ENROLLED
H. B. 2286
(By Delegates Phillips, P. White, Carper,
Michael and Huntwork)
[Passed April 9, 1992;; in effect ninety days from passage.]
AN ACT 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; sections fifteen and
fifteen-a, article four; section four, article twenty-four;
section six, article twenty-five; section two, article
twenty-seven, all of said chapter thirty-three; to further
amend said article twenty-seven by adding thereto a new
section, designated section fourteen; to amend and reenact
section eleven, article thirty-one; sections four and
seventeen, article thirty-two; sections one, two, three,
four, five, six, seven, nine, ten, eleven, and thirteen,
article thirty-three; to further amend article thirty-three
by adding thereto three new sections, designated sections
ten-a, fourteen and fifteen; to amend and reenact section
four, article thirty-four-a; to amend and reenact article
thirty-six, all of chapter thirty-three; and to further
amend said chapter thirty-three 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; annual audited
financial report; designation of independent certified
public accountant; evaluation of accounting procedures and
system of internal control; exemption from compliance;
Canadian and British companies; 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 insurersutilizing 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; 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; sections fifteen and
fifteen-a, article four; section four, article twenty-four;
section six, article twenty-five; section two, article twenty-
seven of said chapter thirty-three be amended and reenacted; that
said article twenty-seven be further amended by adding thereto a
new section, designated section fourteen; that section eleven,
article thirty-one; sections four and seventeen, article thirty-
two; sections one, two, three, four, five, six, seven, nine, ten,
eleven and thirteen, article thirty-three, be amended and
reenacted; that said article thirty-three be further amended by
adding thereto three new sections, designated sections ten-a,
fourteen and fifteen; that section four, article thirty-four-a be
amended and reenacted; that article thirty-six be amended and
reenacted; and that said chapter thirty-three 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) For purposes of this section, the following definitions
shall apply:
(1) "Commissioner" means the commissioner of insurance of
this state.
(2) "Company" or "insurance company" means any person
engaging in or proposing or attempting to engage in any
transaction or kind of insurance or surety business and any
person or group of persons who may otherwise be subject to the
administrative, regulatory or taxing authority of the
commissioner, including, but not limited to, 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 thetype of coverage written, benefits provided or guarantees made by
each.
(3) "Department" means the department of insurance of this
state.
(4) "Examiners" means the commissioner of insurance, or any
individual or firm having been authorized by the commissioner to
conduct an examination pursuant to this section, including, but
not limited to, the commissioner's deputies, other employees,
appointed examiners or other appointed individuals or firms who
are not employees of the department of insurance.
(c) The commissioner or his examiners may conduct an
examination under this section of any company as often as the
commissioner in his or her discretion deems appropriate. The
commissioner or his examiners 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 may also examine the affairs of any
insurer applying for a license to transact any insurance business
in this state.
(d) The commissioner or his examiners 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 may be limited to its United
States business:
Provided,
That 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'sstate 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:
(1) The insurance department was at the time of the
examination accredited under the national association of
insurance commissioners' financial regulation standards and
accreditation program; or
(2) 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.
(e) In scheduling and determining the nature, scope and
frequency of examinations conducted pursuant to this section, 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.
(f) 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, insofar as the
examination or investigation is, in the sole discretion of the
commissioner, necessary or material to the examination of thecompany.
(g) 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 or his examiners
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.
(h) In addition to conducting an examination, the
commissioner or his examiners may, 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.
(i) Examinations made pursuant to this section shall be
conducted in the following manner:
(1) Upon determining that an examination should be
conducted, the commissioner or his designee shall issue an
examination warrant appointing one or more examiners to perform
the examination and instructing them as to the scope of theexamination. 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 shall 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 shall facilitate
the examination and aid in the examination so far as it is in
their power to do so.
(3) 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.
(4) The commissioner or his examiners 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.
(5) 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.
(6) 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 or his examiners 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.
(7) 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 evidenceof the facts stated therein.
(j) Examination reports prepared pursuant to the provisions
of this section shall comply with the following requirements:
(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 ascertained
from 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 thecompany 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 obtaining
additional 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) All orders entered pursuant to 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 issued pursuant to paragraph (A),
subdivision three of this subsection 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.
(k) Hearings conducted pursuant to this section shall be
subject to the following requirements:
(1) Any hearing conducted pursuant to this section by the
commissioner or the commissioner's authorized representative
shall be conducted as a nonadversarial confidential investigatory
proceeding as necessary for the resolution of anyinconsistencies, 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 the company. Within twenty
days of the conclusion of any such hearing, the commissioner
shall enter an order pursuant to paragraph (A), subdivision (3),
subsection (j) of this section.
(2) 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.
(3) 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 orthe commissioner's representative. The company and the
commissioner shall be permitted to make closing statements and
may be represented by counsel of their choice.
(l) Adoption of the examination report shall be subject to
the following requirements:
(1) Upon the adoption of the examination report under
paragraph (A), subdivision (3), subsection (j) of this section,
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 (i) 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.
(2) 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.
(3) 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.
(4) All working papers, recorded information, documents andcopies 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), subsection (i)
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.
(m) 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.
(5) 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.
(n) 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.
(o) All insurers subject to the provisions of this section
of the code shall annually pay to the commissioner on or beforethe 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.
(p) 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 or for the purchase of
equipment and supplies, travel, education and training for the
commissioner's deputies, other employees and appointed examinersnecessary for the commissioner to fulfill the statutory
obligations created by this section.
(q) 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:
(1) Bill and receive payments directly from the insurance
company being examined, analyzed or reviewed for their work,
travel and living expenses as previously provided for in this
section; or
(2) If an individual agent, broker or solicitor is being
examined, analyzed or reviewed, bill and receive payments
directly from the "Commissioner's Examination Revolving Fund" for
their work, travel and living expenses as previously provided for
in this section.
(r) The commissioner and his examiners shall be entitled to
immunity to the following extent:
(1) No cause of action shall arise nor shall any liability
be imposed against the commissioner or his examiners for any
statements made or conduct performed in good faith while carrying
out the provisions of this section.
(2) No cause of action shall arise, nor shall any liability
be imposed against any person for the act of communicating or
delivering information or data to the commissioner or his
examiners pursuant to an examination, analysis or review madeunder this section, if the act of communication or delivery was
performed in good faith and without fraudulent intent or the
intent to deceive.
(3) The commissioner or any examiner shall be 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 subsection.
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 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
the license was in effect, or to liquidate such assets and
liabilities of the insurer as may have resulted from its formerauthorized 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 collecting premiums on and servicing of
policies 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 thebusiness 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 the
policyholders 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) For purposes of this section, an "assumption reinsurance
agreement" means any contract which:
(1) Transfers insurance obligations and/or risks of existing
or in-force contracts of insurance from a transferring insurer 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.
(b) An insurer shall reinsure its risks, or any part
thereof, only in solvent insurers complying with the capital and
surplus requirements of section five-b, article three of this
chapter.
(c) 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 ceding
insurer 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.
(d) 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.
(e) A licensed insurer may reinsure all or substantially all
of its risks on property or lives located in West Virginia, orsubstantially all of a major class thereof, with another insurer
by an assumption reinsurance agreement: Provided, That the
assumption reinsurance agreement shall not become effective
unless filed in advance with and approved in writing by the
commissioner: Provided, however, That if a licensed insurer is
deemed by the commissioner to be in hazardous financial
condition, as defined in article thirty-four-a of this chapter,
or an administrative or judicial proceeding has been instituted
against it for the purpose of liquidating, reorganizing or
conserving such insurer, and the transfer of the contracts of
insurance is determined by the commissioner to be in the best
interest of the policyholders, the commissioner may by written
order waive the advance filing and approval required by this
section, which such waiver may include a form of implied consent
and adequate notification to the policyholder of the
circumstances requiring the transfer.
(f) The commissioner shall approve such agreement within one
hundred twenty days after the filing of the same 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. If the
commissioner does not disapprove the agreement within one hundred
twenty days, the agreement shall be deemed approved.
(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 entireagreement between the parties to the reinsurance agreement.
(h) The commissioner shall promulgate rules and regulations
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; definitions; requirements;
trust accounts; reductions from liability; security;
effective date.
(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 the
District 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 statementthat 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. The statement shall be
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. 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 accreditationby 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 are
not 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 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 orthe 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;
(B) The ceding insurer provides the commissioner with a
certified 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 wheresuch 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 insurer
to 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. 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 shall
consist 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. 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 billiondollars, 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 the group. The group
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 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 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 trusteesshall certify the date of termination of the trust, if so
planned, 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. 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 the assuming insurer
as security for the payment of obligations thereunder: Provided,
That 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.
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, That
letters of credit meeting applicable standards of issueracceptability 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 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, licensed
under 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 orstate 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 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 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
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;
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, articlesixteen (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); and
article thirty-seven (managing general agents); and no other
provision of this chapter may apply to these corporations unless
specifically made applicable by the provisions of this article.
If, however, 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 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); and
article thirty-seven (managing general agents); and no other
provision of this chapter may apply to 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 (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 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 usual
and 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 ninety-three.
ARTICLE 31. CAPTIVE INSURANCE.
§33-31-11. Reinsurance.
A captive insurance company may procure reinsurance or issue
policies of reinsurance to other licensed insurers transacting
like kinds of insurance, pursuant to the provisions of section
fifteen, 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 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 of
domicile:
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 (A) 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 (B) was
offered before 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 registered in this state shallsubmit 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 pursuant to 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) 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, on forms prescribed by the national association of
insurance commissioners, which such forms 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 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 these requirements 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 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 thousandnine 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 required
by this section.
ARTICLE 33. ANNUAL AUDITED FINANCIAL REPORT.
§33-33-1. Declaration of policy and purpose.
(a) The purpose of this article is to improve the insurance
commissioner's surveillance of the financial condition of
insurers by requiring an annual examination by independentcertified public accountants of the financial statements
reporting the financial condition and the results of operations
of insurers.
(b) Foreign or alien insurers filing audited financial
reports in another state, pursuant to the other state's
requirement of audited financial reports which has been found by
the commissioner to be substantially similar to the requirements
herein, are exempt from this article if:
(1) A copy of the audited financial report, report on
significant deficiencies in internal controls, and the
accountant's letter of qualifications which are filed with the
other state are filed with the commissioner in accordance with
the filing dates specified in sections three, ten and ten-a,
respectively. Canadian insurers may submit accountants' reports
as filed with the Canadian Dominion Department of Insurance.
(2) A copy of any notification of adverse financial
condition report filed with the other state is filed with the
commissioner within the time specified in section nine.
(c) This article shall not prohibit or preclude or in any way
limit the commissioner from performing examinations of insurers
as specified in section nine, article two of this chapter or such
any other examinations as the commissioner may be authorized to
perform by this chapter.
§33-33-2. Definitions.
(a) "Accountant," and "independent certified public
accountant" means an independent certified public accountant or
accounting firm in good standing with the American institute of
certified public accountants and in all states in which they arelicensed to practice; for Canadian and British companies, it
means a Canadian-chartered or British-chartered accountant.
(b) "Annual statement" means the annual financial statement
required to be filed by insurers with the commissioner pursuant
to the provisions of this chapter.
(c) "Audited financial report" means and includes those
items specified in section four of this article.
(d) "Insurer" for purposes of this article means any
domestic insurer as defined in section six, article one of this
chapter, and includes any domestic stock insurance company,
mutual insurance company, reciprocal insurance company, farmers'
mutual fire insurance company, fraternal benefit society,
hospital service corporation, medical service corporation, health
care corporation, health maintenance organization, captive
insurance company or risk retention group and any licensed
foreign or alien insurer defined in article one of this chapter.
§33-33-3. Filing and extensions for filing of annual audited
financial reports.
(a) Annual audited financial reports must be filed by all
insurers with the commissioner on or before the first day of June
for the year ending the thirty-first day of December immediately
preceding. The commissioner may require an insurer to file an
audited financial report earlier than the first day of June with
ninety days advance notice to the insurer.
(b) Extensions of the filing date on the first day of June
may be granted by the commissioner for thirty day periods upon
showing by the insurer and its independent certified publicaccountant the reasons for requesting the extension and
determination by the commissioner of good cause for an extension.
A request for extension must be submitted in writing not less
than ten days prior to the due date in sufficient detail to
permit the commissioner to make an informed decision with respect
to the requested extension.
§33-33-4. Contents of annual audited financial report.
(a) The annual audited financial report shall report the
financial condition of the insurer as of the end of the most
recent calendar year and the results of its operations, cash
flows and changes in capital and surplus for the year then ended
in conformity with statutory accounting practices for preparation
of the annual statement or as otherwise permitted by the
commissioner.
(b) The annual audited financial report shall include the
following:
(1) Report of independent certified public accountant;
(2) Balance sheet reporting admitted assets, liabilities,
capital and surplus;
(3) Statement of gain or loss from operations or statement
of revenue and expenses;
(4) Statement of cash flows statement;
(5) Statement of changes in capital and surplus;
(6) Notes to financial statements. These notes shall be
those required by the appropriate national association of
insurance commissioners annual statement instructions and any
other notes required by generally accepted accounting principles
and shall also include:
(A) A reconciliation of differences, if any, between the
audited statutory financial statements and the annual statement
with a written description of the nature of these differences;
(B) A summary of ownership and relationships of the insurer
and all affiliated companies.
(7) The financial statements included in the audited
financial report shall be prepared in a form and using language
and groupings substantially the same as the relevant sections of
the annual statement of the insurer filed with the commissioner;
and:
(A) The financial statement shall be comparative, presenting
the amounts as of the thirty-first day of December of the current
year and the amounts as of the immediately preceding thirty-first
day of December:
Provided,
That in the first year in which an
insurer is required to file an audited financial report, the
comparative data may be omitted.
(B) Amounts may be rounded to the nearest thousand dollars;
(8) Supplementary data and information. This shall include
any additional clarifying information or data which the
commissioner may require to be disclosed.
§33-33-5. Designation of independent certified public
accountant.
(a) Each insurer required by this article to file an annual
audited financial report must, within sixty days after becoming
subject to such requirements, register with the commissioner in
writing the name and address of the certified public accountant
or accounting firm (generally referred to in this article as the
"accountant") retained to conduct the annual audit set forth inthis article.
(b) The insurer shall obtain a letter from the accountant,
and file a copy with the commissioner stating that the accountant
is aware of the provisions of this code and rules that relate to
accounting and financial matters and affirming that he or she
will express his or her opinion on the financial statements in
terms of their conformity to the statutory accounting practices
prescribed or otherwise permitted by the commissioner specifying
any exceptions as he may believe appropriate.
(c) If an accountant who was not the accountant for the
immediately preceding filed audited financial report is engaged
to audit the insurer's financial statements, the insurer shall
within thirty days of the date the accountant is engaged notify
the commissioner of this event.
(d) If an accountant who was the accountant for the
immediately preceding filed audited financial report is dismissed
or resigns, the insurer shall within five business days notify
the commissioner of this event. The insurer shall also furnish
the commissioner with a separate letter within ten business days
of the above notification stating whether in the twenty-four
months preceding the notification there were any disagreements
with the former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope
or procedure, which disagreements, if not resolved to the
satisfaction of the former accountant, would have caused him or
her to make reference to the subject matter of the disagreement
in connection with his or her opinion. The disagreements
required to be reported in response to this section include boththose resolved to the former accountant's satisfaction and those
not resolved to the former accountant's satisfaction.
Disagreements contemplated by this section are those that occur
at the decision-making level between personnel of the insurer
responsible for presentation of its financial statements and
personnel of the accounting firm responsible for rendering its
report. The insurer shall also in writing request the former
accountant to furnish it a letter addressed to the insurer
stating whether the accountant agrees with the statements
contained in the insurer's letter and, if not, stating the
reasons for which he does not agree; and the insurer shall
furnish the responsive letter from the former accountant to the
commissioner together with its own.
§33-33-6. Qualifications of independent certified public
accountants.
(a) The commissioner shall not recognize any person or firm
as a qualified independent certified public accountant that is
not in good standing with the American institute of certified
public accountants and in all states in which the accountant is
licensed to practice, or, for a Canadian or British company, that
is not a chartered accountant.
(b) Except as otherwise provided herein, an independent
certified public accountant shall be recognized as qualified as
long as he or she conforms to the standards of his or her
profession, as contained in the code of professional ethics of
the American institute of certified public accountants and the
rules and regulations and code of ethics and rules of
professional conduct of the West Virginia board of accountancy.
(c) No partner or other person responsible for rendering a
report may act in that capacity for more than seven consecutive
years. Following any period of service the person shall be
disqualified from acting in that or a similar capacity for the
same company or its insurance subsidiaries or affiliates for a
period of two years. An insurer may make application to the
commissioner for relief from the above rotation requirement on
the basis of unusual circumstances. The commissioner may
consider the following factors in determining if the relief
should be granted:
(1) Number of partners, expertise of the partners or the
number of insurance clients in the currently registered firm;
(2) Premium volume of the insurer; or
(3) Number of jurisdictions in which the insurer transacts
business:
Provided,
That the requirements of this subsection
shall become effective two years after the enactment of this
article.
(d) The commissioner shall not recognize as a qualified
independent certified public accountant, nor accept any annual
audited financial report, prepared in whole or in part by, any
natural person who:
(1) Has been convicted of fraud, bribery, a violation of the
Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
Sections 1961-1968, or any dishonest conduct or practices under
federal or state law;
(2) Has been found to have violated the insurance laws of
this state with respect to any previous reports submitted under
this article; or
(3) Has demonstrated a pattern or practice of failing to
detect or disclose material information in previous reports filed
under the provisions of this article.
(e) The commissioner may hold a hearing to determine whether
a certified public accountant is qualified and considering the
evidence presented, may rule that the accountant is not qualified
for purposes of expressing an opinion on the financial statements
in the audited financial report made pursuant to this article and
require the insurer to replace the accountant with another whose
relationship with the insurer is qualified within the meaning of
this article.
§33-33-7. Consolidated or combined audits.
(a) An insurer may make written application to the
commissioner for approval to file audited consolidated or
combined financial statements in lieu of separate annual audited
financial statements if the insurer is part of a group of
insurance companies which utilizes a pooling or one hundred
percent reinsurance agreement that affects the solvency and
integrity of the insurer's reserves and the insurer cedes all of
its direct and assumed business to the pool. If an approval is
granted, a columnar consolidating or combining worksheet shall be
filed with the report incorporating the following:
(1) Amounts shown on the consolidated or combined audited
financial report shall be shown on the worksheet;
(2) Amounts for each insurer subject to this section shall
be stated separately;
(3) Noninsurance operations may be shown on the worksheet on
a combined or individual basis;
(4) Explanations of consolidating and eliminating entries
shall be included; and
(5) A reconciliation shall be included of any differences
between the amounts shown in the individual insurer columns of
the worksheet and comparable amounts shown on the annual
statements of the insurers.
(b) The commissioner shall require any insurer to file
separate annual audited financial statements although permission
had previously been given to file on a consolidated basis or
combined basis if the commissioner determines the reasons or
circumstances given for approval of the consolidated audit,
pursuant to subsection (a) of this section, no longer exist.
(c) An insurer who does not receive approval from the
commissioner to file an audited financial report covering
combined or consolidated audited financial statements for the
insurer and any of its subsidiaries or affiliates must file
pursuant to all the requirements of this article a separate
audited financial report for the insurer and each subsidiary or
affiliate.
(d) Notwithstanding any provision of this section, the
commissioner may require an insurer to file a separate audited
financial report for the insurer and each subsidiary or
affiliate.
§33-33-9. Notification of adverse financial condition.
(a) The independent certified public accountant shall
immediately notify, in writing, an officer or director of the
insurer and the commissioner of any determination by the
independent certified public accountant that the insurer hasmaterially misstated its financial condition as reported to the
commissioner as of the thirty-first day of December immediately
preceding, or of any determination that the insurer does not meet
the applicable minimum capital and surplus requirement of this
chapter or in the case of an insurer not subject to capital and
surplus requirement, that the surplus of the insurer is less than
one hundred thousand dollars as of the thirty-first day of
December immediately preceding. For purposes of this article
material misstatement shall have the meaning prescribed by the
professional standards and pronouncements of the American
institute of certified public accountants:
Provided,
That the
independent certified public accountant shall report a
misstatement that overstates the surplus as regards policyholders
in single financial statement items by five percent or more, or
when taken together with all financial statement items, the
surplus as regards policyholders is overstated by ten percent or
more.
(b) No independent public accountant shall be liable in any
manner to any person for any statement made in connection with
the above paragraph if the statement is made in good faith in
compliance with the above paragraph.
(c) If the accountant, subsequent to the date of the audited
financial report filed pursuant to this article, becomes aware of
facts which might have affected the report, the commissioner
notes the obligation of the accountant to take action as
prescribed in Volume 1, Section AU 561 of the professional
standards of the American institute of certified public
accountants.
§33-33-10. Evaluation of accounting procedures and system of
internal control.
(a) In addition to the annual audited financial reports,
each insurer shall furnish the commissioner with a written report
prepared by the accountant describing significant deficiencies in
the insurer's internal control structure noted by the accountant
during the audit. Statement on auditing standards (SAS) No. 60,
"Communication of Internal Control Structure Matters Noted in an
Audit", AU Section 325 of the professional standards of the
American institute of certified public accountants, requires an
accountant to communicate significant deficiencies, known as
"reportable conditions", noted during a financial statement audit
to the appropriate parties within an entity. No report should be
issued if the accountant does not identify significant
deficiencies.
(b) If significant deficiencies are noted, the written
report shall be filed annually by the insurer with the
commissioner within sixty days after the filing of the annual
audited financial reports. The insurer is required to provide a
description of remedial actions taken or proposed to correct
significant deficiencies, if the actions are not described in the
accountant's report.
§33-33-10a. Accountant's letter of qualifications.
(a) The accountant shall furnish the insurer in connection
with, and for inclusion in, the filing of the annual audited
financial report, a letter stating:
(1) That the accountant is independent with respect to the
insurer and conforms to the standards of his or her profession ascontained in the code of professional ethics and pronouncements
of the American institute of certified public accountants and the
rules of professional conduct of the West Virginia board of
accountancy.
(2) The background and experience in general, and the
experience in audits of insurers of the staff assigned to the
engagement and whether each is an independent certified public
accountant. Nothing within this article shall be construed as
prohibiting the accountant from utilizing staff as he or she
deems appropriate where use is consistent with the standards
prescribed by generally accepted auditing standards.
(3) That the accountant understands the annual audited
financial report and the opinion thereon will be filed in
compliance with this article and that the commissioner will be
relying on this information in the monitoring and regulation of
the financial position of insurers.
(4) That the accountant consents to the requirements of
section eleven of this article and that the accountant consents
and agrees to make available for review by the commissioner, or
the commissioner's designee or appointed agent, the workpapers,
as defined in section eleven.
(5) A representation that the accountant is properly
licensed by the West Virginia board of accountancy and is a
member in good standing in the American institute of certified
public accountants.
(6) A representation that the accountant is in compliance
with the requirements of section six of this article.
§33-33-11. Definition, availability and maintenance of
certified public accountant (CPA) workpapers.
(a) Workpapers shall be kept by the independent certified
public accountant of the procedures followed, the tests
performed, the information obtained and the conclusions reached
pertinent to the examination of the financial statements of an
insurer. Workpapers shall include audit planning documentation,
work programs, analyses, memoranda, letters of confirmation and
representation, abstracts of company documents and schedules or
commentaries prepared or obtained by the independent certified
public accountant in the course of the examination of the
financial statements of an insurer and which support the opinion
thereon.
(b) Every insurer required to file an audited financial
report pursuant to this article, shall require the accountant to
make available for review by the commissioner the workpapers
prepared in the conduct of the examination. The insurer shall
require that the accountant retain the audit workpapers and any
communications related to the audit between the accountant and
the insurer, at the offices of the insurer, at the insurance
department or at any other reasonable place designated by the
commissioner. The insurer shall require that the accountant
retain the audit workpapers and communications until the
commissioner has filed a report of examination, as required by
section nine, article two of this chapter, covering the period of
the audit but no longer than seven years from the date of the
audit report.
(c) In the conduct of the aforementioned periodic review by
the commissioner, it shall be agreed that photocopies ofpertinent audit workpapers may be made and retained by the
commissioner. Reviews by the commissioner shall be considered
investigations and all workpapers and communications obtained
during the course of any investigations shall be afforded the
same confidentiality as other examination workpapers generated by
the commissioner.
§33-33-13. Exemptions from compliance.
(a) Upon written application by an insurer, the commissioner
may grant an exemption from compliance with this article if the
commissioner finds, upon review of the application, that
compliance with this article would constitute a financial or
organizational hardship upon the insurer. An exemption may be
granted at any time and from time to time for a specified period
or periods. Within ten days of a denial of an insurer's written
request for an exemption from this article, the insurer may
request in writing a hearing on its application for an exemption.
(b) Foreign insurers shall comply with this article for the
year ending the thirty-first day of December, one thousand nine
hundred ninety-three and each year thereafter, unless the
commissioner permits otherwise.
§33-33-14. Canadian and British companies.
(a) In the case of Canadian and British insurers, the annual
audited financial report shall be defined as the annual statement
of total business on the form filed by the companies with their
domiciliary supervision authority duly audited by an independent
chartered accountant.
(b) For these insurers, the letter required in section five
shall state that the accountant is aware of the requirementsrelating to the annual audited statement filed with the
commissioner pursuant to section three and shall affirm that the
opinion expressed is in conformity with those requirements.
§33-33-15. Severability.
If any section or portion of a section of this article or
the applicability thereof to any person or circumstance is held
invalid by a court, the remainder of the article or the
applicability of the provision to other persons or circumstances
shall not be affected thereby.
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 becalled 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 his
determination, 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 bystatute.
(c) An order issued pursuant to the provisions of this
article is subject to review pursuant to applicable state
administrative proceedings under article two of this chapter:
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" 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 proxiesrepresenting 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 (l), section four, article
twenty-seven of this chapter 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 the determination, that control
exists in fact, notwithstanding the absence of a presumption to
that effect.
(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:
Provided,
That 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 anycompensation, 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 designation of
any individual or entity as a producer does not 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) The provisions of this section apply if, in any
calendar year, the aggregate amount of gross written premium on
business 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:
Provided,
That the provisions of
this section shall not apply if:
(1) The controlling producer:
(A) Places insurance only with the controlled insurer or
only with the controlled insurer and a member or members of thecontrolled 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
(B) Accepts insurance placements only from nonaffiliated
subproducers, and not directly from insureds; and
(2) The controlled insurer 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:
Provided,
That the provisions of this
subdivision do not apply to insurance business written through a
residual market facility such as the "West Virginia Essential
Property Insurance Association" or the "West Virginia Automobile
Insurance Plan."
(b) 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 and the 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, includinginformation 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 domiciliary
jurisdiction;
(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 andconditions 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 andshall 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 in effect, 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) 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 the
following:
(1) 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 businesswritten 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) A report and summary of 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) 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.
(b) If it is found that because of any material
noncompliance that the controlled insurer or any policyholderthereof 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.
(c) 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 not
materially 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.
(d) Nothing contained in this section may affect the right
of the commissioner to impose any other penalties provided for in
this chapter.
(e) 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 onbehalf 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 the
provisions 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 statehaving an article substantially similar to this law or such
reinsurance 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) The commissioner may issue a reinsurance intermediary
license to any person, firm, association or corporation who has
complied with the requirements of this article. Any licenseissued 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.
(e) 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.
(f) 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 hasgiven 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 this code.
(g) Licensed attorneys at law of this state when acting in
their professional capacity are exempt from this section.
§33-38-4. Required contract provisions; reinsurance
intermediary-brokers.
(a) 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.
(b) Each written authorization shall, at a minimum, provide
that:
(1) The insurer may terminate the reinsurance intermediary-
broker's authority at any time.
(2) 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.
(3) 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.
(4) The reinsurance intermediary-broker shall comply with
section five of this article.
(5) The reinsurance intermediary-broker shall comply with
the written standards established by the insurer for the cession
or retrocession of all risks.
(6) 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 the
commissions 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 ofretrocessionaires 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 licensed
as 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.
(a) 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.
(b) Every contract required by this section shall, at a
minimum, provide, that:
(1) 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.
(2) 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.
(3) 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 financialinstitution 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.
(4) 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:
(A) The type of contract, limits, underwriting
restrictions, classes of risks and territory;
(B) Period of coverage, including effective and expiration
dates, cancellation provisions and notice required of
cancellation, and disposition of outstanding reserves on covered
risks;
(C) Reporting and settlement requirements of balances;
(D) Rate used to compute the reinsurance premium;
(E) Names and addresses of reinsurers;
(F) Rates of all reinsurance commissions, including the
commissions on any retrocessions handled by the reinsurance
intermediary-manager;
(G) Related correspondence and memoranda;
(H) Proof of placement;
(I) 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;
(J) Financial records, including, but not limited to,
premium and loss accounts; and
(K) When the reinsurance intermediary-manager places a
reinsurance contract on behalf of a ceding insurer:
(i) Directly from any assuming reinsurer, written evidence
that the assuming reinsurer has agreed to assume the risk; or
(ii) 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.
(5) 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.
(6) The contract cannot be assigned in whole or in part by
the reinsurance intermediary-manager.
(7) 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.
(8) Sets forth the rates, terms and purposes of
commissions, charges and other fees which the reinsurance
intermediary-manager may levy against the reinsurer.
(9) If the contract permits the reinsurance
intermediary-manager to settle claims on behalf of the reinsurer:
(A) All claims shall be reported to the reinsurer in a
timely manner;
(B) 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:
(i) Has the potential to exceed the lesser of an amountdetermined by the commissioner or the limit set by the reinsurer;
(ii) Involves a coverage dispute;
(iii) May exceed the reinsurance intermediary-manager's
claims settlement authority;
(iv) Is open for more than six months; or
(v) Is closed by payment of the lesser of an amount set by
the commissioner or an amount set by the reinsurer;
(C) 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;
(D) 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.
(10) 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.
(11) The reinsurance intermediary-manager shall annually
provide the reinsurer with a statement of its financial condition
prepared by an independent certified public accountant.
(12) The reinsurer shall periodically, at least semi-
annually, conduct an on-site review of the underwriting and
claims processing operations of the reinsurance intermediary-
manager.
(13) 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.
(14) 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 forwhich 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 anactuary 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 make
restitution 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.