MISSISSIPPI LEGISLATURE
2017 Regular Session
To: Insurance; Accountability, Efficiency, Transparency
By: Senator(s) Carmichael
AN ACT TO AMEND SECTION 83-6-1, MISSISSIPPI CODE OF 1972, TO DEFINE THE TERMS "GROUP-WIDE SUPERVISOR" AND "INTERNATIONALLY ACTIVE INSURANCE GROUP" AS USED IN THE INSURANCE HOLDING COMPANY ACT; TO AMEND SECTION 83-6-21, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT NO DOMESTIC INSURER SHALL PAY AN EXTRAORDINARY DIVIDEND UNTIL THE COMMISSIONER OF INSURANCE HAS RECEIVED NOTICE OF THE DECLARATION AND HAS NOT DISAPPROVED THE PAYMENT; TO AMEND SECTION 83-6-24, MISSISSIPPI CODE OF 1972, TO REQUIRE THE FILING OF A PREACQUISITION NOTIFICATION WITH THE COMMISSIONER OF INSURANCE; TO CREATE A NEW CODE SECTION TO REGULATE ACQUISITIONS INVOLVING INSURERS NOT OTHERWISE COVERED; TO AMEND SECTION 83-6-27, MISSISSIPPI CODE OF 1972, TO REVISE THE AUTHORITY OF THE COMMISSIONER TO CONDUCT A FINANCIAL EXAMINATION OF REGISTERED INSURERS OR AFFILIATES; TO CREATE A NEW SECTION TO AUTHORIZE THE COMMISSIONER OF INSURANCE TO PARTICIPATE IN A SUPERVISORY COLLEGE WITH OTHER INSURANCE REGULATORS IN ORDER TO ASSESS THE BUSINESS STRATEGY, FINANCIAL POSITION, LEGAL AND REGULATORY POSITION, RISK EXPOSURE, RISK MANAGEMENT AND GOVERNANCE PROCESSES, AND AS PART OF THE EXAMINATION OF INDIVIDUAL INSURERS; TO CREATE A NEW SECTION TO AUTHORIZE THE COMMISSIONER OF INSURANCE TO ACT AS THE GROUP-WIDE SUPERVISOR FOR ANY INTERNATIONALLY ACTIVE INSURANCE GROUP; TO AMEND SECTIONS 83-19-151, 83-19-153 AND 83-19-157, MISSISSIPPI CODE OF 1972, UNDER THE CREDIT FOR INSURANCE ACT TO REQUIRE MORE COMPREHENSIVE REGULATION OF REINSURANCE AGREEMENTS; TO CREATE THE "OWN RISK AND SOLVENCY ASSESSMENT ACT"; TO PROVIDE FOR THE PURPOSE AND SCOPE OF THE ACT; TO DEFINE CERTAIN TERMS USED IN THE ACT; TO REQUIRE INSURERS TO CONDUCT AN OWN RISK AND SOLVENCY ASSESSMENT AND FILE WITH THE COMMISSIONER AN ORSA SUMMARY REPORT; TO PROVIDE EXEMPTIONS; TO REQUIRE CERTAIN CONTENTS OF THE ORSA SUMMARY REPORT; TO REQUIRE THE CONFIDENTIALITY OF CERTAIN DOCUMENTS, MATERIALS OR OTHER INFORMATION IN THE POSSESSION OF OR CONTROL OF THE DEPARTMENT OF INSURANCE THAT ARE OBTAINED UNDER THE ACT; TO PROVIDE SANCTIONS FOR FAILING TO TIMELY FILE AN ORSA SUMMARY REPORT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 83-6-1, Mississippi Code of 1972, is amended as follows:
83-6-1. As used in this chapter the following terms have the respective meanings herein set forth unless the context shall require otherwise:
(a) An "affiliate of" or person "affiliated" with a specific person means 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 Commissioner of Insurance.
(c) "Control" (including the terms "controlling," "controlled by" and "under common control with") means the possession 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 (10%) or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided in Section 83-6-17 that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.
(d) An "insurance holding company system" consists of two (2) or more affiliated persons, one or more of which is an insurer.
(e) "Insurer" means only those companies subject to the jurisdiction of the commissioner as provided in Section 83-5-1; however, burial associations regulated pursuant to Chapter 37, Title 83, Mississippi Code of 1972, are excluded from this definition.
(f) "Person" means an individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, any similar entity or any combination of the foregoing acting in concert, but shall not include any securities broker performing no more than the usual and customary broker's function.
(g) A "security holder" of a specified person means 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) "Subsidiary" of a specified person means an affiliate controlled by a person, directly or indirectly, through one or more intermediaries.
(i) The term "voting security" includes any security convertible into or evidencing a right to acquire a voting security.
(j) "Enterprise
risk" shall mean any activity, circumstance, event or series of events
involving one or more affiliates of an insurer that, if not remedied promptly,
is likely to have a material adverse effect upon the financial condition or
liquidity of the insurer or its insurance holding company system as a whole,
including, but not limited to, anything that would cause the insurer's Risk-Based
Capital to fall into company action level as provided in Section 83-5-405 or
would cause the insurer to be in hazardous financial condition as provided in * * * Part 1, Chapter
39, Title 19 of the Mississippi Administrative Code.
(k) "Group-wide supervisor" means the regulatory official authorized to engage in conducting and coordinating group-wide supervision activities who is determined or acknowledged by the commissioner under Section 7 of this act to have sufficient significant contacts with the internationally active insurance group.
(l) "Internationally active insurance group" means an insurance holding company system that:
(i) Includes an insurer registered under Section 83-6-3; and
(ii) Meets the following criteria:
1. Premiums written in at least three (3) countries;
2. The percentage of gross premiums written outside the United States is at least ten percent (10%) of the insurance holding company system's total gross written premiums; and
3. Based on a three-year rolling average, the total assets of the insurance holding company system are at least Fifty Billion ($50,000,000,000.00) or the total gross written premiums of the insurance holding company system are at least Ten Billion Dollars ($10,000,000,000.00).
SECTION 2. Section 83-6-21, Mississippi Code of 1972, is amended as follows:
83-6-21. (1) Transactions within a holding company system to which an insurer subject to registration is a party shall be subject to the following standards:
(a) The terms shall be fair and reasonable;
(b) Agreements for cost sharing services and management shall include such provisions as required by rule and regulation issued by the commissioner;
( * * *c) Charges or fees for services
performed shall be reasonable;
( * * *d) Expenses incurred and payment
received shall be allocated to the insurer in conformity with customary
insurance accounting practices consistently applied;
( * * *e) The books, accounts and records of
each party to all such transactions shall be so maintained as to clearly and
accurately disclose the nature and details of the transactions including such
accounting information as is necessary to support the reasonableness of the
charges or fees to the respective parties; and
( * * *f) The insurer's surplus as regards
policyholders following any dividends or distributions to shareholder
affiliates shall be reasonable in relation to the insurer's outstanding
liabilities and adequate to its financial needs.
(2) The following
transactions involving a domestic insurer and any person in its holding company
system, including amendments or modifications of affiliate agreements
previously filed pursuant to this section, which are subject to any materiality
standards contained in * * * paragraphs (a) through ( * * *i) of this subsection, shall not
be entered into unless the insurer has notified the commissioner in writing of
its intention to enter into such transaction at least thirty (30) days prior
thereto, or such shorter period as the commissioner may permit, and the
commissioner has not disapproved it within such period. The notice for
amendments or modifications shall include the reasons for the change and the
financial impact on the domestic insurer. Informal notice shall be reported
within thirty (30) days after a termination of a previously filed agreement to
the commissioner for determination of the type of filing required, if any.
(a) Sales, purchases, exchanges, loans or extension of credit, guarantees or investments provided such transactions are equal to or exceed: (i) with respect to nonlife insurers, the lesser of three percent (3%) of the insurer's admitted assets or twenty-five percent (25%) of surplus as regards policyholders; and (ii) with respect to life insurers, three percent (3%) of the insurer's admitted assets; each as of December 31 next preceding:
(b) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extension of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of or to make investments in, any affiliate of the insurer making such loans or extensions of credit provided such transactions are equal to or exceed: (i) with respect to nonlife insurers, the lesser of three percent (3%) of the insurer's admitted assets or twenty-five percent (25%) of surplus as regards policyholders; and (ii) with respect to life insurers, three percent (3%) of the insurer's admitted assets; each as of December 31 next preceding;
(c) Reinsurance agreements or modifications thereto, including (i) all reinsurance pooling agreements; and (ii) agreements in which the reinsurance premium or a change in the insurer's liabilities equals or exceeds five percent (5%) of the insurer's surplus as regards policyholders, as of December 31 next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer;
(d) All management agreements that would place control of the insurer outside of the insurance holding company system;
(e) All service contracts or cost-sharing arrangements wherein the annual aggregate cost to the insurer would equal or exceed the amounts specified in paragraph (a) of this subsection;
(f) All tax allocation agreements;
(g) Guarantees when made by a domestic insurer; provided, however, that a guarantee which is quantifiable as to amount is not subject to the notice requirements of this paragraph unless it exceeds the lesser of one-half of one percent (.5%) of the insurer's admitted assets or ten percent (10%) of surplus as regards policyholders as of December 31 next preceding. Further, all guarantees which are not quantifiable as to amounts are subject to the notice requirements of this paragraph;
(h) Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount which, together with its present holdings in such investments, exceeds two and one-half percent (2.5%) of the insurer's surplus as to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to Section 83-6-2, or in nonsubsidiary insurance affiliates that are subject to the provisions of this chapter, are exempt from this requirement; and
(i) Any material transactions, specified by regulation, which the commissioner determines may adversely affect the interests of the insurer's policyholders.
Nothing in this subsection (2) shall be determined to authorize or permit any transactions which, in the case of an insurer not a member of the same insurance holding company system, would be otherwise contrary to law.
(3) A domestic insurer shall not enter into transactions which are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and avoid the review that would occur otherwise. If the commissioner determines that such separate transactions were entered into over any twelve-month period for such purpose, he may exercise his authority under Section 83-6-35.
(4) The commissioner, in reviewing transactions pursuant to subsection (2) of this section, shall consider whether the transactions comply with the standards set forth in subsection (1) of this section and whether they may adversely affect the interests of policyholders.
(5) The commissioner shall be notified within thirty (30) days of any investment of the domestic insurer in any one (1) corporation if the total investment in such corporation by the insurance holding company system exceeds ten percent (10%) of such corporation's voting securities.
(6) Insurance companies within a holding company system shall not sell or exchange their stock among each other unless the companies have obtained stock company permits before conducting such transactions.
(7) Dividends and other Distributions. No domestic insurer shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until thirty (30) days after the commissioner has received notice of the declaration thereof and has not within that period disapproved the payment, or until the commissioner has approved the payment within the thirty-day period. For purposes of this subsection, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding twelve (12) months exceeds the lesser of:
(a) Ten percent (10%) of the insurer's surplus as regards policyholders as of the 31st day of December next preceding; or
(b) The net gain from operations of the insurer, if the insurer is a life insurer, or the net income, if the insurer is not a life insurer, not including realized capital gains, for the twelve-month period ending the 31st day of December next preceding, but shall not include pro rata distributions of any class of the insurer's own securities.
In determining whether a dividend or distribution is extraordinary, an insurer other than a life insurer may carry forward net income from the previous two (2) calendar years that has not already been paid out as dividends. This carry-forward shall be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner's approval, and the declaration shall confer no rights upon shareholders until the commissioner has approved the payment of the dividend or distribution, or the commissioner has not disapproved payment within the thirty-day period referred to above.
SECTION 3. Section 83-6-24, Mississippi Code of 1972, is amended as follows:
83-6-24. (1) (a) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities, or seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, such person would, directly or indirectly (or by conversion or by exercise of any right to acquire) be in control of such insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer or any person controlling a domestic insurer unless, at the time any such offer, request, or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities if no offer or agreement is involved, such person has filed with the commissioner and has sent to such insurer, a statement containing the information required by this section and such offer, request, invitation, agreement or acquisition has been approved by the commissioner in the manner hereinafter prescribed.
(b) For the purposes of this section, "a domestic insurer" shall include any person controlling a domestic insurer unless such person as determined by the commissioner is either directly or through its affiliates primarily engaged in business other than the business of insurance. However, such person shall file a preacquisition notification with the commissioner containing the information set forth in this section thirty (30) days prior to the proposed effective date of the acquisition. For the purposes of this section, "person" shall not include any securities broker holding, in the usual and customary brokers function, less than twenty percent (20%) of the voting securities of an insurance company or of any person which controls an insurance company.
(c) For purposes of this section, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least thirty (30) days prior to the cessation of control. The commissioner shall determine those instances in which the party(ies) seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the commissioner, in his discretion, determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in paragraph (b) of this subsection is otherwise filed, this paragraph shall not apply.
(d) With respect to a transaction subject to this section, the acquiring person must also file a preacquisition notification with the commissioner, which shall contain the information set forth in Section 4(3)(a) of this act. A failure to file the notification may be subject to penalties specified in Section 4(5) of this act.
(2) The statement to be filed with the commissioner hereunder shall be made under oath or affirmation and shall contain the following information:
(a) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (1) is to be effected (hereinafter called "acquiring party"), and
(i) If such person is an individual, his principal occupation and all offices and positions held during the past five (5) years, and any conviction of crimes other than minor traffic violations during the past ten (10) years;
(ii) If such person is not an individual, a report of the nature of its business operations during the past five (5) years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by subparagraph (i).
(b) The source, nature and amount of consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose (including any pledge of the insurer's stock, or the stock of any of its subsidiaries or controlling affiliates), and the identity of persons furnishing such consideration, provided, however, that where a source of such consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests.
(c) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five (5) fiscal years of each such acquiring party (or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence), and similar unaudited information as of a date not earlier than ninety (90) days prior to the filing of the statement.
(d) Any plans or proposals which each acquiring party may have to liquidate such insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.
(e) The number of shares of any security referred to in subsection (1) which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement or acquisition referred to in subsection (1), and a statement as to the method by which the fairness of the proposal was determined.
(f) The amount of each class of any security referred to in subsection (1) which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.
(g) A full description of any contracts, arrangements or understandings with respect to any security referred to in subsection (1) in which any acquiring party is involved, including but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into.
(h) A description of the purchase of any security referred to in subsection (1) during the twelve (12) calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers and consideration paid or agreed to be paid therefor.
(i) A description of any recommendations to purchase any security referred to in subsection (1) made during the twelve (12) calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party.
(j) Copies of all tender offers for, requests, or invitations for tenders of, exchange offers for and agreements to acquire or exchange any securities referred to in subsection (1) and (if distributed) of additional soliciting material relating thereto.
(k) The terms of any agreement, contract or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities referred to in subsection (1) for tender, and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.
(l) An agreement by the person required to file the statement referred to in subsection (1) that it will provide the annual report, specified in Section 83-6-5(5), for so long as control exists.
(m) An acknowledgment by the person required to file the statement referred to in subsection (1) that the person and all subsidiaries within its control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer.
(n) Such additional information as the commissioner may by rule or regulation prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.
If the person required to
file the statement referred to in subsection (1) is a partnership, limited
partnership, syndicate or other group, the commissioner may require that the
information called for by paragraphs (a) through ( * * *n) shall be given with respect to each
partner of such partnership or limited partnership, each member of such
syndicate or group and each person who controls such partner or member. If any
such partner, member or person is a corporation, or the person required to file
the statement referred to in subsection (1) is a corporation, the commissioner
may require that the information called for by paragraphs (a) through ( * * *n) shall be given with respect to such
corporation, each officer and director of such corporation and each person who
is directly or indirectly the beneficial owner of more than ten percent (10%)
of the outstanding voting securities of such corporation.
If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the commissioner and sent to such insurer within two (2) business days after the person learns of such change.
(3) If any offer, request, invitation, agreement or acquisition referred to in subsection (1) is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (1) may utilize such documents in furnishing the information called for by that statement.
(4) (a) The commissioner shall approve any merger or other acquisition of control referred to in subsection (1) unless, after a public hearing thereon, he finds that:
(i) After the change of control, the domestic insurer referred to in subsection (1) would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;
(ii) The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly therein;
(iii) The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders;
(iv) The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest;
(v) The competence, experience and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or
(vi) The acquisition is likely to be hazardous or prejudicial to the insurance buying public.
(b) The public hearing referred to in paragraph (a) of this subsection shall be commenced not less than thirty (30) days after the statement required by subsection (1) is filed, and at least twenty (20) days' notice thereof shall be given by the commissioner to the person filing the statement. Not less than seven (7) days' notice of such public hearing shall be given by the person filing the statement to the insurer and to such other persons as may be designated by the commissioner. The commissioner shall make a determination within thirty (30) days after the conclusion of such hearing. At such hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interest may be affected thereby shall have the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and in connection therewith shall be entitled to conduct discovery proceedings. All discovery proceedings shall be concluded not later than three (3) days prior to the commencement of the public hearing.
(c) The commissioner may retain at the acquiring person's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control.
(d) If the proposed acquisition of control will require the approval of more than one (1) commissioner, the public hearing referred to in paragraph (a) of subsection (4) may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (1) of this section. Such person shall file the statement referred to in subsection (1) with the National Association of Insurance Commissioners (NAIC) within five (5) days of making the request for a public hearing. A commissioner may opt out of a consolidated hearing, and shall provide notice to the applicant of the opt out within ten (10) days of the receipt of the statement referred to in subsection (1). A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled. Such commissioners shall hear and receive evidence. A commissioner may attend such hearing, in person or by telecommunication.
(e) In connection with a change of control of a domestic insurer, any determination by the commissioner that the person acquiring control of the insurer shall be required to maintain or restore the capital of the insurer to the level required by the laws and regulations of this state shall be made not later than sixty (60) days after the date of notification of the change in control submitted pursuant to Section 83-6-24(1).
(5) The provisions of this section shall not apply to any offer, request, invitation, agreement or acquisition which the commissioner by order shall exempt therefrom as (i) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer, or (ii) as otherwise not comprehended within the purposes of this section.
(6) The following shall be violations of this section:
(a) The failure to file any statement, amendment or other material required to be filed pursuant to subsection (1) or (2); or
(b) The effectuation or any attempt to effectuate an acquisition of control of, or merger with, a domestic insurer unless the commissioner has given his approval thereto.
(7) The courts of this state are hereby vested with jurisdiction over every person not resident, domiciled or authorized to do business in this state who files a statement with the commissioner under this section, and overall actions involving such person arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment by such a person of the commissioner to be his true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the commissioner and transmitted by registered or certified mail by the commissioner to such person at his last-known address.
SECTION 4. Acquisitions involving insurers not otherwise covered. (1) Definitions. The following definitions shall apply for the purposes of this section only:
(a) "Acquisition" means any agreement, arrangement or activity the consummation of which results in a person acquiring directly or indirectly the control of another person, and includes, but is not limited to, the acquisition of voting securities, the acquisition of assets, bulk reinsurance and mergers.
(b) An "involved insurer" includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger.
(2) Scope. (a) Except as exempted in paragraph (b) of this subsection, this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this state;
(b) This section shall not apply to the following:
(i) A purchase of securities solely for investment purposes so long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this state. If a purchase of securities results in a presumption of control under Section 83-6-1(c), it is not solely for investment purposes unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the commissioner of this state;
(ii) The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the commissioner in accordance with subsection (3)(a) of this section thirty (30) days prior to the proposed effective date of the acquisition. However, such preacquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other subparagraph of this paragraph (b);
(iii) The acquisition of already affiliated persons;
(iv) An acquisition if, as an immediate result of the acquisition:
1. In no market would the combined market share of the involved insurers exceed five percent (5%) of the total market;
2. There would be no increase in any market share; or
3. In no market would:
a. The combined market share of the involved insurers exceeds twelve percent (12%) of the total market; and
b. The market share increase by more than two percent (2%) of the total market.
For the purpose of this subsection (2)(b)(iv), a market means direct written insurance premium in this state for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this state;
(v) An acquisition for which a preacquisition notification would be required pursuant to this section due solely to the resulting effect on the ocean marine insurance line of business;
(vi) An acquisition of an insurer whose domiciliary commissioner affirmatively finds that the insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving the insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and the findings are communicated by the domiciliary commissioner to the commissioner of this state.
(3) Preacquisition notification; waiting period. An acquisition covered by subsection (2) may be subject to an order pursuant to subsection (5) unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification. The commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in this chapter.
(a) The preacquisition notification shall be in such form and contain such information as prescribed by the National Association of Insurance Commissioners (NAIC) relating to those markets which, under subsection (2)(b)(iv) of this section, cause the acquisition not to be exempted from the provisions of this section. The commissioner may require such additional material and information as deemed necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (4) of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this state accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion.
(b) The waiting period required shall begin on the date of receipt of the commissioner of a preacquisition notification and shall end on the earlier of the thirtieth day after the date of receipt, or termination of the waiting period by the commissioner. Prior to the end of the waiting period, the commissioner on a one-time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the thirtieth day after receipt of the additional information by the commissioner or termination of the waiting period by the commissioner.
(4) Competitive standard. (a) The commissioner may enter an order under subsection (5)(a) of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this state or tend to create a monopoly or if the insurer fails to file adequate information in compliance with subsection (3) of this section.
(b) In determining whether a proposed acquisition would violate the competitive standard of paragraph (a) of this subsection, the commissioner shall consider the following:
(i) Any acquisition covered under subsection (2) of this section involving two (2) or more insurers competing in the same market is prima facie evidence of violation of the competitive standards.
1. If the market is highly concentrated and the involved insurers possess the following shares of the market:
Insurer A Insurer B
4% 4% or more
10% 2% or more
15% 1% or more
2. Or, if the market is not highly concentrated and the involved insurers possess the following shares of the market:
Insurer A Insurer B
5% 5% or more
10% 4% or more
15% 3% or more
19% 1% or more
A highly concentrated market is one in which the share of the four (4) largest insurers is seventy-five percent (75%) or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two (2) insurers are involved, exceeding the total of the two (2) columns in the table is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection. For the purpose of this item, the insurer with the largest share of the market shall be deemed to be Insurer A.
(ii) There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest insurers in the market, from the two (2) largest to the eight (8) largest, has increased by seven percent (7%) or more of the market over a period of time extending from any base year five (5) to ten (10) years prior to the acquisition up to the time of the acquisition. Any acquisition or merger covered under subsection (2) of this section involving two (2) or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection if:
1. There is a significant trend toward increased concentration in the market;
2. One (1) of the insurers involved is one of the insurers in a grouping of large insurers showing the requisite increase in the market share; and
3. Another involved insurer's market is two percent (2%) or more.
(iii) For the purposes of paragraph (b) of this subsection (4):
1. The term "insurer" includes any company or group of companies under common management, ownership or control;
2. The term "market" means the relevant product and geographical markets. In determining the relevant product and geographical markets, the commissioner shall give due consideration to, among other things, the definitions or guidelines, if any, promulgated by the NAIC and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this state, and the relevant geographical market is assumed to be this state;
3. The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner.
(iv) Even though an acquisition is not prima facie violative of the competitive standard under paragraph (b)(i) and (ii) of this subsection (4), the commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under paragraph (b)(i) and (ii) of this subsection (4), a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this subparagraph include, but are not limited to, the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market.
(c) An order may not be entered under subsection (5)(a) of this section if:
(i) The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition; or
(ii) The acquisition will substantially increase the availability of insurance, and the public benefits of the increase exceed the public benefits which would arise from not lessening competition.
(5) Orders and penalties. (a) (i) If an acquisition violates the standards of this section, the commissioner may enter an order:
1. Requiring an involved insurer to cease and desist from doing business in this state with respect to the line or lines of insurance involved in the violation; or
2. Denying the application of an acquired or acquiring insurer for a license to do business in this state.
(ii) Such an order shall not be entered unless there is a hearing:
1. Notice of the hearing is issued prior to the end of the waiting period and not less than fifteen (15) days prior to the hearing; and
2. The hearing is concluded and the order is issued no later than sixty (60) days after the date of the filing of the preacquisition notification with the commissioner.
Every order shall be accompanied by a written decision of the commissioner setting forth findings of fact and conclusions of law.
(iii) An order pursuant to this paragraph shall not apply if the acquisition is not consummated.
(b) Any person who violates a cease and desist order of the commissioner under paragraph (a) of this subsection and while the order is in effect may, after notice and hearing and upon order of the commissioner, be subject at the discretion of the commissioner to one or more of the following:
(i) A monetary penalty of not more than Ten Thousand Dollars ($10,000.00) for every day of violation; or
(ii) Suspension or revocation of the person's license.
(iii) Any insurer or other person who fails to make any filing required by this section, and who also fails to demonstrate a good faith effort to comply with any filing requirement, shall be subject to a fine of not more than Fifty Thousand Dollars ($50,000.00).
(6) Inapplicable provisions. Section 83-6-33(2) and (3) and Section 83-6-39 do not apply to acquisitions covered under this section.
SECTION 5. Section 83-6-27, Mississippi Code of 1972, is amended as follows:
83-6-27. (1) * * * Power of commissioner. Subject to
the limitation contained in this section and in addition to the powers which
the commissioner has under Sections 83-5-201 through 83-5-217 relating to the
examination of insurers, the commissioner shall have the power to examine any
insurer registered under Section 83-6-3 and its affiliates to ascertain the
financial condition of the insurer, including the enterprise risk to the
insurer by the ultimate controlling party, or by any entity or combination of
entities within the insurance holding company system, or by the insurance
holding company system on a consolidated basis.
(2) Access to books
and records. (a) The commissioner * * * may order any insurer registered under Section
83-6-3 to produce such records, books, or other information in the possession
of the insurer or its affiliates as are reasonably necessary to determine
compliance with this chapter.
(b) To determine compliance with this chapter, the commissioner may order any insurer registered under Section 83-6-3 to produce information not in the possession of the insurer if the insurer can obtain access to such information pursuant to contractual relationships, statutory obligations, or other method. In the event the insurer cannot obtain the information requested by the commissioner, the insurer shall provide the commissioner a detailed explanation of the reason that the insurer cannot obtain the information and the identity of the holder of information. Whenever it appears to the commissioner that the detailed explanation is without merit, the commissioner may require, after notice and hearing, the insurer to pay a penalty of One Hundred Dollars ($100.00) for each day's delay, or may suspend or revoke the insurer's license.
(3) Use of consultants. The commissioner may retain at the registered insurer's expense such attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff which are reasonably necessary to assist in the conduct of the examination under subsection (1) of this section. Any persons so retained are under the direction and control of the commissioner and shall act in a purely advisory capacity.
(4) Expenses.
Each registered insurer producing for examination records, books and papers
pursuant to subsection (1) of this section * * * shall be liable for and shall pay
the expense of * * *
examination in accordance with Section 83-5-213.
(5) Compelling production. In the event the insurer fails to comply with an order, the commissioner shall have the power to examine the affiliates to obtain the information. The commissioner shall also have the power to issue subpoenas, to administer oaths, and to examine under oath any person for purposes of determining compliance with this section. Upon the failure or refusal of any person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. Every person shall be obliged to attend as a witness at the place specified in the subpoena, when subpoenaed, anywhere within the state. He or she shall be entitled to the same fees and mileage, if claimed, as a witness in Section 25-7-47, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses, and their testimony, shall be itemized and charged against, and be paid by, the company being examined.
SECTION 6. Supervisory colleges. (1) Power of commissioner. With respect to any insurer registered under Section 83-6-3, and in accordance with subsection (3) of this section, the commissioner shall also have the power to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with this chapter. The powers of the commissioner with respect to supervisory colleges include, but are not limited to, the following:
(a) Initiating the establishment of a supervisory college;
(b) Clarifying the membership and participation of other supervisors in the supervisory college;
(c) Clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor;
(d) Coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and
(e) Establishing a crisis management plan.
(2) Expenses. Each registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the commissioner's participation in a supervisory college in accordance with subsection (3) of this section, including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the commissioner may establish a regular assessment to the insurer for the payment of these expenses.
(3) Supervisory college. In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management and governance processes, and as part of the examination of individual insurers in accordance with Section 83-6-27, the commissioner may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal and international regulatory agencies. The commissioner may enter into agreements in accordance with the confidentiality provisions of this chapter providing the basis for cooperation between the commissioner and the other regulatory agencies, and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the commissioner to regulate or supervise the insurer or its affiliates within its jurisdiction.
SECTION 7. Group-wide supervision of internationally active insurance groups. (1) The commissioner is authorized to act as the group-wide supervisor for any internationally active insurance group in accordance with the provisions of this section. However, the commissioner may otherwise acknowledge another regulatory
official as the group-wide supervisor where the internationally active insurance group:
(a) Does not have substantial insurance operations in the United States;
(b) Has substantial insurance operations in the United States, but not in this state; or
(c) Has substantial insurance operations in the United States and this state, but the commissioner has determined pursuant to the factors set forth in subsections (2) and (6) of this section that the other regulatory official is the appropriate group-wide supervisor.
An insurance holding company system that does not otherwise qualify as an internationally active insurance group may request that the commissioner make a determination or acknowledgment as to a group-wide supervisor pursuant to this section.
(2) In cooperation with other state, federal and international regulatory agencies, the commissioner will identify a single group-wide supervisor for an internationally active insurance group. The commissioner may determine that the commissioner is the appropriate group-wide supervisor for an internationally active insurance group that conducts substantial insurance operations concentrated in this state. However, the commissioner may acknowledge that a regulatory official from another jurisdiction is the appropriate group-wide supervisor for the internationally active insurance group. The commissioner shall consider the following factors when making a determination or acknowledgment under this subsection:
(a) The place of domicile of the insurers within the internationally active insurance group that hold the largest share of the group's written premiums, assets or liabilities;
(b) The place of domicile of the top-tiered insurer(s) in the insurance holding company system of the internationally active insurance group;
(c) The location of the executive offices or largest operational offices of the internationally active insurance group;
(d) Whether another regulatory official is acting or is seeking to act as the group-wide supervisor under a regulatory system that the commissioner determines to be:
(i) Substantially similar to the system of regulation provided under the laws of this state, or
(ii) Otherwise sufficient in terms of providing for group-wide supervision, enterprise risk analysis, and cooperation with other regulatory officials; and
(e) Whether another regulatory official acting or seeking to act as the group-wide supervisor provides the commissioner with reasonably reciprocal recognition and cooperation.
However, a commissioner identified under this section as the group-wide supervisor may determine that it is appropriate to acknowledge another supervisor to serve as the group-wide supervisor. The acknowledgment of the group-wide supervisor shall be made after consideration of the factors listed in paragraphs (a) through (e) of this subsection, and shall be made in cooperation with and subject to the acknowledgment of other regulatory officials involved with supervision of members of the internationally active insurance group, and in consultation with the internationally active insurance group.
(3) Notwithstanding any other provision of law, when another regulatory official is acting as the group-wide supervisor of an internationally active insurance group, the commissioner shall acknowledge that regulatory official as the group-wide supervisor. However, in the event of a material change in the internationally active insurance group that results in:
(a) The internationally active insurance group's insurers domiciled in this state holding the largest share of the group's premiums, assets or liabilities; or
(b) This state being the place of domicile of the top-tiered insurer(s) in the insurance holding company system of the internationally active insurance group, the commissioner shall make a determination or acknowledgment as to the appropriate group-wide supervisor for such an internationally active insurance group pursuant to subsection (2) of this section.
(4) Pursuant to Section 83-6-27, the commissioner is authorized to collect from any insurer registered pursuant to Section 83-6-3 all information necessary to determine whether the commissioner may act as the group-wide supervisor of an internationally active insurance group or if the commissioner may acknowledge another regulatory official to act as the group-wide supervisor. Prior to issuing a determination that an internationally active insurance group is subject to group-wide supervision by the commissioner, the commissioner shall notify the insurer registered pursuant to Section 83-6-3 and the ultimate controlling person within the internationally active insurance group. The internationally active insurance group shall have not less than thirty (30) days to provide the commissioner with additional information pertinent to the pending determination. The commissioner shall publish in the Mississippi Administrative Code and on its Internet website the identity of internationally active insurance groups that the commissioner has determined are subject to group-wide supervision by the commissioner.
(5) If the commissioner is the group-wide supervisor for an internationally active insurance group, the commissioner is authorized to engage in any of the following group-wide supervision activities:
(a) Assess the enterprise risks within the internationally active insurance group to ensure that:
(i) The material financial condition and liquidity risks to the members of the internationally active insurance group that are engaged in the business of insurance are identified by management; and
(ii) Reasonable and effective mitigation measures are in place;
(b) Request, from any member of an internationally active insurance group subject to the commissioner's supervision, information necessary and appropriate to assess enterprise risk, including, but not limited to, information about the members of the internationally active insurance group regarding:
(i) Governance, risk assessment and management;
(ii) Capital adequacy; and
(iii) Material intercompany transactions;
(c) Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the internationally active insurance group are domiciled, compel development and implementation of reasonable measures designed to ensure that the internationally active insurance group is able to timely recognize and mitigate enterprise risks to members of such internationally active insurance group that are engaged in the business of insurance;
(d) Communicate with other state, federal and international regulatory agencies for members within the internationally active insurance group and share relevant information subject to the confidentiality provisions of this chapter, through supervisory colleges as set forth in Section 6 of this act or otherwise;
(e) Enter into agreements with or obtain documentation from any insurer registered under Section 83-6-3, any member of the internationally active insurance group, and any other state, federal and international regulatory agencies for members of the internationally active insurance group, providing the basis for or otherwise clarifying the commissioner's role as group-wide supervisor, including provisions for resolving disputes with other regulatory officials. Such agreements or documentation shall not serve as evidence in any proceeding that any insurer or person within an insurance holding company system not domiciled or incorporated in this state is doing business in this state or is otherwise subject to jurisdiction in this state; and
(f) Other group-wide supervision activities, consistent with the authorities and purposes enumerated above, as considered necessary by the commissioner.
(6) If the commissioner acknowledges that another regulatory official from a jurisdiction that is not accredited by the NAIC is the group-wide supervisor, the commissioner is authorized to reasonably cooperate, through supervisory colleges or otherwise, with group-wide supervision undertaken by the group-wide supervisor, provided that:
(a) The commissioner's cooperation is in compliance with the laws of this state; and
(b) The regulatory official acknowledged as the group-wide supervisor also recognizes and cooperates with the commissioner's activities as a group-wide supervisor for other internationally active insurance groups where applicable. Where such recognition and cooperation is not reasonably reciprocal, the commissioner is authorized to refuse recognition and cooperation.
(7) The commissioner is authorized to enter into agreements with or obtain documentation from any insurer registered under Section 83-6-3, any affiliate of the insurer, and other state, federal and international regulatory agencies for members of the internationally active insurance group, that provide the basis for or otherwise clarify a regulatory official's role as group-wide supervisor.
(8) The commissioner may promulgate regulations necessary for the administration of this section.
(9) A registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the commissioner's participation in the administration of this section, including the engagement of attorneys, actuaries and any other professionals and all reasonable travel expenses.
SECTION 8. Section 83-19-151, Mississippi Code of 1972, is amended as follows:
83-19-151. Credit for
reinsurance shall be allowed a domestic ceding insurer as either an asset or a
deduction from liability on account of reinsurance ceded only when the
reinsurer meets the requirements of paragraph (a), (b), (c), (d) * * *, (e) or (f) of this section;
provided further that the commissioner may adopt by regulation pursuant to
Section 83-19-157 specific additional requirements relating to or setting forth
the valuation of assets or reserve credits, the amount and forms of
security supporting reinsurance arrangements described in Section 83-19-157,
and/or the circumstances pursuant to which credit will be reduced or eliminated. * * * Credit
shall be allowed under paragraph (a), (b) or (c) of this section only as
respects cessions of those kinds or classes of business which the assuming
insurer is licensed or otherwise permitted to write or assume in its state of
domicile or, in the case of a United States branch of an alien assuming
insurer, in the state through which it is entered and licensed to transact
insurance or reinsurance. Credit shall be allowed under paragraph (c) or (d)
of this section only if the applicable requirements of paragraph (g) have been
satisfied.
(a) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is licensed to transact insurance or reinsurance in this state.
(b) Credit shall be
allowed when the reinsurance is ceded to an assuming insurer which is
accredited as a reinsurer in this state. * * * In
order to be eligible for accreditation, a reinsurer must:
(i) Files with the commissioner evidence of its submission to this state's jurisdiction;
(ii) Submits to this state's authority to examine its books and records;
(iii) * * * Be licensed to transact insurance or
reinsurance in at least one (1) state, or in the case of a United States branch
of an alien assuming insurer * * *, be entered through and licensed to
transact insurance or reinsurance in at least one (1) state;
(iv) Files
annually with the commissioner a copy of its annual statement filed with the
Insurance Department of its state of domicile and a copy of its most recent
audited financial statement; and * * *
* * *
(v) Demonstrate to the satisfaction of the commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders in an amount not less than Twenty Million Dollars ($20,000,000.00) and its accreditation has not been denied by the commissioner within ninety (90) days after submission of its application.
(c) (i) 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, a state which employs standards regarding credit for reinsurance substantially similar to those applicable under this statute and the assuming insurer or United States branch of an alien assuming insurer;
* * *1. Maintains a surplus as regards
policyholders in an amount not less than Twenty Million Dollars ($20,000,000.00);
and
* * *2. Submits to the authority of this
state to examine its books and records.
(ii) The requirement of item 1 of this paragraph (c)(i) does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.
(d) (i) Credit shall
be allowed when the reinsurance is ceded to an assuming insurer which maintains
a trust fund in a qualified United States financial institution, as defined in
paragraph (b) of Section 83-19-155, for the payment of the valid claims of its
United States * * * ceding insurers, their assigns and successors in
interest. To enable the commissioner to determine the sufficiency of the
trust fund, 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 * * *. * * * The assuming insurer shall submit
to examination of its books and records by the commissioner and bear the
expense of examination.
(ii) * * * 1. Credit for reinsurance shall not be
granted under this subsection unless the form of the trust and any amendments
to the trust have been approved by:
a. The commissioner of the state where the trust is domiciled; or
b. The commissioner of another state who, pursuant to the terms of the trust instrument, has accepted principal regulatory oversight of the trust.
2. The form of the trust and any trust amendments also shall be filed with the commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. 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 its trustees for the benefit of the assuming insurer's United States ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the commissioner.
3. The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. No later than February 28 of each year the trustee of the trust shall report to the commissioner in writing the balance of the trust and listing the trust's investments at the preceding year-end and shall certify the date of termination of the trust, if so planned, or certify that the trust will not expire prior to the following December 31.
(iii) * * * The following
requirements apply to the following categories of assuming insurer:
1. The trust fund for a single assuming insurer shall consist of funds in trust in an amount not less than the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers, and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than Twenty Million Dollars ($20,000,000.00) except as provided in item 2 of this paragraph (d)(iii).
2. At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three (3) full years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of United States ceding insurers, policyholders and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty percent (30%) of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust.
3. a. In the case of a group including incorporated and individual unincorporated underwriters:
A. For reinsurance ceded under reinsurance agreements with an inception, amendment or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several liabilities attributable to business ceded by United States domiciled ceding insurers to any underwriter of the group;
B. For reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992, and not amended or renewed after that date, notwithstanding the other provisions of this act, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several insurance and reinsurance liabilities attributable to business written in the United States; and
C. In addition to these trusts, the group shall maintain in trust a trusteed surplus of which One Hundred Million Dollars ($100,000,000.00) shall be held jointly for the benefit of the United States domiciled ceding insurers of any member of the group for all years of account; and
b. The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the group's domiciliary regulator as are the unincorporated members.
c. Within ninety (90) days after its financial statements are due to be filed with the group's domiciliary regulator, the group shall provide to the commissioner an annual certification by the group's domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the group.
(iv) * * *
In the case of a group of incorporated underwriters under common
administration, the group shall:
1. Have continuously transacted an insurance business outside the United States for at least three (3) years immediately prior to making application for accreditation;
2. Maintain aggregate policyholders' surplus of at least Ten Billion Dollars ($10,000,000,000.00);
3. Maintain a trust fund in an amount not less than the group's several liabilities attributable to business ceded by United States domiciled ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of the group;
4. In addition, maintain a joint trusteed surplus of which One Hundred Million Dollars ($100,000,000.00) shall be held jointly for the benefit of United States domiciled ceding insurers of any member of the group as additional security for these liabilities; and
5. Within ninety (90) days after its financial statements are due to be filed with the group's domiciliary regulator, make available to the commissioner an annual certification of each underwriter member's solvency by the member's domiciliary regulator and financial statements of each underwriter member of the group prepared by its independent public accountant.
(e) * * * Credit shall be allowed when the reinsurance is
ceded to an assuming insurer that has been certified by the commissioner as a
reinsurer in this state and secures its obligations in accordance with the
requirements of this subsection.
(i) In order to be eligible for certification, the assuming insurer shall meet the following requirements:
1. The assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to subparagraph (iii) of this paragraph (e);
2. The assuming insurer must maintain minimum capital and surplus, or its equivalent, in an amount to be determined by the commissioner pursuant to regulation;
3. The assuming insurer must maintain financial strength ratings from two (2) or more rating agencies deemed acceptable by the commissioner pursuant to regulation;
4. The assuming insurer must agree to submit to the jurisdiction of this state, appoint the commissioner as its agent for service of process in this state, and agree to provide security for one hundred percent (100%) of the assuming insurer's liabilities attributable reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment;
5. The assuming insurer must agree to meet applicable information filing requirements as determined by the commissioner, both with respect to an initial application for certification and on an ongoing basis; and
6. The assuming insurer must satisfy any other requirements for certification deemed relevant by the commissioner.
(ii) An association including incorporated and individual unincorporated underwriters may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying requirements of subparagraph (i) of this paragraph (e):
1. The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents (net of liabilities) of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association or any of its members, in an amount determined by the commissioner to provide adequate protection;
2. The incorporated members of the association shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the association's domiciliary regulator as are the unincorporated members; and
3. Within ninety (90) days after its financial statements are due to be filed with the association's domiciliary regulator, the association shall provide to the commissioner an annual certification by the association's domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association.
(iii) The commissioner shall create and publish a list of qualified jurisdictions, under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the commissioner as a certified reinsurer.
1. In order to determine whether the domiciliary jurisdiction of a non-United States assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits and the extent of reciprocal recognition afforded by the non-United States jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction must agree to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the commissioner has determined that the jurisdiction does not adequately and promptly enforce final United States judgments and arbitration awards. Additional factors may be considered in the discretion of the commissioner.
2. A list of qualified jurisdictions shall be published through the NAIC Committee Process. The commissioner shall consider this list in determining qualified jurisdictions. If the commissioner approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the commissioner shall provide thoroughly documented justification in accordance with criteria to be developed under regulations.
3. United States jurisdictions that meet the requirement for accreditation under the NAIC Financial Regulation Standards and Accreditation Program shall be recognized as qualified jurisdictions.
4. If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, the commissioner has the discretion to suspend the reinsurer's certification indefinitely, in lieu of revocation.
(iv) The commissioner shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the commissioner pursuant to regulation. The commissioner shall publish a list of all certified reinsurers and their ratings.
(v) A certified reinsurer shall secure obligations assumed from United States ceding insurers under this subsection at a level consistent with its rating, as specified in regulations promulgated by the commissioner.
1. In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the commissioner and consistent with the provisions of Section 9 of this act or in a multibeneficiary trust in accordance with paragraph (d) of this subsection, except as otherwise provided in this subsection.
2. If a certified reinsurer maintains a trust to fully secure its obligations subject to paragraph (d) of this subsection, and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subsection or comparable laws of other United States jurisdictions and for its obligations subject to paragraph (d) of this subsection. It shall be a condition to the grant of certification under this paragraph (e) that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account.
3. The minimum trusteed surplus requirements provided in paragraph (d) of this subsection are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subsection, except that such trust shall maintain a minimum trusteed surplus of Ten Million Dollars ($10,000,000.00).
4. With respect to obligations incurred by a certified reinsurer under this subsection, if the security is insufficient, the commissioner shall reduce the allowable credit by an amount proportionate to the deficiency, and has the discretion to impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurer's obligations will not be paid in full when due.
5. For purposes of this subsection, a certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure one hundred percent (100%) of its obligations.
6. As used in this subsection, the term "terminated" refers to revocation, suspension, voluntary surrender and inactive status.
7. If the commissioner continues to assign a higher rating as permitted by other provisions of this section, this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended.
(vi) If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, the commissioner has the discretion to defer to that jurisdiction's certification, and has the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall be considered to be a certified reinsurer in this state.
(vii) A certified reinsurer that ceases to assume new business in this state may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this subsection, and the commissioner shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.
(f) * * *
Credit shall be allowed
when the reinsurance is ceded to an assuming insurer not meeting the
requirements of paragraph (a), (b), (c), (d) or (e) of this subsection, but
only as to the insurance of risks located in jurisdictions where the reinsurance
is required by applicable law or regulation of that jurisdiction.
(g) If the assuming insurer is not licensed, accredited or certified to transact insurance or reinsurance in this state, the credit permitted by paragraphs (c) and (d) of this subsection shall not be allowed unless the assuming insurer agrees in the reinsurance agreements:
(i) 1. 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, will comply with all requirements necessary to give the court jurisdiction, and will abide by the final decision of the court or of any appellate court in the event of an appeal; and
2. To designate the commissioner or a designated attorney 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 insurer.
(ii) This subsection is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the agreement.
(h) If the assuming insurer does not meet the requirements of paragraph (a), (b), or (c) of this subsection the credit permitted by paragraph (d) or (e) of this subsection shall not be allowed unless the assuming insurer agrees in the trust agreements to the following conditions:
(i) Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by paragraph (d)(iii) of this subsection, or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the commissioner with regulatory oversight all of the assets of the trust fund.
(ii) The assets shall be distributed by and claims shall be filed with and valued by the commissioner with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies.
(iii) If the commissioner with regulatory oversight determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the United States ceding insurers of the grantor of the trust, the assets or part thereof shall be returned by the commissioner with regulatory oversight to the trustee for distribution in accordance with the trust agreement.
(iv) The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this provision.
(i) If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the commissioner may suspend or revoke the reinsurer's accreditation or certification.
(i) The commissioner must give the reinsurer notice and opportunity for hearing. The suspension or revocation may not take effect until after the commissioner's order on hearing, unless:
1. The reinsurer waives its right to hearing;
2. The commissioner's order is based on regulatory action by the reinsurer's domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under paragraph (e)(vi) of this subsection; or
3. The commissioner finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the commissioner's action.
(ii) While a reinsurer's accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit except to the extent that the reinsurer's obligations under the contract are secured in accordance with Section 83-19-153. If a reinsurer's accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation except to the extent that the reinsurer's obligations under the contract are secured in accordance with paragraph (e)(v) of this subsection or Section 83-19-153.
(j) Concentration risk.
(i) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the commissioner within thirty (30) days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceeds fifty percent (50%) of the domestic ceding insurer's last-reported surplus to policyholders, or after it is determined that reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
(ii) A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the commissioner within thirty (30) days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than twenty percent (20%) of the ceding insurer's gross written premium in the prior calendar year, or after it has determined that the reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
SECTION 9. Section 83-19-153, Mississippi Code of 1972, is amended as follows:
83-19-153. * * * An asset or reduction from
liability for the reinsurance ceded by a domestic insurer to an assuming
insurer not meeting the requirements of Section 83-19-151 shall be allowed in
an amount not exceeding the liabilities carried by the ceding insurer * * *, provided that the
commissioner may adopt by regulation pursuant to Section 10(2) of this act
specific additional requirements relating to or setting forth: (i) the
valuation of assets or reserves credits; (ii) the amount and forms of security
supporting reinsurance arrangements described in Section 10(2) of this act;
and/or (iii) the circumstances pursuant to which the credit will be reduced or
eliminated. The reduction shall be in the amount of funds held by or on
behalf of the ceding insurer, including funds held in trust for the ceding
insurer, under a reinsurance contract with such assuming insurer as security
for the payment of obligations thereunder, if such 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 in paragraph (b) of Section 83-19-155.
This security may be in the form of:
(a) Cash;
(b) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Securities Valuation Office, and qualifying as admitted assets;
(c) (i) Clean,
irrevocable, unconditional letters of credit, issued or confirmed by a
qualified United States financial institution, as defined in paragraph (a) * * * of Section 83-19-155, effective no later
than December 31 in respect of the year for which filing is being made, and in
the possession of, or in trust for, the ceding * * * insurer on or before the filing
date of its annual statement.
(ii) Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs; or
(d) Any other form of security acceptable to the commissioner.
SECTION 10. Section 83-19-157, Mississippi Code of 1972, is amended as follows:
83-19-157. (1) The commissioner may adopt rules and regulations implementing the provisions of Sections 83-19-151 through 83-19-157.
(2) The commissioner is further authorized to adopt rules and regulations applicable to reinsurance arrangements described in paragraph (a) of this subsection (2).
(a) A regulation adopted pursuant to this subsection (2) may apply only to reinsurance relating to:
(i) Life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits;
(ii) Universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period;
(iii) Variable annuities with guaranteed death or living benefits;
(iv) Long-term care insurance policies; or
(v) Such other life and health insurance and annuity products as to which the NAIC adopts model regulatory requirements with respect to credit for reinsurance.
(b) A regulation adopted pursuant to paragraph (a)(i) or (ii) of this subsection (2) may apply to any treaty containing (i) policies issued on or after January 1, 2015, and/or (ii) policies issued prior to January 1, 2015, if risk pertaining to such pre-2015 policies is ceded in connection with the treaty, in whole or in part, on or after January 1, 2015.
(c) A regulation adopted pursuant to this subsection (2) may require the ceding insurer, in calculating the amounts or forms of security required to be held under regulations promulgated under this authority, to use the Valuation Manual adopted by the NAIC under Section 83-7-23(11)(b)(i), including all amendments adopted by the NAIC and in effect on the date as of which the calculation is made, to the extent applicable.
(d) A regulation adopted pursuant to this subsection (2) shall not apply to cessions to an assuming insurer that:
(i) Is certified in this state or, if this state has not adopted provisions substantially equivalent to Section 83-19-151(e), certified in a minimum of five (5) other states; or
(ii) Maintains at least Two Hundred Fifty Million Dollars ($250,000,000.00) in capital and surplus when determined in accordance with the NAIC Accounting Practices and Procedures Manual, including all amendments thereto adopted by the NAIC, excluding the impact of any permitted or prescribed practices; and is:
1. Licensed in at least twenty-six (26) states; or
2. Licensed in at least ten (10) states, and licensed or accredited in a total of at least thirty-five (35) states.
(e) The authority to adopt regulations pursuant to this subsection (2) does not limit the commissioner's general authority to adopt regulations pursuant to subsection (1) of this section.
SECTION 11. Title. Sections 11 through 21 of this act shall be known and may be cited as the "Own Risk and Solvency Assessment Act."
SECTION 12. Own Risk and Solvency Assessment (ORSA) purpose and scope. The purpose of Sections 11 through 21 of this act is to provide the requirements for maintaining a risk management framework and completing an Own Risk and Solvency Assessment (ORSA) and provide guidance and instructions for filing an ORSA Summary Report with the insurance commissioner of this state. The requirements of Sections 11 through 21 of this act shall apply to all insurers domiciled in this state unless exempt pursuant to Section 17 of this act.
SECTION 13. Definitions. As used in Sections 11 through 21 of this act, the following words shall have the meaning ascribed herein unless the context clearly requires otherwise:
(a) "Insurance group" means, for the purpose of conducting an ORSA, those insurers and affiliates included within an insurance holding company system as defined in Section 83-6-1(d).
(b) "Insurer" shall have the same meaning as set forth in Section 83-6-1(e), 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.
(c) "Own Risk and Solvency Assessment" or "ORSA" means a confidential internal assessment, appropriate to the nature, scale and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer or insurance group's current business plan, and the sufficiency of capital resources to support those risks.
(d) "ORSA Guidance Manual" means the current version of the Own Risk and Solvency Assessment Guidance Manual developed and adopted by the National Association of Insurance Commissioners (NAIC) and as amended from time to time. A change in the ORSA Guidance Manual shall be effective on the January 1 following the calendar year in which the changes have been adopted by the NAIC.
(e) "ORSA Summary Report" means a confidential high-level summary of an insurer or insurance group's ORSA.
SECTION 14. Risk management framework. An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer.
SECTION 15. ORSA requirement. Subject to Section 17 of this act, an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an ORSA consistent with a process comparable to the ORSA Guidance Manual. The ORSA shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member.
SECTION 16. ORSA Summary Report. (1) Upon the commissioner's request, and no more than once each year, an insurer shall submit to the commissioner an ORSA Summary Report or any combination of reports that together contain the information described in the ORSA Guidance Manual, applicable to the insurer and/or the insurance group of which it is a member. Notwithstanding any request from the commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report(s) required by this subsection if the commissioner is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.
(2) The report(s) shall include a signature of the insurer or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process attesting to the best of his/her belief and knowledge that the insurer applies the enterprise risk management process described in the ORSA Summary Report and that a copy of the report has been provided to the insurer's board of directors or the appropriate committee thereof.
(3) An insurer may comply with subsection (1) by providing the most recent and substantially similar report(s) provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction, if that report provides information that is comparable to the information described in the ORSA Guidance Manual. Any such report in a language other than English must be accompanied by a translation of that report into the English language.
SECTION 17. Exemption. (1) An insurer shall be exempt from the requirements of Sections 11 through 21 of this act, if:
(a) The insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than Five Hundred Million Dollars ($500,000,000.00); and
(b) The insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than One Billion Dollars ($1,000,000,000.00).
(2) If an insurer qualifies for exemption pursuant to paragraph (a) of subsection (1), but the insurance group of which the insurer is a member does not qualify for exemption pursuant to paragraph (b) of subsection (1), then the ORSA Summary Report that may be required pursuant to Section 16 of this act shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one ORSA Summary Report for any combination of insurers provided any combination of reports includes every insurer within the insurance group.
(3) If an insurer does not qualify for exemption pursuant to paragraph (a) of subsection (1), but the insurance group of which it is a member qualifies for exemption pursuant to paragraph (b) of subsection (1), then the only ORSA Summary Report that may be required pursuant to Section 16 of this act shall be the report applicable to that insurer.
(4) An insurer that does not qualify for exemption pursuant to subsection (1) may apply to the commissioner for a waiver from the requirements of Sections 11 through 21 of this act based upon unique circumstances. In deciding whether to grant the insurer's request for waiver, the commissioner may consider the type and volume of business written, ownership and organizational structure, and any other factor the commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one (1) state, the commissioner shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer's request for a waiver.
(5) Notwithstanding the exemptions stated in this section:
(a) The commissioner may require that an insurer maintain a risk management framework, conduct an ORSA and file an ORSA Summary Report based on unique circumstances including, but not limited to, the type and volume of business written, ownership and organizational structure, federal agency requests, and international supervisor requests.
(b) The commissioner may require that an insurer maintain a risk management framework, conduct an ORSA and file an ORSA Summary Report if the insurer has Risk-Based Capital for company action level event as defined in Sections 83-5-401 through 83-5-427, meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in Part 1, Chapter 39, Title 19 of the Mississippi Administrative Code, or otherwise exhibits qualities of a troubled insurer as determined by the commissioner.
(6) If an insurer that qualifies for an exemption pursuant to subsection (1) subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one (1) year following the year the threshold is exceeded to comply with the requirements of Sections 11 through 21 of this act.
SECTION 18. Contents of ORSA Summary Report. (1) The ORSA Summary Report shall be prepared consistent with the ORSA Guidance Manual, subject to the requirements of subsection (2) of this section. Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner.
(2) The review of the ORSA Summary Report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multistate or global insurers and insurance groups.
SECTION 19. Confidentiality. (1) Documents, materials or other information, including the ORSA Summary Report, in the possession of or control of the Department of Insurance that are obtained by, created by or disclosed to the commissioner or any other person under this act, is recognized by this state as being proprietary and to contain trade secrets. All such documents, materials or other information shall be confidential by law and privileged, shall not be subject to Sections 25-61-1 through 25-61-17, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make the documents, materials or other information public without the prior written consent of the insurer.
(2) Neither the commissioner nor any person who received documents, materials or other ORSA-related information, through examination or otherwise, while acting under the authority of the commissioner or with whom such documents, materials or other information are shared pursuant to Sections 11 through 21 of this act shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (1) of this section.
(3) In order to assist in the performance of the commissioner's regulatory duties, the commissioner:
(a) May, upon request, share documents, materials or other ORSA-related information, including the confidential and privileged documents, materials or information subject to subsection (1) of this section, including proprietary and trade secret documents and materials with other state, federal and international financial regulatory agencies, including members of any supervisory college with the NAIC and with any third-party consultants designated by the commissioner, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials or other information and has verified in writing the legal authority to maintain confidentiality;
(b) May receive documents, materials or other ORSA-related information, including otherwise confidential and privileged documents, materials or information, including proprietary and trade-secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college and from the NAIC, and shall maintain as confidential or privileged any documents, materials or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information; and
(c) Shall enter into a written agreement with the NAIC or a third-party consultant governing sharing and use of information provided pursuant to Sections 11 through 21 of this act, consistent with this subsection that shall:
(i) Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant pursuant to Sections 11 through 21 of this act, including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials or other information and has verified in writing the legal authority to maintain confidentiality;
(ii) Specify that ownership of information shared with the NAIC or a third-party consultant pursuant to Sections 11 through 21 of this act remains with the commissioner and the NAIC's or a third-party consultant's use of the information is subject to the direction of the commissioner;
(iii) Prohibit the NAIC or third-party consultant from storing the information shared pursuant to Sections 11 through 21 of this act in a permanent database after the underlying analysis is completed;
(iv) Require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant pursuant to Sections 11 through 21 of this act is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production;
(v) Require the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to Sections 11 through 21 of this act; and
(vi) In the case of an agreement involving a third-party consultant, provide for the insurer's written consent.
(4) The sharing of information and documents by the commissioner pursuant to Sections 11 through 21 of this act shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution and enforcement of the provisions of Sections 11 through 21 of this act.
(5) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials or other ORSA-related information shall occur as a result of disclosure of such ORSA-related information or documents to the commissioner under this section or as a result of sharing as authorized in Sections 11 through 21 of this act.
(6) Documents, materials or other information in the possession or control of the NAIC or a third-party consultants pursuant to Sections 11 through 21 of this act shall be confidential by law and privileged, shall not be subject to the provisions of Section 25-61-1 through 25-61-17, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
SECTION 20. Sanctions. Any insurer failing, without just cause, to timely file the ORSA Summary Report as required in Sections 11 through 21 of this act shall be required, after notice and hearing, to pay a penalty of One Hundred Dollars ($100.00) for each day's delay, to be recovered by the commissioner and the penalty so recovered shall be paid into the General Revenue Fund of this state. The maximum penalty under this section is Ten Thousand Dollars ($10,000.00). The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.
SECTION 21. Severability clause. If any provision of Sections 11 through 21 of this act, or the application thereof to any person or circumstance, is held invalid, such determination shall not affect the provisions or applications of Sections 11 through 21 of this act which can be given effect without the invalid provision or application, and to that end the provisions of Sections 11 through 21 of this act are severable.
SECTION 22. This act shall take effect and be in force from and after its passage, except Sections 11 through 21 of this act shall take effect and be in force from and after January 1, 2018. The first filing of the ORSA Summary Report shall be in 2018 pursuant to Section 16 of this act.