is qualified
under this article.
(b) A purchasing group shall, within ten days, notify the
commissioner of any changes in any of the items set forth in this
section.
(c) The purchasing group shall register with and designate
the commissioner (or other appropriate authority) as its agent
solely for the purpose of receiving service of legal documents or
process:
Provided,
That such these requirements shall do not
apply in the case of a purchasing group which:
(1) Was domiciled before the first day of April, one
thousand nine hundred eighty-six in any state of the United
States; and
(2) Is domiciled on and after the second twenty-seventh day
of October, one thousand nine hundred eighty-six, in any state of
the United States and which:
(A) Before the twenty-seventh day of October, one thousand
nine hundred eighty-six, purchased insurance from an insurance
carrier licensed in any state; and
(B) Since the twenty-seventh day of October, one thousand
nine hundred eighty-six, purchased its insurance from an
insurance carrier licensed in any state;
(3) Which was a purchasing group under the requirements of
the product liability risk retention act of 1981, before the
twenty-seventh day of October, one thousand nine hundred eighty-
six; and
(4) Which does not purchase insurance that was not
authorized for purposes of an exemption under that act, as in
effect before the twenty-seventh day of October, one thousand
nine hundred eighty-six.
(d) Each purchasing group that is required to give notice
pursuant to subsection (a) of this section shall also furnish
such information as may be required by the commissioner to:
(1) Verify that the entity qualifies as a purchasing group;
(2) Determine where the purchasing group is located; and
(3) Determine appropriate tax treatment.
(e) The insurance commissioner shall promulgate rules
pursuant to the provisions of chapter twenty-nine-a of this code
regarding the amount of all registration or filing fees requiredby this section.
ARTICLE 34A. STANDARDS AND COMMISSIONER'S AUTHORITY FOR
COMPANIES DEEMED TO BE IN HAZARDOUS FINANCIAL CONDITION.
§33-34A-4. Commissioner's authority.
(a) For the purposes of making a determination of an
insurer's financial condition under this regulation, the
commissioner may:
(1) Disregard any credit or amount receivable resulting from
transactions with a reinsurer which is insolvent, impaired or
otherwise subject to a delinquency proceeding;
(2) Make appropriate adjustments to asset values
attributable to investments in or transactions with parents,
subsidiaries, or affiliates;
(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; or
(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 upon to meet the obligation undertaken within the next
twelve-month period.
(b) If, after notice of hearing, the commissioner determines
that the continued operation of the insurer licensed to transact
business in this state may be hazardous to the policyholders or
the general public, then the commissioner may, upon hisdetermination, 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 dividend
by an insurer to its stockholders or to its policyholders;
(6) File reports in a form acceptable to the commissioner
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
commissioner deems necessary;
(8) Document the adequacy of premium rates in relation to
the risks insured; or
(9) File, in addition to regular annual statements, interim
financial reports on the form adopted by the national association
of insurance commissioners or on such format as promulgated by
the commissioner. If the insurer is a foreign insurer the
commissioner's order may be limited to the extent provided by
statute.
(c) An order issued pursuant to the provisions of this
article shall be is subject to review pursuant to applicable
state administrative proceedings under article two of thischapter:
Provided,
That all hearings pursuant to this section
shall be held privately, unless the insurer requests a public
hearing, in which case the hearing shall be public.
ARTICLE 36. BUSINESS TRANSACTED WITH PRODUCER CONTROLLED
PROPERTY/CASUALTY INSURER ACT.
§33-36-1. Short Title.
This article may be cited as the "Business Transacted with
Producer Controlled Insurer Act."
§33-36-2. Definitions.
As used in this article:
(a) "Accredited State" means a state in which the insurance
department or regulatory agency has qualified as meeting the
minimum financial regulatory standards promulgated and
established from time to time by the national association of
insurance commissioners.
(b) "Control" or "Controlled" has the meaning ascribed in
section two, article twenty-seven of this chapter.
(c) "Controlled Insurer" means a licensed insurer which is
controlled, directly or indirectly, by a producer.
(d) "Controlling Producer" means a producer who, directly or
indirectly, controls an insurer.
(e) "Licensed Insurer" or "Insurer" means any person, firm,
association or corporation duly licensed to transact a property
or casualty insurance business, or both property and casualty
insurance, in this state. The following are not licensed
insurers for the purposes of this article:
(1) All risk retention groups as defined in article thirty-
two of this chapter;
(2) All residual market pools and joint underwriting
authorities or associations; and
(3) All captive insurance companies as defined in article
thirty-one of this chapter.
(f) "Producer" means an insurance broker or brokers or any
other person, firm, association or corporation, when, for any
compensation, commission or other thing of value, the person,
firm, association or corporation acts or aids in any manner in
soliciting, negotiating or procuring the making of any insurance
contract on behalf of an insured other than the person, firm,
association or corporation:
Provided,
That the term producer is
not intended to expand upon or provide for activities beyond
those permitted by article twelve of this chapter.
§33-36-3. Applicability.
This article applies to licensed insurers as defined in
section two of this article, either domiciled in this state or
domiciled in a state that does not have in effect a substantially
similar law. All provisions of article twenty-seven of this
chapter, to the extent they are not superseded by this article,
shall continue to apply to all parties within holding company
systems subject to this article.
§33-36-4. Minimum Standards.
(a)(1) The provisions of this section apply if, in any
calendar year, the aggregate amount of gross written premium onbusiness placed with a controlled insurer by a controlling
producer is equal to or greater than five percent of the admitted
assets of the controlled insurer, as reported in the controlled
insurers' quarterly statement filed as of the thirtieth day of
September of the prior year.
(2) Notwithstanding paragraph (1) of this subsection, the
provisions of this section do not apply if:
(A) The controlling producer: (i) Places insurance only with
the controlled insurer or only with the controlled insurer and a
member or members of the controlled insurer's holding company
system or the controlled insurer's parent, affiliate or
subsidiary and receives no compensation based upon the amount of
premiums written in connection with such insurance; and (ii)
Accepts insurance placements only from nonaffiliated
subproducers, and not directly from insureds; and
(B) The controlled insurer, except for insurance business
written through a residual market facility such as the "West
Virginia Essential Property Insurance Association" or the "West
Virginia Automobile Insurance Plan," accepts insurance business
only from a controlling producer, a producer controlled by the
controlled insurer, or a producer that is a subsidiary of the
controlled insurer.
(b) Required contract provisions. A controlled insurer may
not accept business from a controlling producer and a controlling
producer may not place business with a controlled insurer unless
there is a written contract between the controlling producer andthe insurer specifying the responsibilities of each party, which
contract has been approved by the board of directors of the
insurer and contains the following minimum provisions:
(1) The controlled insurer may terminate the contract for
cause, upon written notice to the controlling producer. The
controlled insurer shall suspend the authority of the controlling
producer to write business during the pendency of any dispute
regarding the cause for the termination;
(2) The controlling producer shall render accounts to the
controlled insurer detailing all material transactions, including
information necessary to support all commissions, charges and
other fees received by, or owing to, the controlling producer;
(3) The controlling producer shall remit all funds due under
the terms of the contract to the controlled insurer on at least
a monthly basis. The due date shall be fixed so that premiums or
installments thereof collected shall be remitted no later than
ninety days after the effective date of any policy placed with
the controlled insurer under this contract;
(4) All funds collected for the controlled insurer's account
shall be held by the controlling producer in a fiduciary
capacity, in one or more appropriately identified bank accounts
in banks that are members of the federal reserve system, in
accordance with the applicable provisions of this chapter.
However, funds of a controlling producer not required to be
licensed in this state shall be maintained in compliance with the
requirements of the controlling producer's domiciliaryjurisdiction;
(5) The controlling producer shall maintain separately
identifiable records of business written for the controlled
insurer;
(6) The contract may not be assigned in whole or in part by
the controlling producer;
(7) The controlled insurer shall provide the controlling
producer with its underwriting standards, rules and procedures
manuals setting forth the rates to be charged and the conditions
for the acceptance or rejection of risks. The controlling
producer shall adhere to the standards, rules, procedures, rates
and conditions. The standards, rules, procedures, rates and
conditions shall be the same as those applicable to comparable
business placed with the controlled insurer by a producer other
than the controlling producer;
(8) The rates and terms of the controlling producer's
commissions, charges or other fees and the purposes for those
charges or fees. The rates of the commissions, charges and other
fees may be no greater than those applicable to comparable
business placed with the controlled insurer by producers other
than controlling producers. For purposes of this subdivision and
subdivision (7) of this subsection, examples of "comparable
business" includes the same lines of insurance, same kinds of
insurance, same kinds of risks, similar policy limits and similar
quality of business;
(9) If the contract provides that the controlling producer,on insurance business placed with the insurer, is to be
compensated contingent upon the insurer's profits on that
business, then the compensation may not be determined and paid
until at least five years after the premiums on liability
insurance are earned and at least one year after the premiums are
earned on any other insurance. In no event may the commissions
be paid until the adequacy of the controlled insurer's reserves
on remaining claims has been independently verified pursuant to
subdivision (1), subsection (d) of this section;
(10) A limit on the controlling producer's writings in
relation to the controlled insurer's surplus and total writings.
The insurer may establish a different limit for each line or
subline of business. The controlled insurer shall notify the
controlling producer when the applicable limit is approached and
shall not accept business from the controlling producer if the
limit is reached. The controlling producer may not place
business with the controlled insurer if it has been notified by
the controlled insurer that the limit has been reached; and
(11) The controlling producer may negotiate but may not bind
reinsurance on behalf of the controlled insurer on business the
controlling producer places with the controlled insurer, except
that the controlling producer may bind facultative reinsurance
contracts pursuant to obligatory facultative agreements if the
contract with the controlled insurer contains underwriting
guidelines including, for both reinsurance assumed and ceded, a
list of reinsurers with which the automatic agreements are ineffect, the coverages and amounts or percentages that may be
reinsured and commission schedules.
(c) Every controlled insurer shall have an audit committee
of the board of directors composed of independent directors. The
audit committee shall annually meet with management, the
insurer's independent certified public accountants, and an
independent casualty actuary or other independent loss reserve
specialist acceptable to the commissioner to review the adequacy
of the insurer's loss reserves.
(d)(1) In addition to any other required loss reserve
certification, the controlled insurer shall annually, on the
first day of April of each year, file with the commissioner an
opinion of an independent casualty actuary or any other
independent loss reserve specialist acceptable to the
commissioner, reporting loss ratios for each line of business
written and attesting to the adequacy of loss reserves
established for losses incurred and outstanding as of year-end,
including incurred but not reported losses, on business placed by
the producer; and
(2) The controlled insurer shall annually report to the
commissioner the amount of commissions paid to the producer, the
percentage such amount represents of the net premiums written and
comparable amounts and percentage paid to noncontrolling
producers for placements of the same kinds of insurance.
§33-36-5. Disclosure.
The producer, prior to the effective date of the policy,shall deliver written notice to the prospective insured
disclosing the relationship between the producer and the
controlled insurer. If the business is placed through a
subproducer who is not a controlling producer, the controlling
producer shall retain in his records a signed commitment from the
subproducer that the subproducer is aware of the relationship
between the insurer and the producer and that the subproducer has
or will notify the insured.
§33-36-6. Penalties.
(a)(1) If the commissioner believes that the controlling
producer or any other person has not materially complied with
this article, or any rule or order promulgated hereunder, after
notice and opportunity to be heard, the commissioner may order
the controlling producer to cease placing business with the
controlled insurer; and
(2) If it is found that because of any material
noncompliance that the controlled insurer or any policyholder
thereof has suffered any loss or damage, the commissioner may
maintain a civil action or intervene in an action brought by or
on behalf of the insurer or policyholder for recovery of
compensatory damages for the benefit of the insurer or
policyholder or other appropriate relief.
(b) If an order for liquidation or rehabilitation of the
controlled insurer has been entered pursuant to article ten of
this chapter and the receiver appointed under that order believes
that the controlling producer or any other person has notmaterially complied with this article or any rule or order
promulgated hereunder, and the insurer suffered any loss or
damage therefrom, the receiver may maintain a civil action for
recovery of damages or other appropriate sanctions for the
benefit of the insurer.
(c) Nothing contained in this section may affect the right
of the commissioner to impose any other penalties provided for in
this chapter.
(d) Nothing contained in this section is intended to or may
in any manner alter or affect the rights of policyholders,
claimants, creditors or other third parties.
§33-36-7. Effective date.
Controlled insurers and controlling producers who are not in
compliance with section four of this article on its effective
date have sixty days to come into compliance. The controlled
insurers and controlling producers have sixty days after the
effective date of this article to comply with section five of
this article.
ARTICLE 38. REINSURANCE INTERMEDIARY ACT.
§33-38-1. Short title.
This article may be cited as the "Reinsurance Intermediary
Act."
§33-38-2. Definitions.
As used in this article:
(a) "Actuary" means a person who is a member in good
standing of the American academy of actuaries.
(b) "Controlling person" means any person, firm, association
or corporation who directly or indirectly has the power to direct
or cause to be directed, the management, control or activities of
the reinsurance intermediary.
(c) "Commissioner" means the insurance commissioner of West
Virginia.
(d) "Insurer" means any person, firm, association or
corporation duly licensed in this state pursuant to the
applicable provisions of this chapter as an insurer.
(e) "Licensed producer" means an agent or reinsurance
intermediary licensed pursuant to the applicable provisions of
this chapter.
(f) "Reinsurance intermediary" means a reinsurance
intermediary-broker or a reinsurance intermediary-manager as
these terms are defined in subdivisions (g) and (h) of this
section.
(g) "Reinsurance intermediary-broker" means any person,
other than an officer or employee of the ceding insurer, firm,
association or corporation who solicits, negotiates or places
reinsurance cessions or retrocessions on behalf of a ceding
insurer without the authority or power to bind reinsurance on
behalf of such insurer.
(h) "Reinsurance intermediary-manager" means any person,
firm, association or corporation who has authority to bind or
manages all or part of the assumed reinsurance business of a
reinsurer including the management of a separate division,department or underwriting office and acts as an agent for such
reinsurer whether known as a reinsurance intermediary-manager,
manager or other similar term. Notwithstanding the above, the
following persons are not considered a reinsurance intermediary-
manager, with respect to such reinsurer, for the purposes of this
article:
(1) An employee of the reinsurer;
(2) A United States manager of the United States branch of
an alien reinsurer;
(3) An underwriting manager who, pursuant to contract,
manages all the reinsurance operations of the reinsurer, is under
common control with the reinsurer, subject to article twenty-
seven of this chapter, and whose compensation is not based on the
volume of premiums written.
(4) The manager of a group, association, pool or
organization of insurers which engage in joint underwriting or
joint reinsurance and who are subject to examination by the
official charged with regulation of insurance in the state in
which the manager's principal business office is located.
(i) "Reinsurer" means any person, firm, association or
corporation duly licensed or accredited in this state pursuant to
the applicable provisions of this chapter as an insurer with the
authority to assume reinsurance.
(j) "To be in violation" means that the reinsurance
intermediary, insurer or reinsurer for whom the reinsurance
intermediary was acting failed to substantially comply with theprovisions of this article.
(k) For purposes of this article, 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.
§33-38-3. Licensure.
(a) No person, firm, association or corporation may act as
a reinsurance intermediary-broker in this state if the
reinsurance intermediary-broker maintains an office either
directly or as a member or employee of a firm or association, or
an officer, director or employee of a corporation:
(1) In this state, unless such reinsurance intermediary-
broker is a licensed producer in this state; or
(2) In another state, unless such reinsurance intermediary-
broker is a licensed producer in this state or another state
having an article substantially similar to this law or suchreinsurance intermediary-broker is licensed in this state as a
nonresident reinsurance intermediary.
(b) No person, firm, association or corporation may act as
a reinsurance intermediary-manager:
(1) For a reinsurer domiciled in this state, unless such
reinsurance intermediary-manager is a licensed producer in this
state;
(2) In this state, if the reinsurance intermediary-manager
maintains an office either directly or as a member or employee of
a firm or association, or an officer, director or employee of a
corporation in this state, unless such reinsurance intermediary-
manager is a licensed producer in this state;
(3) In another state for a nondomestic insurer, unless such
reinsurance intermediary-manager is a licensed producer in this
state or another state having an article substantially similar to
this law or such person is licensed in this state as a
nonresident reinsurance intermediary.
(c) The commissioner may require a reinsurance intermediary-
manager subject to the provisions of subsection (b) of this
section to:
(1) File a bond in an amount from an insurer acceptable to
the commissioner for the protection of the reinsurer; and
(2) Maintain an errors and omissions policy in an amount
acceptable to the commissioner.
(d)(1) The commissioner may issue a reinsurance intermediary
license to any person, firm, association or corporation who hascomplied with the requirements of this article. Any license
issued to a firm or association authorizes all the members of the
firm or association and any designated employees to act as
reinsurance intermediaries under the license, and all of these
persons shall be named in the application and any supplements
thereto. Any license issued to a corporation shall authorize all
of the officers, and any designated employees and directors
thereof to act as reinsurance intermediaries on behalf of such
corporation, and all of these persons shall be named in the
application and any supplements thereto.
(2) If the applicant for a reinsurance intermediary license
is a nonresident, the applicant as a condition precedent to
receiving or holding a license, shall designate the commissioner
as agent for service of process in the manner and with the same
legal effect provided for by this chapter for designation of
service of process upon unauthorized insurers. The applicant
shall also furnish the commissioner with the name and address of
a resident of this state upon whom notices or orders of the
commissioner or process affecting such nonresident reinsurance
intermediary may be served. The licensee shall promptly notify
the commissioner in writing of every change in its designated
agent for service of process, and the change shall not become
effective until acknowledged by the commissioner.
(e) The commissioner may refuse to issue a reinsurance
intermediary license if, in his or her judgment, the applicant,
any one named on the application or any member, principal,officer or director of the applicant is not trustworthy or that
any controlling person of the applicant is not trustworthy to act
as a reinsurance intermediary or that any of the foregoing has
given cause for revocation or suspension of such license or has
failed to comply with any prerequisite for the issuance of the
license. Upon written request therefor, the commissioner shall
furnish a summary of the basis for refusal to issue a license,
which document shall be privileged and not subject to the
provisions of article one, chapter twenty-nine of the this code.
(f) Licensed attorneys at law of this state when acting in
their professional capacity are be exempt from this section.
§33-38-4. Required contract provisions; reinsurance
intermediary-brokers.
Transactions between a reinsurance intermediary-broker and
the insurer it represents in that capacity may only be entered
into pursuant to a written authorization, specifying the
responsibilities of each party. The authorization shall, at a
minimum, provide that:
(a) The insurer may terminate the reinsurance intermediary-
broker's authority at any time.
(b) The reinsurance intermediary-broker shall render
accounts to the insurer accurately detailing all material
transactions, including information necessary to support all
commissions, charges and other fees received by, or owing, to the
reinsurance intermediary-broker, and remit all funds due to the
insurer within thirty days of receipt.
(c) All funds collected for the insurer's account shall be
held by the reinsurance intermediary-broker in a fiduciary
capacity in a bank which is a qualified United States financial
institution as defined herein.
(d) The reinsurance intermediary-broker shall comply with
section five of this article.
(e) The reinsurance intermediary-broker shall comply with
the written standards established by the insurer for the cession
or retrocession of all risks.
(f) The reinsurance intermediary-broker shall disclose to
the insurer any relationship with any reinsurer to which business
will be ceded or retroceded.
§33-38-5. Books and records; reinsurance intermediary-brokers.
(a) For at least ten years after expiration of each contract
of reinsurance transacted by the reinsurance intermediary-broker,
the reinsurance intermediary-broker will keep a complete record
for each transaction showing:
(1) The type of contract, limits, underwriting restrictions,
classes or risks and territory;
(2) Period of coverage, including effective and expiration
dates, cancellation provisions and notice required of
cancellation;
(3) Reporting and settlement requirements of balances;
(4) Rate used to compute the reinsurance premium;
(5) Names and addresses of assuming reinsurers;
(6) Rates of all reinsurance commissions, including thecommissions on any retrocessions handled by the reinsurance
intermediary-broker;
(7) Related correspondence and memoranda;
(8) Proof of placement;
(9) Details regarding retrocessions handled by the
reinsurance intermediary-broker including the identity of
retrocessionaires and percentage of each contract assumed or
ceded;
(10) Financial records, including but not limited to,
premium and loss accounts; and
(11) When the reinsurance intermediary-broker procures a
reinsurance contract on behalf of a licensed ceding insurer:
(A) Directly from any assuming reinsurer, written evidence
that the assuming reinsurer has agreed to assume the risk; or
(B) If placed through a representative of the assuming
reinsurer, other than an employee, written evidence that such
reinsurer has delegated binding authority to the representative.
(b) The insurer shall have access and the right to copy and
audit all accounts and records maintained by the reinsurance
intermediary-broker related to its business in a form usable by
the insurer.
§33-38-6. Duties of insurers utilizing the services of a
reinsurance intermediary-broker.
(a) An insurer may not engage the services of any person,
firm, association or corporation to act as a reinsurance
intermediary-broker on its behalf unless that person is licensedas required by subsection (a), section three of this article.
(b) An insurer may not employ an individual who is employed
by a reinsurance intermediary-broker with which it transacts
business, unless the reinsurance intermediary-broker is under
common control with the insurer and subject to article twenty-
seven of this chapter.
(c) The insurer shall annually obtain a copy of statements
of the financial condition of each reinsurance intermediary-
broker with which it transacts business.
§33-38-7. Required contract provisions; reinsurance
intermediary-managers.
Transactions between a reinsurance intermediary-manager and
the reinsurer it represents in that capacity may only be entered
into pursuant to a written contract, specifying the
responsibilities of each party, which shall be approved by the
reinsurer's board of directors. At least thirty days before such
reinsurer assumes or cedes business through such producer, a true
copy of the approved contract shall be filed with the
commissioner for approval. The contract shall, at a minimum,
provide, that:
(a) The reinsurer may terminate the contract for cause upon
written notice to the reinsurance intermediary-manager. The
reinsurer may immediately suspend the authority of the
reinsurance intermediary-manager to assume or cede business
during the pendency of any dispute regarding the cause for
termination.
(b) The reinsurance intermediary-manager shall render
accounts to the reinsurer accurately detailing all material
transactions, including information necessary to support all
commissions, charges and other fees received by, or owing to the
reinsurance intermediary-manager, and remit all funds due under
the contract to the reinsurer on not less than a monthly basis.
(c) All funds collected for the reinsurer's account shall be
held by the reinsurance intermediary-manager in a fiduciary
capacity in a bank which is a qualified United States financial
institution as defined herein. The reinsurance intermediary-
manager may retain no more than three months estimated claims
payments and allocated loss adjustment expenses. The reinsurance
intermediary-manager shall maintain a separate bank account for
each reinsurer that it represents.
(d) For at least ten years after expiration of each contract
of reinsurance transacted by the reinsurance intermediary-
manager, the reinsurance intermediary-manager shall keep a
complete record for each transaction showing:
(1) The type of contract, limits, underwriting
restrictions, classes of risks and territory;
(2) Period of coverage, including effective and expiration
dates, cancellation provisions and notice required of
cancellation, and disposition of outstanding reserves on covered
risks;
(3) Reporting and settlement requirements of balances;
(4) Rate used to compute the reinsurance premium;
(5) Names and addresses of reinsurers;
(6) Rates of all reinsurance commissions, including the
commissions on any retrocessions handled by the reinsurance
intermediary-manager;
(7) Related correspondence and memoranda;
(8) Proof of placement;
(9) Details regarding retrocessions handled by the
reinsurance intermediary-manager, as permitted by subsection (d),
section nine of this article, including the identity of
retrocessionaires and percentage of each contract assumed or
ceded;
(10) Financial records, including but not limited to,
premium and loss accounts; and
(11) When the reinsurance intermediary-manager places a
reinsurance contract on behalf of a ceding insurer:
(A) Directly from any assuming reinsurer, written evidence
that the assuming reinsurer has agreed to assume the risk; or
(B) If placed through a representative of the assuming
reinsurer, other than an employee, written evidence that such
reinsurer has delegated binding authority to the representative.
(e) The reinsurer shall have access and the right to copy
all accounts and records maintained by the reinsurance
intermediary-manager related to its business in a form usable by
the reinsurer.
(f) The contract cannot be assigned in whole or in part by
the reinsurance intermediary-manager.
(g) The reinsurance intermediary-manager shall comply with
the written underwriting and rating standards established by the
insurer for the acceptance, rejection or cession of all risks.
(h) Sets forth the rates, terms and purposes of commissions,
charges and other fees which the reinsurance intermediary-manager
may levy against the reinsurer.
(i) If the contract permits the reinsurance intermediary-
manager to settle claims on behalf of the reinsurer:
(1) All claims shall be reported to the reinsurer in a
timely manner;
(2) A copy of the claim file shall be sent to the reinsurer
at its request or as soon as it becomes known that the claim:
(A) Has the potential to exceed the lesser of an amount
determined by the commissioner or the limit set by the reinsurer;
(B) Involves a coverage dispute;
(C) May exceed the reinsurance intermediary-manager's claims
settlement authority;
(D) Is open for more than six months; or
(E) Is closed by payment of the lesser of an amount set by
the commissioner or an amount set by the reinsurer;
(3) All claim files will be the joint property of the
reinsurer and reinsurance intermediary-manager. However, upon an
order of liquidation of the reinsurer these files shall become
the sole property of the reinsurer or its estate. The
reinsurance intermediary-manager shall have reasonable access to
and the right to copy the files on a timely basis;
(4) Any settlement authority granted to the reinsurance
intermediary-manager may be terminated for cause upon the
reinsurer's written notice to the reinsurance intermediary-
manager or upon the termination of the contract. The reinsurer
may suspend the settlement authority during the pendency of the
dispute regarding the cause of termination.
(j) If the contract provides for a sharing of interim
profits by the reinsurance intermediary-manager that these
interim profits may not be paid until one year after the end of
each underwriting period for property business, and five years
after the end of each underwriting period for casualty business,
or a later period set by the commissioner for specified lines of
insurance, and not until the adequacy of reserves on remaining
claims has been verified pursuant to subsection (c), section nine
of this article.
(k) The reinsurance intermediary-manager shall annually
provide the reinsurer with a statement of its financial condition
prepared by an independent certified public accountant.
(l) The reinsurer shall periodically, at least semiannually,
conduct an on-site review of the underwriting and claims
processing operations of the reinsurance intermediary-manager.
(m) The reinsurance intermediary-manager shall disclose to
the reinsurer any relationship it has with any insurer prior to
ceding or assuming any business with such insurer pursuant to
this contract.
(n) Within the scope of its actual or apparent authority,the acts of the reinsurance intermediary-manager are deemed to be
the acts of the reinsurer on whose behalf it is acting.
§33-38-8. Prohibited acts.
The reinsurance intermediary-manager may not:
(a) Cede retrocessions on behalf of the reinsurer, except
that the reinsurance intermediary-manager may cede facultative
retrocessions pursuant to obligatory facultative agreements if
the contract with the reinsurer contains reinsurance underwriting
guidelines for the retrocessions. The guidelines shall include
a list of reinsurers with which the automatic agreements are in
effect, and for each reinsurer, the coverages and amounts or
percentages that may be reinsured, and commission schedules.
(b) Commit the reinsurer to participate in reinsurance
syndicates.
(c) Appoint any producer without assuring that the producer
is lawfully licensed to transact the type of reinsurance for
which he is appointed.
(d) Without prior approval of the reinsurer, pay or commit
the reinsurer to pay a claim, net of retrocessions, that exceeds
the lesser of an amount specified by the reinsurer or one percent
of the reinsurer's policyholder's surplus as of the thirty-first
day of December, next preceding.
(e) Collect any payment from a retrocessionaire or commit
the reinsurer to any claim settlement with a retrocessionaire,
without prior approval of the reinsurer. If prior approval is
given, a report must be promptly forwarded to the reinsurer.
(f) Jointly employ an individual who is employed by the
reinsurer unless such reinsurance intermediary-manager is under
common control with the reinsurer subject to article twenty-seven
of this chapter.
(g) Appoint a subreinsurance intermediary-manager.
§33-38-9. Duties of reinsurers utilizing the services of a
reinsurance intermediary-manager.
(a) A reinsurer may not engage the services of any person,
firm, association or corporation to act as a reinsurance
intermediary-manager on its behalf unless that person is licensed
as required by subsection (b), section three of this article.
(b) The reinsurer shall annually obtain a copy of statements
of the financial condition of each reinsurance intermediary-
manager which such reinsurer has engaged prepared by an
independent certified public accountant in a form acceptable to
the commissioner.
(c) If a reinsurance intermediary-manager establishes loss
reserves, the reinsurer shall annually obtain the opinion of an
actuary attesting to the adequacy of loss reserves established
for losses incurred and outstanding on business produced by the
reinsurance intermediary-manager. This opinion shall be in
addition to any other required loss reserve certification.
(d) Binding authority for all retrocessional contracts or
participation in reinsurance syndicates shall rest with an
officer of the reinsurer who may not be affiliated with the
reinsurance intermediary-manager.
(e) Within thirty days of termination of a contract with a
reinsurance intermediary-manager, the reinsurer shall provide
written notification of such termination to the commissioner.
(f) A reinsurer may not appoint to its board of directors,
any officer, director, employee, controlling shareholder or
subproducer of its reinsurance intermediary-manager. This
subsection does not apply to relationships governed by article
twenty-seven of this chapter.
§33-38-10. Examination authority.
(a) A reinsurance intermediary is subject to examination by
the commissioner at his or her discretion. The commissioner
shall have access to all books, bank accounts and records of the
reinsurance intermediary in a form usable to the commissioner.
(b) A reinsurance intermediary-manager may be examined as if
it were the reinsurer.
§33-38-11. Penalties and liabilities.
(a) A reinsurance intermediary, insurer or reinsurer found
by the commissioner, after a hearing conducted in accordance with
section thirteen, article two of this chapter, to be in violation
of any provision or provisions of this article, shall:
(1) For each separate violation, pay a penalty in an amount
not exceeding five thousand dollars;
(2) Be subject to revocation or suspension of its license;
and
(3) If a violation was committed by the reinsurance
intermediary, such reinsurance intermediary shall makerestitution to the insurer, reinsurer, rehabilitator or
liquidator of the insurer or reinsurer for the net losses
incurred by the insurer or reinsurer attributable to the
violation.
(b) The decision, determination or order of the commissioner
pursuant to subsection (a) of this section is subject to judicial
review pursuant to section fourteen, article two of this chapter.
(c) Nothing contained in this section may affect the right
of the commissioner to impose any other penalties provided in the
insurance law.
(d) Nothing contained in this article is intended to or may
in any manner limit or restrict the rights of policyholders,
claimants, creditors or other third parties or confer any rights
to such persons.
§33-38-12. Regulatory authority.
The commissioner is hereby authorized to promulgate
reasonable rules, pursuant to chapter twenty-nine-a of the West
Virginia code, for the implementation and administration of the
provisions of this article. These rules to include but not be
limited to setting reasonable fees and standards for licensing.
§33-38-13. Effective date.
This article shall take effect on the first day of January,
one thousand nine hundred ninety-four. No insurer or reinsurer
may continue to utilize the services of a reinsurance
intermediary on and after the effective date unless utilization
is in compliance with this article.
NOTE: The purpose of this bill is to strengthen the
authority of the state insurance commissioner to regulate the
insurance industry in this state and to protect and safeguard the
interests of policyholders and the general public.
The bill strengthens the commissioner's existing authority
to examine the activities, operations, financial condition and
affairs of all persons transacting or attempting to transact an
insurance business in this state. The bill enables the
commissioner to adopt a flexible system of examinations which
directs resources as may be deemed appropriate and necessary for
the administration of the insurance code and insurance related
laws of this state.
The bill amends existing language that exempted insurers
from licensure requirements but subjected said insurers to
premium and annuity tax requirements if the insurer was not
transacting new insurance business but collecting premiums on and
servicing of policies in force in this state. The amendments
specifically limit this exemption from licensure requirements to
insurers of individuals who have moved to this state and continue
to purchase insurance coverage from said unlicensed companies.
The bill allows the commissioner to require an insurer to
maintain funds in excess of the current minimum capital and
surplus requirements due to the amount, kind or combination of
kinds of insurance transacted by an insurer. Failure of an
insurer to maintain funds as ordered by the commissioner are
grounds for suspension, revocation, refusal or nonrenewal of the
insurer's license. Any order so issued by the commissioner is
subject to review pursuant to applicable administrative
proceedings of the insurance code.
The bill amends existing provisions on credit for
reinsurance being allowed either as an asset or as a deduction
from liability to any ceding insurer. Credits are not allowed
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. Credits are not allowed unless under the
reinsurance contract the liability for such reinsurance is
assumed by the assuming insurer or insurers as of the same
effective date. The bill amends existing language that requires
insurers to file with and gain the commissioner's approval of
reinsurance agreements to state that said reinsurance agreements
shall not become effective unless the commissioner's approval is
gained in advance. New language is added that states causes for
not approving said agreements; that define assumption reinsurance
agreements; that a filing for approval of a reinsurance agreement
must be certified under oath by responsible officers of theparties involved that the filing contains the entire agreement;
and that the commissioner may promulgate rules to implement the
provisions of section fifteen, article four of this chapter. The
bill is amended to require a reinsurer to be accredited on or
before the effective date of the reinsurance contract, rather
than the thirty-first day of December of the year for which the
ceding insurer is claiming a credit.
The bill makes hospital service corporations and healthcare
corporations adhere to existing provisions of article sixteen-a
of the insurance code regarding conversion of an insured's health
insurance coverage under a group policy to an individual health
insurance policy.
The bill requires the commissioner to promulgate a rule
setting forth procedural requirements necessary to implement the
provisions of the insurance holding company systems act and
specifying the reporting forms required by said act.
The bill amends the Risk Retention Act to require risk
retention groups registered in this state to make annual filings.
The bill makes an allowance that administrative hearings
held to review an order the commissioner has issued pursuant to
article thirty-four-a, which deals with companies deemed to be in
a hazardous financial condition, shall be private unless the
insurer requests a public hearing.
The bill amends and reenacts article thirty-six which
defines the commissioner's authority to regulate and sets
standards for business transactions between a property/casualty
insurer and a producer who has effective control of such an
insurer. The amendments are made to conform this article to the
model law required for accreditation under the National
Association of Insurance Commissioner's Financial Regulation
Standards and Accreditation Program. The amendments deal with
definitions, applicability, minimum standards, disclosure,
penalties and effective date.
The bill adds a new article to the insurance code designated
article thirty-eight. The new article establishes the
commissioner's authority to regulate business transactions
between reinsurance intermediaries, insurance companies and
reinsurance companies. The article requires said reinsurance
intermediaries to become licensed in this state or to be licensed
in a state with a substantially similar law.
Strike-throughs indicate language that would be stricken
from present law, and underscoring indicates new language that
would be added.
§33-2-9 adds substantially new language. Retained languageof existing §33-2-9 is so extensively rearranged that strike-
throughs and underscoring would be detrimental to the reader's
understanding of the passage. Strike-throughs and underscoring
are therefore omitted from §33-2-9.
Article thirty-six is effectively repealed and a new article
with the same number with new language dealing with the same
general subject matter is reenacted. Strike-throughs and
underscoring would be detrimental to the reader's understanding
of the passage. Strike-throughs and underscoring are therefore
omitted from article thirty-six.
Article thirty-eight is new, therefore strike-throughs and
underscoring have been omitted.
§33-3-5 and §33-3-5a regarding capital and surplus
requirements of insurance companies prior to the first day of
January, one thousand nine hundred and ninety-three are repealed.