ENGROSSED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 434
(By Senator Minard)
____________
[Originating in the Committee on Banking and Insurance;
reported March 2, 1994.]
____________
A BILL to amend and reenact sections ten, eleven and twelve,
article seven, chapter thirty-three of the code of West
Virginia, one thousand nine hundred thirty-one, as amended;
to amend and reenact section two, article twenty-two of said
chapter; to amend and reenact section two, article twenty-
three 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 twenty-four, article twenty-five-a of
said chapter; to amend and reenact sections four and five,
article twenty-seven of said chapter; to amend and reenact
sections one and six, article thirty-one of said chapter; to
amend and reenact section three, article thirty-two of said
chapter; and to further amend said chapter by adding thereto
two new articles, designated articles thirty-nine and forty,
all relating to insurance; assets and liabilities; valuation
of bonds; valuation of other securities; valuation of real
property; farmers' mutual fire insurance companies;
applicability of other provisions; fraternal benefit
societies; applicability of other provisions; 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; health
maintenance organization act; issuance of certificate of
authority; insurance holding company systems; registration
of insurers; standards; captive insurance; definitions;
corporate organization; risk retention act; charter and
license requirements for domestic groups; disclosure of
material transactions; report; acquisitions and dispositions
of assets; nonrenewals, cancellations or revisions of ceded
reinsurance programs; effective date; risk based capital for
life and/or health insurers; definitions; risk based capital
reports; company action level event; regulatory action level
event; authorized control level event; mandatory control
level event; hearings; confidentiality and prohibition on
announcements; supplemental provisions; foreign insurers;
severability clause; notices; and effective date.
Be it enacted by the Legislature of West Virginia:
That sections ten, eleven and twelve, article seven, chapter
thirty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, be amended and reenacted; that
section two, article twenty-two of said chapter be amended andreenacted; that section two, article twenty-three 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 twenty-four, article twenty-five-a of said chapter
be amended and reenacted; that sections four and five, article
twenty-seven of said chapter be amended and reenacted; that
sections one and six, article thirty-one of said chapter be
amended and reenacted; that section three, article thirty-two of
said chapter be amended and reenacted; and that said chapter be
further amended by adding thereto two new articles, designated
articles thirty-nine and forty, all to read as follows:
ARTICLE 7. ASSETS AND LIABILITIES.
§33-7-10. Valuation of bonds.
(a) All bonds or other evidences of debt having a fixed term
and rate of interest held by any insurer may, if amply secured
and not in default as to principal or interest, be valued as
follows:
(1) If purchased at par, at the par value.
(2) If purchased above or below par, on the basis of the
purchase price adjusted so as to bring the value to par at
maturity and so as to yield in the meantime the effective rate of
interest at which the purchase was made, or in lieu of such
method, according to such accepted method of valuation as is
approved by the commissioner.
(3) Purchase price shall in no case be taken at a higher
figure than the actual market value at the time of purchase, plus
actual brokerage, transfer, postage or express charges paid inthe acquisition of such securities.
(4) Unless otherwise provided by valuation established or
approved by the commissioner, no such security shall be carried
at above the call price for the entire issue during any period
within which the security may be so called.
(b) The commissioner shall have full discretion in
determining the method of calculating values according to the
rules set forth in this section, but no such method or valuation
shall be inconsistent with any applicable valuation or method
then currently formulated or approved by the committee on
valuation of securities of the national association of insurance
commissioners or its successor organization.
§33-7-11. Valuation of other securities.
(a) Securities, other than those referred to in section ten
of this article, held by an insurer shall be valued, in the
discretion of the commissioner, at their market value, or at
their appraised value, or at prices determined by him as
representing their fair market value, all consistent with any
current method for the valuation of any such security formulated
or approved by the commissioner.
(b) Preferred or guaranteed stocks or shares while paying
full dividends may be carried at a fixed value in lieu of market
value, at the discretion of the commissioner and in accordance
with such method of computation as he may approve.
(c) Stock of a subsidiary corporation of an insurer shall
not be valued in excess of the net value thereof as based upon
those assets only of the subsidiary which would be eligible
pursuant to the provisions of this article, and article eight ofthis chapter, for investment of funds of the insurer directly.
(d) No valuations under this section shall be inconsistent
with any applicable valuation or method then currently formulated
or approved by the committee on valuation of securities of the
national association of insurance commissioners or its successor
organization.
§33-7-12. Valuation of real property.
(a) In the event of a default real property acquired
pursuant to a mortgage loan or contract for sale shall not be
valued at an amount greater than the unpaid principal of the
defaulted loan or contract at the date of such acquisition,
together with any taxes and expenses paid or incurred in
connection with such acquisition, and the cost of improvements
thereafter made by the insurer and any amounts thereafter paid by
the insurer on assessments levied for improvements in connection
with the property.
(b) The value of other real property acquired or held by an
insurer shall in no event be valued at more than the purchase
price. Purchase price includes capitalized permanent
improvements, less depreciation as allowed by the current
accounting practices and procedures manuals of the national
association of insurance commissioners. Real property that has
been affected by permanent declines in value shall be valued at
not more than market value.
ARTICLE 22. FARMERS' MUTUAL FIRE INSURANCE COMPANIES.
§33-22-2. Applicability of other provisions.
Each company to the same extent such provisions are
applicable to domestic mutual insurers shall be governed by andbe subject to the following articles of this chapter: Article
one (definitions); article two (insurance commissioner); article
four (general provisions) except that section sixteen of article
four shall not be applicable thereto; article seven (assets and
liabilities); article ten (rehabilitation and liquidation) except
that under the provisions of section thirty-two of said article
ten assessments shall not be levied against any former member of
a farmers' mutual fire insurance company who is no longer a
member of the company at the time the order to show cause was
issued; article eleven (unfair trade practices); article twelve
(agents, brokers and solicitors) except that the agent's license
fee shall be five dollars; article twenty-six (West Virginia
Insurance Guaranty Association Act); article twenty-seven
(insurance holding company systems); article thirty (mine
subsidence insurance) except that under the provisions of section
six, article thirty, a farmers' mutual insurance company shall
have the option of offering mine subsidence coverage to all of
its policyholders but shall not be required to do so, 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); article
thirty-six (business transacted with producer-controlled
property/casualty insurer); article thirty-seven (managing
general agents); and article thirty-nine (disclosure of material
transactions); but only to the extent these provisions are not
inconsistent with the provisions of this article.
ARTICLE 23. FRATERNAL BENEFIT SOCIETIES.
§33-23-2. Applicability of other provisions.
Every fraternal benefit society shall be governed and be
subject to the same extent as other insurers transacting like
kinds of insurance, to the following articles of this chapter:
Article one (definitions); article two (insurance commissioner);
article four (general provisions); section thirty, article six
(fee for form and rate filing); article seven (assets and
liabilities); article ten (rehabilitation and liquidation);
article eleven (unfair trade practices); article twelve (agents,
brokers, solicitors and excess lines); article thirteen (life
insurance); article fifteen-a (long-term care insurance); article
twenty-seven (insurance holding company systems); 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); article thirty-seven
(managing general agents); and article thirty-nine (disclosure of
material transactions).
ARTICLE 24. HOSPITAL SERVICE CORPORATIONS, MEDICAL SERVICE
CORPORATIONS, DENTAL SERVICE CORPORATIONS AND HEALTH SERVICE
CORPORATIONS.
§33-24-4. Exemptions; applicability of insurance laws.
Every corporation defined in section two of this article is
hereby declared to be a scientific, nonprofit institution and
exempt from the payment of all property and other taxes. Every
corporation, to the same extent the provisions are applicable toinsurers 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
said article, examinations shall be conducted at least once every
four years; article four (general provisions), except that
section sixteen of said article shall not be applicable thereto;
section thirty-four, article six (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, article
sixteen (required policy provisions); 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); article
thirty-seven (managing general agents); and article thirty-nine
(disclosure of material transactions); and no other provision of
this chapter may apply to these corporations unless specifically
made applicable by the provisions of this article. If, however,
any such 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 are subject to
supervision and regulation of the insurance commissioner. The
corporations organized under this article, to the same extent
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 said article 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); section
three, article sixteen (required policy provisions); 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);
article thirty-seven (managing general agents); and article
thirty-nine (disclosure of material transactions); and no other
provision of this chapter may apply to these corporations unless
specifically made applicable by the provisions of this article.
ARTICLE 25A. HEALTH MAINTENANCE ORGANIZATION ACT.
§33-25A-24. Statutory construction and relationship to other
laws.
(a) Except as otherwise provided in this article, provisions
of the insurance laws and provisions of hospital or medical
service corporation laws shall not be applicable to any health
maintenance organization granted a certificate of authority under
this article. This provision shall not apply to an insurer or
hospital or medical service corporation licensed and regulated
pursuant to the insurance laws or the hospital or medical service
corporation laws of this state except with respect to its health
maintenance corporation activities authorized and regulatedpursuant to this article.
(b) Factually accurate advertising or solicitation regarding
the range of services provided, the premiums and copayments
charged, the sites of services and hours of operation, and any
other quantifiable, nonprofessional aspects of its operation by
a health maintenance organization granted a certificate of
authority, or its representative shall not be construed to
violate any provision of law relating to solicitation or
advertising by health professions:
Provided,
That nothing
contained herein shall be construed as authorizing any
solicitation or advertising which identifies or refers to any
individual provider, or makes any qualitative judgment concerning
any provider.
(c) Any health maintenance organization authorized under
this article shall not be deemed to be practicing medicine and
shall be exempt from the provision of chapter thirty of this
code, relating to the practice of medicine.
(d) The provisions of section fifteen, article four (general
provisions); article six-c (guaranteed loss ratio); article seven
(assets and liabilities); article eight (investments); section
fourteen, article fifteen (individual accident and sickness
insurance); article fifteen-b (uniform health care administration
act); section three, article sixteen (required policy
provisions); section three-f, article sixteen (treatment of
temporomandibular 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); articletwenty-seven (insurance holding company systems); 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); article thirty-seven (managing general agents); and
article thirty-nine (disclosure of material transactions) shall
be applicable to any health maintenance organization granted a
certificate of authority under this article.
(e) Any long-term care insurance policy delivered or issued
for delivery in this state by a health maintenance organization
shall comply with the provisions of article fifteen-a of this
chapter.
ARTICLE 27. INSURANCE HOLDING COMPANY SYSTEMS.
§33-27-4. Registration of insurers.
(a) Every insurer which is authorized to do business in this
state and which is a member of an insurance holding company
system shall register with the commissioner, except a foreign
insurer subject to disclosure requirements and standards adopted
by statute or regulation in the jurisdiction of its domicile
which are substantially similar to those contained in this
section. Any insurer which is subject to registration under this
section shall register within sixty days after the effective date
of this article or fifteen days after it becomes subject to
registration, whichever is later, and annually thereafter by the
first day of June of each year for the previous calendar year,
unless the commissioner for good cause shown extends the time for
registration, and then within such extended time. The
commissioner may require any authorized insurer which is a memberof a holding company system which is not subject to registration
under this section to furnish a copy of the registration
statement, the summary described in subsection (c) of this
section, or other information filed by such insurance company
with the insurance regulatory authority of domiciliary
jurisdiction.
(b) Every insurer subject to registration shall file a
registration statement on a form prescribed by the national
association of insurance commissioners, which shall contain
current information about:
(1) The capital structure, general financial condition,
ownership and management of the insurer and any person
controlling the insurer.
(2) The identity and relationship of every member of the
insurance holding company system.
(3) The following agreements in force, relationships
subsisting, and transactions currently outstanding or which have
occurred during the last calendar year between such insurer and
its affiliates:
(A) Loans, other investments, or purchases, sales or
exchanges of securities of the affiliates by the insurer or of
the insurer by its affiliates;
(B) Purchases, sales or exchanges of assets;
(C) Transactions not in the ordinary course of business;
(D) Guarantees or undertakings for the benefit of an
affiliate which result in an actual contingent exposure of the
insurer's assets to liability, other than insurance contracts
entered into in the ordinary course of the insurer's business;
(E) All management and service contracts and all
cost-sharing arrangements;
(F) All reinsurance agreements;
(G) Dividends and other distributions to shareholders; and
(H) Any pledge of the insurer's stock, including stock of
any subsidiary or controlling affiliate, for a loan made to any
member of the insurance holding company system.
(4) Other matters concerning transactions between registered
insurers and any affiliates as may be included from time to time
in any registration forms adopted or approved by the
commissioner.
(c) All registration statements shall contain a summary
outlining all items in the current registration statement
representing changes from the prior registration statement.
(d) Information need not be disclosed on the registration
statement filed pursuant to subsection (b) of this section if
such information is not material for the purpose of this section.
Unless the commissioner by rule or order provides otherwise,
sales, purchases, exchanges, loans or extensions of credit, or
investments, involving one half of one percent or less of an
insurer's admitted assets as of the thirty-first day of December
next preceding shall not be deemed material for purposes of this
section.
(e) Each registered insurer shall keep current the
information required to be disclosed in its registration
statement by reporting all material changes or additions on
amendment forms provided by the commissioner within fifteen days
after the end of the month in which it learns of each such changeor addition.
(f) Subject to subsection (c), section five of this article,
each registered insurer shall report to the commissioner all
dividends and other distributions to shareholders within fifteen
business days following the declaration thereof.
(g) Any person within an insurance holding company system
subject to registration shall be required to provide complete and
accurate information to an insurer, when such information is
reasonably necessary to enable the insurer to comply with the
provisions of this article.
(h) The commissioner shall terminate the registration of any
insurer which demonstrates that it no longer is a member of an
insurance holding company system.
(i) The commissioner may require or allow two or more
affiliated insurers subject to registration hereunder to file a
consolidated registration statement or consolidated reports
amending their consolidated registration statement or their
individual registration statements.
(j) The commissioner may allow an insurer which is
authorized to do business in this state and which is a part of an
insurance holding company system to register on behalf of any
affiliated insurer which is required to register under subsection
(a) of this section and to file all information and material
required to be filed under this section.
(k) The provisions of this section shall not apply to any
insurer, information or transaction if and to the extent that the
commissioner by rule or order shall exempt the same from the
provisions of this section.
(l) Any person may file with the commissioner a disclaimer
of affiliation with any authorized insurer or such a disclaimer
may be filed by such insurer or any member of an insurance
holding company system. The disclaimer shall fully disclose all
material relationships and bases for affiliation between such
person and such insurer as well as the basis for disclaiming such
affiliation. After a disclaimer has been filed, the insurer
shall be relieved of any duty to register or report under this
section which may arise out of the insurer's relationship with
such person unless and until the commissioner disallows such a
disclaimer. The commissioner shall disallow such a disclaimer
only after furnishing all parties in interest with notice and
opportunity to be heard and after making specific findings of
fact to support such disallowance.
(m) The failure to file a registration statement or any
amendment thereto required by this section within the time
specified for such filing shall be a violation of this section.
§33-27-5. Standards.
(a) Transactions by registered insurers with their
affiliates shall be subject to the following standards:
(1) The terms shall be fair and reasonable;
(2) Charges or fees for services performed shall be
reasonable;
(3) Expenses incurred and payment received shall be
allocated to the insurer in conformity with customary insurance
accounting practices consistently applied;
(4) The books, accounts and records of each party shall be
so maintained as to clearly and accurately disclose the precisenature and details of the transactions, including such accounting
information as is necessary to support the reasonableness of the
charges or fees to the respective parties; and
(5) The insurer's surplus as regards policyholders following
any dividends or distributions to shareholder affiliates shall be
reasonable in relation to the insurer's outstanding liabilities
and adequate to its financial needs.
(b) For purposes of this article, in determining whether an
insurer's surplus as regards policyholders is reasonable in
relation to the insurer's outstanding liabilities and adequate to
its financial needs, the following factors, among others, shall
be considered:
(1) The size of the insurer as measured by its assets,
capital and surplus, reserves, premium writings, insurance in
force and other appropriate criteria;
(2) The extent to which the insurer's business is
diversified among the several lines of insurance;
(3) The number and size of risks insured in each line of
business;
(4) The extent of the geographical dispersion of the
insurer's insured risks;
(5) The nature and extent of the insurer's reinsurance
program;
(6) The quality, diversification and liquidity of the
insurer's investment portfolio;
(7) The recent past and projected future trend in the size
of the insurer's surplus as regards policyholders;
(8) The surplus as regards policyholders maintained by othercomparable insurers;
(9) The adequacy of the insurer's reserves; and
(10) The quality and liquidity of investments in affiliates.
The commissioner may treat any such investment as a disallowed
asset for purposes of determining the adequacy of surplus as
regards policyholders whenever in his or her judgment such
investment so warrants.
(c) An insurer subject to registration under section four of
this article shall not pay any extraordinary dividend or make any
other extraordinary distribution to its shareholders until: (1)
Thirty days after the commissioner has received notice of the
declaration thereof and has not within such period disapproved
such payment; or (2) the commissioner shall have approved such
payment within such thirty-day period.
(d) For purposes of this section, an extraordinary dividend
or distribution includes any dividend or distribution of cash or
other property, whose fair market value together with that of
other dividends or distributions made within the preceding twelve
months exceeds the lesser of: (1) Ten percent of such insurer's
surplus as regards policyholders as of the thirty-first day of
December next preceding; or (2) the net gain from operations of
such insurer, if such insurer is a life insurer, or the net
income, if such insurer is not a life insurer, not including
realized capital gains, for the twelve-month period ending the
thirty-first day of December next preceding, but shall not
include pro rata distributions of any class of the insurer's own
securities. In determining whether a dividend or distribution is
extraordinary, an insurer other than a life insurer may carryforward net income from the previous two calendar years that has
not already been paid out as dividends. This carry-forward shall
be computed by taking the net income from the second and third
preceding calendar years, not including realized capital gains,
less dividends paid in the second and immediate preceding
calendar years.
(e) Notwithstanding any other provision of law, an insurer
may declare an extraordinary dividend or distribution which is
conditional upon the commissioner's approval thereof, and such a
declaration shall confer no rights upon shareholders until: (1)
The commissioner has approved the payment of such dividend or
distribution; or (2) the commissioner has not disapproved such
payment within the thirty-day period referred to above.
(f) The following transactions involving a domestic insurer
and any person in its holding company system may not be entered
into unless the insurer has notified the commissioner in writing
of its intention to enter into such transaction at least thirty
days prior thereto, or such shorter period as the commissioner
may permit, and the commissioner has not disapproved it within
such period:
(1) Sales, purchases, exchanges, loans or extensions of
credit, guarantees or investments provided such transactions are
equal to or exceed: The lesser of one percent of the insurer's
admitted assets or ten percent of surplus as regards
policyholders; each as of the thirty-first day of December next
preceding;
(2) Loans or extensions of credit to any person who is not
an affiliate, where the insurer makes such loans or extensions ofcredit with the agreement or understanding that the proceeds of
such transactions, in whole or in substantial part, are to be
used to make loans or extensions of credit to, purchase assets
of, or to make investments in, any affiliate of the insurer
making such loans or extensions of credit provided such
transactions are equal to or exceed: The lesser of one percent
of the insurer's admitted assets or ten percent of surplus as
regards policyholders; each as of the thirty-first day of
December next preceding;
(3) Reinsurance agreements or modifications thereto in which
the reinsurance premium or a change in the insurer's liabilities
equals or exceeds five percent of the insurer's surplus as
regards policyholders, as of the thirty-first day of December
next preceding, including those agreements which may require as
consideration the transfer of assets from an insurer to a
nonaffiliate, if an agreement or understanding exists between the
insurer and nonaffiliate that any portion of such assets will be
transferred to one or more affiliates of the insurer;
(4) All management agreements, service contracts and all
cost-sharing arrangements; and
(5) Any material transactions, specified by rule, which the
commissioner determines may adversely affect the interests of the
insurer's policyholders.
(g) Nothing contained in subsection (h) herein shall be
deemed to authorize or permit any transactions which, in the case
of an insurer not a member of the same holding company system,
would be otherwise contrary to law.
(h) A domestic insurer shall not enter into transactionswhich are part of a plan or series of like transactions with
persons within the holding company system if the purpose of those
separate transactions is to avoid the statutory threshold amount
and thus avoid the review that would occur otherwise. If the
commissioner determines that such separate transactions were
entered into over any twelve-month period for such purpose, he or
she may exercise his or her authority under section nine.
(i) The commissioner, in reviewing transactions pursuant to
subsection (f) of this section, shall consider whether the
transactions comply with the standards set forth in subsection
(a) of this section and whether they may adversely affect the
interests of policyholders.
(j) The commissioner shall be notified within thirty days of
any investment of the domestic insurer in any one corporation if
the total investment in such corporation by the insurance holding
company system exceeds ten percent of such corporation's voting
securities.
(k) With regard to domestic insurers, the following
requirements apply:
(1) Notwithstanding the control of a domestic insurer by any
person, the officers and directors of the insurer shall not
thereby be relieved of any obligation or liability to which they
would otherwise be subject by law, and the insurer shall be
managed so as to assure its separate operating identity
consistent with the provisions of this chapter.
(2) Nothing herein shall preclude a domestic insurer from
having or sharing a common management or cooperatively, or
jointly using personnel, property or services with one or moreother persons under arrangements meeting the standards of
subsection (a) of this section.
ARTICLE 31. CAPTIVE INSURANCE.
§33-31-1. Definitions.
As used in this chapter, unless the context requires
otherwise:
(1) "Affiliated company" means any company in the same
corporate system as a parent, an industrial insured, or a member
organization by virtue of common ownership, control, operation or
management.
(2) "Association" means any legal association of
individuals, corporations, partnerships or associations that has
been in continuous existence for at least one year, the member
organizations of which collectively:
(A) Own, control or hold with power to vote all of the
outstanding voting securities of an association captive insurance
company incorporated as a stock insurer; or
(B) Have complete voting control over an association captive
insurance company incorporated as a mutual insurer.
(3) "Association captive insurance company" means any
company that insures risks of the member organizations of the
association, and their affiliated companies.
(4) "Captive insurance company" means any pure captive
insurance company, association captive insurance company, or
industrial insured captive insurance company formed or licensed
under the provisions of this chapter.
(5) "Commissioner" means the insurance commissioner of West
Virginia.
(6) "Industrial insured" means an insured:
(A) Who procures the insurance of any risk or risks by use
of the services of a full-time employee acting as an insurance
manager or buyer;
(B) Whose aggregate annual premiums for insurance on all
risks total at least twenty-five thousand dollars; and
(C) Who has at least twenty-five full-time employees.
(7) "Industrial insured captive insurance company" means any
company that insures risks of the industrial insureds that
comprise the industrial insured group and their affiliated
companies.
(8) "Industrial insured group" means any group that meets
the following criteria:
Any group of industrial insureds that collectively:
(i) Own, control or hold with power to vote all of the
outstanding voting securities of an industrial insured captive
insurance company incorporated as a stock insurer; or
(ii) Have complete voting control over an industrial insured
captive insurance company incorporated as a mutual insurer.
(9) "Member organization" means any individual, corporation,
partnership or association that belongs to an association.
(10) "Parent" means a corporation, partnership or individual
that directly or indirectly owns, controls or holds with power to
vote more than fifty percent of the outstanding voting securities
of a pure captive insurance company.
(11) "Pure captive insurance company" means any company that
insures risks of its parent and affiliated companies.
§33-31-6. Corporate organization.
(a) A pure captive insurance company shall be incorporated
as a stock insurer with its capital divided into shares and held
by the stockholders.
(b) An association captive insurance company or an
industrial insured captive insurance company may be incorporated:
(1) As a stock insurer with its capital divided into shares
and held by the stockholders; or
(2) As a mutual insurer without capital stock, the governing
body of which is elected by the member organizations of its
association.
(c) A captive insurance company shall have at least one
incorporator who shall be a resident of this state.
(d) Before the articles of association are transmitted to
the secretary of state, the incorporators shall petition the
commissioner to issue a certificate setting forth his or her
finding that the establishment and maintenance of the proposed
corporation will promote the general good of the state. In
arriving at such finding the commissioner shall consider:
(1) The character, reputation, financial standing and
purpose of the incorporators;
(2) The character, reputation, financial responsibility,
insurance experience and business qualifications of the officers
and directors; and
(3) Such other aspects as the commissioner deems advisable.
(e) The articles of association, such certificate and the
organization fee shall be transmitted to the secretary of state,
who shall thereupon record both the articles of incorporation and
the certificate.
(f) The capital stock of a captive insurance company
incorporated as a stock insurer shall be issued at not less than
par value.
(g) At least one of the members of the board of directors of
a captive insurance company incorporated in this state shall be
a resident of this state.
(h) Captive insurance companies formed under the provisions
of this chapter shall have the privileges and be subject to the
provisions of the general corporation law as well as the
applicable provisions contained in this chapter. Captive
insurance companies are subject to the provisions of article
thirty-three, article thirty-four, article thirty-seven and
article thirty-nine of this chapter. In the event of conflict
between the provisions of said general corporation law and the
provisions of this chapter, the latter shall control.
ARTICLE 32. RISK RETENTION ACT.
§33-32-3. Charter and license requirements for domestic groups.
(a) A risk retention group shall, pursuant to the provisions
of article five of this chapter, be chartered and licensed to
write only liability insurance pursuant to this article and,
except as provided elsewhere in this article, shall comply with
all of the laws, rules and requirements applicable to insurers
chartered and licensed in this state and with section four of
this article, to the extent such requirements are not a
limitation on laws, rules or requirements of this state.
(b) Notwithstanding any other provision of this chapter to
the contrary, all risk retention groups chartered in this state
shall file with the commissioner and the national association ofinsurance commissioners, an annual statement on a form prescribed
by the national association of insurance commissioners and in
diskette form, if required by the commissioner and completed in
accordance with the national association of insurance
commissioners' instructions and the national association of
insurance commissioners accounting practices and procedures
manual.
(c) Before it may offer insurance in any state, each risk
retention group shall also submit for approval by the insurance
commissioner of this state a plan of operation or feasibility
study. The risk retention group shall submit an appropriate
revision of such plan or study, in the event of any subsequent
material change in any item of the plan of operation or
feasibility study, within ten days of any such change. The risk
retention group shall not offer any additional kinds of liability
insurance, in this state or in any other state, until a revision
of the plan or study is approved by the commissioner.
(d) At the time of filing its application for a charter, the
risk retention group shall provide to the commissioner in summary
form the following information: The identity of the initial
members of the group, the identity of those individuals who
organized the group or who will provide administrative services
or otherwise influence or control the activities of the group,
the amount and nature of initial capitalization, the coverages to
be afforded, and the states in which the group intends to
operate. Upon receipt of this information, the commissioner
shall forward the information to the national association of
insurance commissioners. Providing notification to the nationalassociation of insurance commissioners is in addition to and
shall not be sufficient to satisfy the requirements of section
four or any other sections of this article.
(e) Risk retention groups are subject to the provisions of
article thirty-three, article thirty-four, article thirty-seven
and article thirty-nine of this chapter.
ARTICLE 39. DISCLOSURE OF MATERIAL TRANSACTIONS.
§33-39-1. Report.
(a) Every insurer domiciled in this state shall file a
report with the commissioner disclosing material acquisitions and
dispositions of assets or material nonrenewals, cancellations or
revisions of ceded reinsurance programs unless such acquisitions
and dispositions of assets or material nonrenewals, cancellations
or revisions of ceded reinsurance programs have been submitted to
the commissioner for review, approval or information purposes
pursuant to other provisions of this chapter.
(b) The report required in subsection (a) of this section is
due within fifteen days after the end of the calendar month in
which any of the foregoing transactions occur.
(c) One complete copy of the report, including any exhibits
or other attachments filed as part thereof, shall be filed with:
(1) The insurance commissioner; and
(2) The national association of insurance commissioners.
(d) All reports obtained by or disclosed to the commissioner
pursuant to this article, shall be given confidential treatment
and shall not be subject to subpoena and shall not be made public
by the commissioner, the national association of insurance
commissioners, or any other person, except to insurancedepartments of other states, without the prior written consent of
the insurer to which it pertains unless the commissioner, after
giving the insurer who would be affected thereby, notice and an
opportunity to be heard, determines that the interest of
policyholders, shareholders or the public will be served by the
publication thereof, in which event the commissioner may publish
all or any part thereof in such manner as he or she may deem
appropriate.
§33-39-2. Acquisitions and dispositions of assets.
(a) No acquisitions or dispositions of assets need be
reported pursuant to section one of this article if the
acquisitions or dispositions are not material. For purposes of
this article, a material acquisition, or the aggregate of any
series of acquisitions during any thirty-day period, is one that
is nonrecurring and not in the ordinary course of business and
involves more than five percent of the reporting insurer's total
admitted assets as reported in its most recent statutory
statement filed with the insurance commissioner. For purposes of
this article, a material disposition, or the aggregate of any
series of dispositions during any thirty-day period, is one that
is nonrecurring and not in the ordinary course of business and
involves more than five percent of the reporting insurer's total
admitted assets as reported in its most recent statutory
statement filed with the insurance commissioner.
(b) Asset acquisitions subject to this article include every
purchase, lease, exchange, merger, consolidation, succession or
other acquisition other than the construction or development of
real property by or for the reporting insurer or the acquisitionof materials for such purpose.
(c) Asset dispositions subject to this article include every
sale, lease, exchange, merger, consolidation, mortgage,
hypothecation, assignment, whether for the benefit of creditors
or otherwise, abandonment, destruction or other disposition.
(d) The following information is required to be disclosed in
any report of a material acquisition or disposition of assets:
(1) Date of the transaction;
(2) Manner of acquisition or disposition;
(3) Description of the assets involved;
(4) Nature and amount of the consideration given or
received;
(5) Purpose of, or reason for, the transaction;
(6) Manner by which the amount of consideration was
determined;
(7) Gain or loss recognized or realized as a result of the
transaction; and
(8) Name(s) of the person(s) from whom the assets were
acquired or to whom they were disposed.
(e) Insurers are required to report material acquisitions
and dispositions on a nonconsolidated basis unless the insurer is
part of a consolidated group of insurers which utilizes a pooling
arrangement or a one hundred percent reinsurance agreement that
affects the solvency and integrity of the insurer's reserves and
such insurer ceded substantially all of its direct and assumed
business to a pool. An insurer is deemed to have ceded
"substantially all" of its direct and assumed business to a pool
if the insurer has less than one million dollars of total directplus assumed written premiums during a calendar year that are not
subject to the pooling arrangement and the net income of the
business not subject to the pooling arrangement represents less
than five percent of the insurer's capital and surplus. If a
group of insurers reports on a consolidated basis as here
allowed, the report should identify the individual insurers that
are members of the group.
§33-39-3. Nonrenewals, cancellations or revisions of ceded
reinsurance programs.
(a) No nonrenewals, cancellations or revisions of ceded
reinsurance programs need be reported pursuant to section one of
this article if the nonrenewals, cancellations or revisions are
not material. For purposes of this article, a material
nonrenewal, cancellation or revision is one that affects for
property and casualty business, including accident and health
business when written as such, more than fifty percent of an
insurer's ceded written premium, or for life, annuity and
accident and health business, more than fifty percent of the
total reserve credit taken for business ceded, on an annualized
basis as indicated in the insurer's most recently filed statutory
statement: Provided, That no filing is required if the insurer's
ceded written premium or the total reserve credit taken for
business ceded represents, on an annualized basis, less than ten
percent of direct plus assumed written premium or ten percent of
the statutory reserve requirement prior to any cession,
respectively.
(b) Subject to the criteria outlined above, a report is to
be filed without regard to which party has initiated thenonrenewal, cancellation or revision of ceded reinsurance
whenever one or more of the following conditions exist:
(1) The entire cession has been canceled, nonrenewed or
revised and ceded indemnity and loss adjustment expense reserves
after any nonrenewal, cancellation or revision represent less
than fifty percent of the comparable reserves that would have
been ceded had the nonrenewal, cancellation or revision not
occurred;
(2) An authorized or accredited reinsurer has been replaced
on an existing cession by an unauthorized reinsurer;
(3) Collateral requirements previously established for
unauthorized reinsurers have been reduced. For example, the
requirement to collateralize incurred but not reported claim
reserves has been waived with respect to one or more unauthorized
reinsurers newly participating in an existing cession; or
(4) Subject to the materiality criteria, for purposes of
subdivisions (2) and (3) above, a report shall be filed if the
result of the revision affects more than ten percent of the
cession.
(c) The following information is required to be disclosed in
any report of a material nonrenewal, cancellation or revision of
a ceded reinsurance program:
(1) Effective date of the nonrenewal, cancellation or
revision;
(2) The description of the transaction with an
identification of the initiator thereof;
(3) Purpose of, or reason for, the transaction; and
(4) If applicable, the identity of the replacementreinsurers.
(d) Insurers are required to report all material
nonrenewals, cancellations or revisions of ceded reinsurance
agreements on a nonconsolidated basis unless the insurer is part
of a consolidated group of insurers which utilizes a pooling
arrangement or a one hundred percent reinsurance agreement that
affects the solvency and integrity of the insurer's reserves and
the insurer ceded substantially all of its direct and assumed
business to a pool. An insurer is deemed to have ceded
"substantially all" of its direct and assumed business to a pool
if the insurer has less than one million dollars of total direct
plus assumed written premiums during a calendar year that are not
subject to the pooling arrangement and the net income of the
business not subject to the pooling arrangement represents less
than five percent of the insurer's capital and surplus. If a
group of insurers reports on a consolidated basis as here
allowed, the report shall identify the individual insurers that
are members of the group.
§33-39-4. Effective date.
This article shall take effect on the first day of January,
one thousand nine hundred ninety-six.
ARTICLE 40. RISK BASED CAPITAL FOR LIFE AND/OR HEALTH INSURERS
§33-40-1. Definitions.
(a) "Adjusted risk based capital report" means a risk based
capital report which has been adjusted by the commissioner in
accordance with subsection (c), section two of this article.
(b) "Corrective order" means an order issued by the
commissioner specifying corrective actions which the commissionerhas determined are required.
(c) "Domestic insurer" means any life and/or health
insurance company organized in this state pursuant to article
five of this chapter.
(d) "Foreign insurer" means any life and/or health insurance
company which is licensed to do business in this state pursuant
to article three of this chapter but is not domiciled in this
state.
(e) "Negative trend" means a negative trend over a period of
time, as determined in accordance with the trend test calculation
included in the risk based capital instructions defined in
subsection (f) of this section.
(f) "Risk based capital instructions" means the risk based
capital report including risk based capital instructions, as
amended and adopted by the national association of insurance
commissioners.
(g) "Risk based capital level" is an insurer's company
action level, regulatory action level, authorized control level
or mandatory control level where:
(1) "Authorized control level" is the amount calculated by
applying the risk based capital formula in accordance with the
risk based capital instructions;
(2) "Company action level" is the risk based capital amount
equal to the product of multiplying the authorized control level
by two;
(3) "Mandatory control level" is the risk based capital
amount equal to the product of multiplying the authorized control
level by seven tenths;
(4) "Regulatory action level" is the risk based capital
amount equal to the product of multiplying the authorized control
level by one and one-half.
(h) A "risk based capital plan" is a comprehensive financial
plan containing the elements specified in subsection (b), section
three of this article. If the commissioner rejects the risk
based capital plan, and it is revised by the insurer, with or
without the commissioner's recommendation, the plan shall be
called the "revised risk based capital plan".
(i) A "risk based capital report" is the report required by
section two of this article.
(j) "Total adjusted capital" is the sum of:
(1) An insurer's statutory capital and surplus; and
(2) Such other items, if any, as the risk based capital
instructions may provide.
§33-40-2. Risk based capital reports.
(a) Every domestic insurer shall annually on or before the
fifteenth day of March, prepare and file with the commissioner a
report of its risk based capital levels for the year ended the
thirty-first day of December next preceding. The risk based
capital report shall be in a form containing such information as
is required by the risk based capital instructions. In addition,
every domestic insurer shall file its risk based capital report:
(1) With the national association of insurance commissioners
in accordance with the risk based capital instructions; and
(2) With the insurance commissioner of any state in which
the insurer is authorized to do business, and that insurance
commissioner has notified the insurer of its request in writing. When so requested, the insurer shall file its risk based capital
report:
(i) Fifteen days from the receipt of notice to file its risk
based capital report with that state; or
(ii) If the request is received after the thirty-first day
of December next preceding but prior to the first day of March,
on or before the fifteenth day of March.
(b) An insurer's risk based capital shall be determined in
accordance with the formula set forth in the risk based capital
instructions. The formula shall take into account and may adjust
for the covariance between:
(1) The risk with respect to the insurer's assets;
(2) The risk of adverse insurance experience with respect to
the insurer's liabilities and obligations;
(3) The interest rate risk with respect to the insurer's
business; and
(4) All other business risks and such other relevant risks
as are set forth in the risk based capital instructions.
The above risks shall be determined in each case by applying
the factors in the manner set forth in the risk based capital
instructions.
(c) If a domestic insurer files a risk based capital report
which in the judgment of the commissioner is inaccurate, then the
commissioner shall adjust the risk based capital report to
correct the inaccuracy and shall notify the insurer of the
adjustment. The notice shall contain a statement of the reason
for the adjustment. A risk based capital report so adjusted is
referred to as an "adjusted risk based capital report".
§33-40-3. Company action level event.
(a) A "company action level event" is any of the following
events:
(1) The filing of a risk based capital report by an insurer
which indicates that:
(A) The insurer's total adjusted capital is greater than or
equal to its regulatory action level but less than its company
action level; or
(B) The insurer has total adjusted capital which is greater
than or equal to its company action level but less than the
product of multiplying its authorized control level by two and
one-half and has a negative trend;
(2) Notification from the commissioner of an adjusted risk
based capital report that indicates the event in paragraph (A) or
(B), subdivision (1) of this subsection: Provided, That the
insurer does not challenge the adjusted risk based capital report
pursuant to section seven of this article; or
(3) If the insurer challenges an adjusted risk based capital
report that indicates the event in paragraph (A) or (B),
subdivison (1) of this subsection pursuant to section seven of
this article, notification from the commissioner of rejection of
the insurer's challenge.
(b) In the event of a company action level event, the
insurer shall prepare and file with the commissioner a
comprehensive financial plan which shall:
(1) Identify the internal conditions of the insurer which
contribute to the company action level event;
(2) Contain proposals of corrective actions which theinsurer intends to take that are expected to result in the
elimination of the company action level event;
(3) Provide separate projections of the insurer's financial
results in the current year and at least the four succeeding
years. One projection prepared giving effect to the proposed
corrective actions and one projection not giving effect to the
proposed corrective actions. The projections shall include
estimates of statutory operating income, net income, capital
and/or surplus. The projections for both new and renewal
business may include separate projections for each major line of
business and separately identify each significant income, expense
and benefit component;
(4) Identify the key assumptions impacting the insurer's
projections and the sensitivity of the projections to the
assumptions; and
(5) Identify the quality of, and problems associated with,
the insurer's business, including, but not limited to, its
assets, anticipated business growth and associated surplus
strain, extraordinary exposure to risk, mix of business and use
of reinsurance in each case, if any.
(c) The risk based capital plan shall be filed:
(1) Within forty-five days of the company action level
event; or
(2) If the insurer challenges an adjusted risk based capital
report pursuant to section seven of this article, within forty-
five days after notification to the insurer that the commissioner
has, after a hearing, rejected the insurer's challenge.
(d) Within sixty days after the filing of a risk basedcapital plan, the commissioner shall notify the insurer whether
the risk based capital plan shall be implemented or that it is
unsatisfactory. If the commissioner determines the risk based
capital plan is unsatisfactory, the notification to the insurer
shall set forth the reasons for the determination and may set
forth proposed revisions which will render the risk based capital
plan satisfactory. Upon notification from the commissioner, the
insurer shall prepare a revised risk based capital plan, which
may incorporate by reference any revisions proposed by the
commissioner. The revised risk based capital plan shall be filed
with the commissioner:
(1) Within forty-five days after the notification from the
commissioner; or
(2) If the insurer challenges the notification from the
commissioner pursuant to section seven of this article, within
forty-five days after a notification to the insurer that the
commissioner has, after a hearing, rejected the insurer's
challenge.
(e) In the event of a notification by the commissioner to an
insurer that the insurer's risk based capital plan or revised
risk based capital plan is unsatisfactory, the commissioner may
specify in the notification that the notification constitutes a
regulatory action level event. Such notification is subject to
the insurer's right to a hearing pursuant to section seven of
this article.
(f) Every domestic insurer that files a risk based capital
plan or revised risk based capital plan with the commissioner
shall file a copy of the risk based capital plan or revised riskbased capital plan with the insurance commissioner of any state
in which the insurer is authorized to do business if:
(1) Such state has a risk based capital provision
substantially similar to the provision of subsection (a), section
eight of this article; and
(2) The insurance commissioner of that state has notified
the insurer of its request for the filing in writing. The
insurer shall file a copy of the risk based capital plan or
revised risk based capital plan in that state on or before the
later of:
(A) Fifteen days after the receipt of notice to file a copy
of its risk based capital plan or revised risk based capital plan
with that state; or
(B) The date of which the risk based capital plan or revised
risk based capital plan is filed under subsection (c), section
four of this article.
§33-40-4. Regulatory action level event.
(a) A "regulatory action level event", with respect to any
insurer, is any of the following events:
(1) The filing of a risk based capital report by the insurer
which indicates that the insurer's total adjusted capital is
greater than or equal to its authorized control level but less
than its regulatory action level;
(2) Notification from the commissioner of an adjusted risk
based capital report that indicates the event in subdivision (1)
of this subsection: Provided, That the insurer does not
challenge the adjusted risk based capital report pursuant to
section seven of this article;
(3) If the insurer challenges an adjusted risk based capital
report that indicates the event in subdivision (1) of this
subsection pursuant to section seven of this article,
notification from the commissioner of rejection of the insurer's
challenge;
(4) The failure of the insurer to file a risk based capital
report by the filing date, unless the insurer has provided an
explanation for such failure which is satisfactory to the
commissioner and has cured the failure within ten days after the
filing date;
(5) The failure of the insurer to file a risk based capital
plan with the commissioner within the time period set forth in
subsection (c), section three of this article.
(6) Notification from the commissioner that:
(A) The risk based capital plan or revised risk based
capital plan filed by the insurer is unsatisfactory; and
(B) Such notification constitutes a regulatory action level
event with respect to the insurer: Provided, That the insurer
has not challenged the determination pursuant to section seven of
this article;
(7) If the insurer challenges a determination by the
commissioner under subdivision (6) of this subsection pursuant to
section seven of this article, notification from the commissioner
of rejection of the insurer's challenge;
(8) Notification from the commissioner that the insurer has
failed to adhere to its risk based capital plan or revised risk
based capital plan. The commissioner must determine that the
failure to adhere has a substantial adverse effect or the abilityof the insurer to eliminate the regulatory action level event in
accordance with its risk based capital plan or revised risk based
capital plan and state so in the notification. A determination
challenged pursuant to section seven of this article is not a
regulatory action level event; or
(9) If the insurer challenges a determination by the
commissioner under subdivision (8) of this subsection pursuant to
section seven of this article, notification from the commissioner
of rejection of the insurer's challenge.
(b) In the event of a regulatory action level event the
commissioner shall:
(1) Require the insurer to prepare and file a risk based
capital plan or, if applicable, a revised risk based capital
plan;
(2) Perform such examination or analysis as the commissioner
deems necessary of the assets, liabilities and operations of the
insurer including a review of its risk based capital plan or
revised risk based capital plan; and
(3) Subsequent to the examination or analysis, issue an
order specifying such corrective actions as the commissioner
shall determine are required.
(c) In determining corrective actions, the commissioner may
take into account such factors as are deemed relevant with
respect to the insurer based upon the commissioner's examination
or analysis of the assets, liabilities and operations of the
insurer, including, but not limited to, the results of any
sensitivity tests undertaken pursuant to the risk based capital
instructions. The risk based capital plan or revised risk basedcapital plan shall be filed:
(1) Within forty-five days after the occurrence of the
regulatory action level event;
(2) If the insurer challenges an adjusted risk based capital
report pursuant to section seven of this article and the
challenge is not in the judgment of the commissioner frivolous,
within forty-five days after the notification from the
commissioner that the challenge has been rejected; or
(3) If the insurer challenges a revised risk based capital
plan pursuant to section seven of this article, within forty-five
days after notification from the commissioner that the challenge
has been rejected.
(d) The commissioner may retain actuaries and investment
experts and other consultants as may be necessary in the judgment
of the commissioner to review the insurer's risk based capital
plan or revised risk based capital plan, examine or analyze the
assets, liabilities and operations of the insurer and formulate
the corrective order with respect to the insurer. The fees,
costs and expenses relating to consultants shall be borne by the
insurer or such other party as directed by the commissioner.
§33-40-5. Authorized control level event.
(a) An "authorized control level event" is any of the
following events:
(1) The filing of a risk based capital report by the insurer
which indicates that the insurer's total adjusted capital is
greater than or equal to its mandatory control level but less
than its authorized control level;
(2) Notification from the commissioner of an adjusted riskbased capital report that indicates the event in subdivision (1)
of this subsection: Provided, That the insurer does not
challenge the adjusted risk based capital report pursuant to
section seven of this article;
(3) If the insurer challenges an adjusted risk based capital
report that indicates the event in subdivision (1) of this
subsection pursuant to section seven of this article,
notification from the commissioner of rejection of the insurer's
challenge;
(4) The failure of the insurer to respond, in a manner
satisfactory to the commissioner, to a corrective order:
Provided, That the insurer has not challenged the corrective
order pursuant to section seven of this article; or
(5) If the insurer has challenged a corrective order
pursuant to section seven of this article and the commissioner
has rejected the challenge or modified the corrective order, the
failure of the insurer to respond, in a manner satisfactory to
the commissioner, to the corrective order subsequent to rejection
or modification by the commissioner.
(b) In the event of an authorized control level event with
respect to an insurer, the commissioner shall:
(1) Take such actions as are required by subsection (b),
section four of this article when a regulatory action level event
has occurred; or
(2) If the commissioner deems it to be in the best interests
of the policyholders and creditors of the insurer and of the
public, take such actions as are necessary to cause the insurer
to be placed under regulatory control pursuant to article ten ofthis chapter. In the event the commissioner takes such actions,
the authorized control level event shall be deemed sufficient
grounds for the commissioner to take action pursuant to said
article, and the commissioner shall have the rights, powers and
duties with respect to the insurer as are set forth in said
article. In the event the commissioner takes actions under this
subdivision pursuant to an adjusted risk based capital report,
the insurer shall be entitled to such protections as are afforded
to insurers pursuant to the provisions of article ten of this
chapter pertaining to summary proceedings.
§33-40-6. Mandatory control level event.
(a) A "mandatory control level event" is any of the
following events:
(1) The filing of a risk based capital report which
indicates that the insurer's total adjusted capital is less than
its mandatory control level;
(2) Notification from the commissioner of an adjusted risk
based capital report that indicates the event in subdivision (1)
of this subsection: Provided, That the insurer does not
challenge the adjusted risk based capital report pursuant to
section seven of this article; or
(3) If the insurer challenges an adjusted risk based capital
report that indicates the event in subdivision (1) of this
subsection pursuant to section seven of this article,
notification from the commissioner of rejection of the insurer's
challenge.
(b) In the event of a mandatory control level event, the
commissioner shall take actions as are necessary to cause theinsurer to be placed under regulatory control pursuant to article
ten of this chapter. In that event, the mandatory control level
event shall be deemed sufficient grounds for the commissioner to
take action pursuant to said article, and the commissioner shall
have the rights, powers and duties with respect to the insurer as
are set forth in said article. In the event the commissioner
takes actions pursuant to an adjusted risk based capital report,
the insurer shall be entitled to such protections as are afforded
to insurers pursuant to the provisions of said article pertaining
to summary proceedings. Notwithstanding any of the foregoing,
the commissioner may forego action for up to ninety days after
the mandatory control level event if he or she finds there is a
reasonable expectation that the mandatory control level event may
be eliminated within the ninety day period.
§33-40-7. Hearings.
An insurer shall have the right to a departmental hearing,
on a record, at which the insurer may challenge any determination
or action of the commissioner made pursuant to the provisions of
this article. The insurer shall notify the commissioner of its
request for a hearing within five days after receiving from the
commissioner:
(a) Notification of an adjusted risk based capital report;
or
(b) Notification that:
(1) The insurer's risk based capital plan or revised risk
based capital plan is unsatisfactory; and
(2) Such notification constitutes a regulatory action level
event with respect to such insurer; or
(c) Notification that the insurer has failed to adhere to
its risk based capital plan or revised risk based capital plan
and that such failure has a substantial adverse effect on the
ability of the insurer to eliminate the company action level
event with respect to the insurer in accordance with its risk
based capital plan or revised risk based capital plan; or
(d) Notification of a corrective order with respect to the
insurer.
Upon receipt of the insurer's request for a hearing, the
commissioner shall set a date for the hearing, no less than
fifteen nor more than forty-five days after the date of the
insurer's request.
§33-40-8. Confidentiality and prohibition on announcements.
(a) All risk based capital reports, to the extent the
information therein is not required to be set forth in a publicly
available annual statement schedule, and risk based capital
plans, including the results or report of any examination or
analysis of an insurer performed pursuant hereto and any
corrective order issued by the commissioner pursuant to
examination or analysis, with respect to any domestic insurer or
foreign insurer which are filed with the commissioner constitute
information that might be damaging to the insurer if made
available to its competitors and therefore shall be kept
confidential by the commissioner. This information shall not be
made public and/or be subject to subpoena, other than by the
commissioner and then only for the purpose of enforcement actions
taken by the commissioner pursuant to this article or any other
provision of the insurance laws of this state.
(b) It is the judgment of the Legislature that the
comparison of an insurer's total adjusted capital to any of its
risk based capital levels is a regulatory tool which may indicate
the need for possible corrective action with respect to the
insurer and is not intended as a means to rank insurers
generally. Therefore, except as otherwise required under the
provisions of this article, the making, publishing,
disseminating, circulating or placing before the public, or
causing, directly or indirectly to be made, published,
disseminated, circulated or placed before the public, in a
newspaper, magazine or other publication, or in the form of a
notice, circular, pamphlet, letter or poster, or over any radio
or television station, or in any other way, an advertisement,
announcement or statement containing an assertion, representation
or statement with regard to the risk based capital levels of any
insurer, or of any component derived in the calculation, by any
insurer, agent, broker or other person engaged in any manner in
the insurance business would be misleading and is therefore
prohibited: Provided, That if any materially false statement
with respect to the comparison regarding an insurer's total
adjusted capital to its risk based capital levels, or any of
them, or an inappropriate comparison of any other amount to the
insurers' risk based capital levels is published in any written
publication and the insurer is able to demonstrate to the
commissioner with substantial proof the falsity of such
statement, or the inappropriateness, as the case may be, then the
insurer may publish an announcement in a written publication if
the sole purpose of the announcement is to rebut the materiallyfalse statement.
§33-40-9. Supplemental provisions.
The provisions of this article are supplemental to any other
provisions of the laws of this state, and shall not preclude or
limit any other powers or duties of the commissioner under such
laws, including, but not limited to, article ten of this chapter.
§33-40-10. Foreign insurers.
(a) Any licensed foreign insurer shall, upon the written
request of the commissioner, file with the commissioner a risk
based capital report for the year ending the thirty-first day of
December next preceding:
(1) Fifteen days from the receipt of notice to file its risk
based capital report; or
(2) If the request is received after the thirty-first day of
December next preceding but prior to the first day of March, on
or before the fifteenth day of March.
Any licensed foreign insurer shall, at the written request
of the commissioner, promptly file with the commissioner a copy
of any risk based capital plan that is filed with the insurance
commissioner of any other state.
(b) The commissioner may require any licensed foreign
insurer to file a risk based capital plan in the event of a
company action level event or a regulatory action level event
when:
(1) The event is determined pursuant to the risk based
capital statute applicable in the insurer's state of domicile or
as determined pursuant to the provisions of this article if there
is no risk based capital statute in force in that state; and
(2) The insurance commissioner of the state of domicile
fails to require the insurer to file a risk based capital plan
pursuant to the risk based capital statute in force in that state
or under the provisions of section three of this article if there
is no risk based capital statute in force in that state.
In such event, the failure of the licensed foreign insurer
to file a risk based capital plan with the commissioner shall be
grounds to order the insurer to cease and desist writing new
insurance business in this state.
(c) In the event of a mandatory control level event with
respect to any licensed foreign insurer, if no domiciliary
receiver has been appointed with respect to the foreign insurer
under the rehabilitation and liquidation statute applicable in
the state of domicile of the foreign insurer, the commissioner
may make application to the circuit court of Kanawha county
permitted pursuant to the provisions of article ten of this
chapter with respect to the liquidation of property of foreign
insurers found in this state and the occurrence of the mandatory
control level event shall be considered adequate grounds for the
application.
§33-40-11. Severability clause.
If any provision of this article, or the application thereof
to any person or circumstances, is held invalid, such
determination shall not affect the provisions or applications of
this article which can be given effect without the invalid
provision or application and to that end the provisions of this
article are severable.
§33-40-12. Notices.
All notices from the commissioner to an insurer which may
result in regulatory action hereunder shall be subject to and
deemed effective pursuant to the provision of section twelve,
article two of this chapter.
§33-40-13. Effective date.
This article shall take effect on the first day of January,
one thousand nine hundred ninety-six.