MISSISSIPPI LEGISLATURE
2013 Regular Session
To: Insurance
By: Representative Chism
AN ACT TO AMEND SECTIONS 83-5-401 THROUGH 83-5-405, 83-5-417 AND 83-5-427, MISSISSIPPI CODE OF 1972, TO INCLUDE HEALTH ORGANIZATION INSURERS UNDER THE RISK BASED CAPITAL LAWS; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 83-5-401, Mississippi Code of 1972, is amended as follows:
83-5-401. As used in Sections 83-5-401 through 83-5-427, the following words and phrases shall have the meanings ascribed herein unless the context clearly indicates otherwise:
(a) "Adjusted RBC report" means a risk-based capital report which has been adjusted by the commissioner in accordance with Section 83-5-403(5).
(b) "Corrective order" means an order issued by the commissioner specifying corrective actions which the commissioner has determined are required.
(c) "Domestic insurer" means any insurance company domiciled in this state.
(d) "Foreign insurer" means any insurance company which is licensed to do business in this state under Section 83-21-1 et seq., but is not domiciled in this state.
(e) "NAIC" means the National Association of Insurance Commissioners.
(f) "Life and/or health insurer" means any insurance company licensed under Section 83-19-1 et seq., or a licensed property and casualty insurer writing only accident and health insurance.
(g) "Property and casualty insurer" means any insurance company licensed under Section 83-19-1 et seq., but shall not include monoline mortgage guaranty insurers, financial guaranty insurers and title insurers.
(h) "Negative trend" means, with respect to a life and/or health insurer, negative trend over a period of time, as determined in accordance with the "Trend Test Calculation" included in the Life RBC instructions.
(i) "RBC instructions" means the RBC report including risk-based capital instructions adopted by the NAIC, as such RBC instructions may be amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.
(j) "RBC level" means an insurer's company action level RBC, regulatory action level RBC, authorized control level RBC, or mandatory control level RBC where:
(i) "Company action level RBC" means, with respect to any insurer, the product of 2.0 and its authorized control level RBC;
(ii) "Regulatory action level RBC" means the product of 1.5 and its authorized control level RBC;
(iii) "Authorized control level RBC" means the number determined under the risk-based capital formula in accordance with the RBC instructions;
(iv) "Mandatory control level RBC" means the product of .70 and the authorized control level RBC.
(k) "RBC plan" means a comprehensive financial plan containing the elements specified in Section 83-5-405(2). If the commissioner rejects the RBC plan, and it is revised by the insurer, with or without the commissioner's recommendation, the plan shall be called the "revised RBC plan."
(l) "RBC report" means the report required in Section 83-5-403.
(m) "Total adjusted capital" means the sum of:
(i) An insurer's statutory capital and surplus as determined in accordance with the statutory accounting applicable to the annual financial statements required to be filed under Section 83-5-55; and
(ii) Such other items, if any, as the RBC instructions may provide.
(n) "Domestic health organization insurer" means a health organization insurer domiciled in this state.
(o) "Foreign health organization insurer" means a health organization insurer that is licensed to do business in this state under Section 83-21-1 et seq., but is not domiciled in this state.
(p) "Health organization insurer" means a health maintenance organization, limited health service organization, dental or vision plan, hospital, medical and dental indemnity or service corporation or other managed care organization that holds a certificate of authority under Section 83-41-305. This definition does not include an organization that is licensed as either a life and health insurer or property and casualty insurer and that is otherwise subject to either the life or property and casualty RBC requirements.
SECTION 2. Section 83-5-403, Mississippi Code of 1972, is amended as follows:
83-5-403. (1) Every domestic insurer shall, on or before each March 1, the filing date, prepare and submit to the commissioner a report of its RBC levels as of the end of the calendar year just ended, in a form and containing such information as is required by the RBC instructions. In addition, every domestic insurer shall file its RBC report:
(a) With the NAIC in accordance with the RBC instructions; and
(b) With the insurance commissioner in any state in which the insurer is authorized to do business, if the insurance commissioner has notified the insurer of its request in writing, in which case the insurer shall file its RBC report not later than the later of:
(i) Fifteen (15) days from the receipt of notice to file its RBC report with that state; or
(ii) The filing date.
(2) A life and health insurer's RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take into account, and may adjust for the covariance between, the following factors determined in each case by applying the factors in the manner set forth in the RBC instructions.
(a) The risk with respect to the insurer's assets;
(b) The risk of adverse insurance experience with respect to the insurer's liabilities and obligations;
(c) The interest rate risk with respect to the insurer's business; and
(d) All other business risks and such other relevant risks as are set forth in the RBC instructions.
(3) A property and casualty insurer's RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take the following into account, and may adjust for the covariance between, determined in each case by applying the factors in the manner set forth in the RBC instructions:
(a) Asset risk;
(b) Credit risk;
(c) Underwriting risk; and
(d) All other business risks and such other relevant risks as are set forth in the RBC instructions.
(4) A health organization insurer's RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take the following into account (and may adjust for the covariance between) determined in each case by applying the factors in the manner set forth in the RBC instructions:
(a) Asset risk;
(b) Credit risk;
(c) Underwriting risk; and
(d) All other business risks and such other relevant risks as are set forth in the RBC instructions.
( * * *5) An excess of capital over the
amount produced by the risk-based capital requirements contained in Sections 83-5-401
through 83-5-427 and the formulas, schedules and instructions referenced in
Sections 83-5-401 through 83-5-427, is desirable in the business of insurance.
Accordingly, insurers should seek to maintain capital above the RBC levels
required by Sections 83-5-401 through 83-5-427. Additional capital is used and
useful in the insurance business and helps to secure an insurer against various
risks inherent in, or affecting, the business of insurance and not accounted
for or only partially measured by the risk-based
capital requirements contained in Sections 83-5-401 through 83-5-427.
( * * *6) If a domestic insurer files a RBC
report which in the judgment of the commissioner is inaccurate, then the
commissioner shall adjust the RBC report to correct the inaccuracy and shall
notify the insurer of the adjustment. The notice shall contain a statement of
the reason for the adjustment. A RBC report as so adjusted is referred to as
an "adjusted RBC report."
SECTION 3. Section 83-5-405, Mississippi Code of 1972, is amended as follows:
83-5-405. (1) "Company action level event" means any of the following events:
(a) The filing of a RBC report by an insurer which indicates that:
(i) The insurer's total adjusted capital is greater than or equal to its regulatory action level RBC but less than its company action level RBC;
(ii) If a life and/or health insurer, the insurer has total adjusted capital which is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 2.5 and has a negative trend; or
(iii) If a property and casualty insurer, the insurer has total adjusted capital which is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the property and casualty RBC instructions;
(iv) If a health organization insurer, the insurer has total adjusted capital which is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculations included in the health RBC instructions;
(b) The notification by the commissioner to the insurer of an adjusted RBC report that indicates an event in paragraph (a) of this subsection, provided the insurer does not challenge the adjusted RBC report under Section 83-5-413; or
(c) If, under Section 83-5-413, an insurer challenges an adjusted RBC report that indicates the event in paragraph (a) of this subsection, the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer's challenge.
(2) In the event of a company action level event, the insurer shall prepare and submit to the commissioner a RBC plan which shall:
(a) Identify the conditions which contribute to the company action level event;
(b) Contain proposals of corrective actions which the insurer intends to take and would be expected to result in the elimination of the company action level event;
(c) Provide projections of the insurer's financial results in the current year and at least the four (4) succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital and surplus. The projections for both new and renewal business might include separate projections for each major line of business and separately identify each significant income, expense and benefit component;
(d) Identify the key assumptions impacting the insurer's projections and the sensitivity of the projections to the assumptions; and
(e) Identify the quality of, and problems associated with, the insurer's business, including, but not limited to, its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business and use of reinsurance, if any, in each case.
(3) The RBC plan shall be submitted:
(a) Within forty-five (45) days of the company action level event; or
(b) If the insurer challenges an adjusted RBC report under Section 83-5-413, within forty-five (45) days after notification to the insurer that the commissioner has, after a hearing, rejected the insurer's challenge.
(4) Within sixty (60) days after the submission by an insurer of a RBC plan to the commissioner, the commissioner shall notify the insurer whether the RBC plan shall be implemented or is, in the judgment of the commissioner, unsatisfactory. If the commissioner determines the RBC plan is unsatisfactory, the notification to the insurer shall set forth the reasons for the determination, and may set forth proposed revisions which will render the RBC plan satisfactory, in the judgment of the commissioner. Upon notification from the commissioner, the insurer shall prepare a revised RBC plan, which may incorporate by reference any revisions proposed by the commissioner, and shall submit the revised RBC plan to the commissioner:
(a) Within forty-five (45) days after the notification from the commissioner; or
(b) If the insurer challenges the notification from the commissioner under Section 83-5-413, within forty-five (45) days after a notification to the insurer that the commissioner has, after a hearing, rejected the insurer's challenge.
(5) In the event of a notification by the commissioner to an insurer that the insurer's RBC plan or revised RBC plan is unsatisfactory, the commissioner may at the commissioner's discretion, subject to the insurer's right to a hearing under Section 83-5-413, specify in the notification that the notification constitutes a regulatory action level event.
(6) Every domestic insurer that files a RBC plan or revised RBC plan with the commissioner shall file a copy of the RBC plan or revised RBC plan with the insurance commissioner in any state in which the insurer is authorized to do business if:
(a) Such state has a RBC provision substantially similar to Section 83-5-415(1); and
(b) The insurance commissioner of that state has notified the insurer of its request for the filing in writing, in which case the insurer shall file a copy of the RBC plan or revised RBC plan in that state no later than the later of:
(i) Fifteen (15) days after the receipt of notice to file a copy of its RBC plan or revised RBC plan with the state; or
(ii) The date on which the RBC plan or revised RBC plan is filed under Section 83-5-405(3) and (4).
SECTION 4. Section 83-5-417, Mississippi Code of 1972, is amended as follows:
83-5-417. (1) The provisions of Sections 83-5-401 through 83-5-427 are supplemental to any other provisions of the laws of this state and shall not preclude or limit any other powers or duties of the commissioner under such laws.
(2) The commissioner may promulgate rules and regulations necessary for the implementation of Sections 83-5-401 through 83-5-427.
(3) The commissioner may exempt from the application of Sections 83-5-401 through 83-5-427 any domestic insurer, other than a domestic health organization insurer, that:
(a) Writes direct business only in this state;
(b) Writes direct annual premiums of Two Million Dollars ($2,000,000.00) or less; and
(c) Assumes no reinsurance in excess of five percent (5%) of direct premium written.
(4) The commissioner may exempt from the application of Sections 83-5-401 through 83-5-427 a domestic health organization insurer that:
(a) Writes direct business only in this state;
(b) Assumes no reinsurance in excess of five percent (5%) of direct premium written; and
(c) Writes direct annual premiums for comprehensive medical business of Two Million Dollars ($2,000,000.00) or less, or is a limited health service organization that covers less than two thousand (2,000) lives.
SECTION 5. Section 83-5-427, Mississippi Code of 1972, is amended as follows:
83-5-427. (1) For RBC reports required to be filed by life insurers with respect to 1996, the following requirements shall apply in lieu of the provisions of Sections 83-5-405, 83-5-407, 83-5-409, and 83-5-411.
(a) In the event of a company action level event with respect to a domestic insurer, the commissioner shall take no regulatory action hereunder.
(b) In the event of a regulatory action level event under Section 83-5-407(1)(a), (b) or (c), the commissioner shall take the actions required under Section 83-5-405.
(c) In the event of a regulatory action level event under Section 83-5-407(1)(d), (e), (f), (g), (h) or (i), or an authorized control level event, the commissioner shall take the actions required under Section 83-5-407 with respect to the insurer.
(d) In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under Section 83-5-409 with respect to the insurer.
(2) For RBC reports required to be filed by property and casualty insurers with respect to 1996, the following requirements shall apply in lieu of the provisions of Sections 83-5-405, 83-5-407, 83-5-409, and 83-5-411:
(a) In the event of a company action level event with respect to a domestic insurer, the commissioner shall take no regulatory action hereunder.
(b) In the event of a regulatory action level event under Section 83-5-407(1)(a), (b) or (c), the commissioner shall take the actions required under Section 83-5-405.
(c) In the event of a regulatory action level event under Section 83-5-407(1)(d), (e), (f), (g), (h) or (i), or an authorized control level event, the commissioner shall take the actions required under Section 83-5-407 with respect to the insurer.
(d) In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under Section 83-5-409 with respect to the insurer.
(3) For RBC reports required to be filed by health organization insurers with respect to 2013, the following requirements shall apply in lieu of the provisions of Sections 83-5-405, 83-5-407, 83-5-409 and 83-5-411:
(a) In the event of a company action level event with respect to a domestic health organization insurer, the commissioner shall take no regulatory action hereunder;
(b) In the event of a regulatory action level event under Section 83-5-407(1)(a), (b) or (c), the commissioner shall take the actions required under Section 83-5-405;
(c) In the event of a regulatory action level event under Section 83-5-407(1)(d), (e), (f), (g), (h) or (i), or an authorized control level event, the commissioner shall take the actions required under Section 83-5-407 with respect to the health organization insurer; and
(d) In the event of a mandatory control level event with respect to a health organization insurer, the commissioner shall take the actions required under Section 83-5-409 with respect to the health organization insurer.
SECTION 6. This act shall take effect and be in force from and after July 1, 2014.