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SESSION ENROLLED VIRGINIA ACTS OF ASSEMBLY –– CHAPTER E An Act to amend and reenact §§ 38.2-1322, 38.2-1329, 38.2-1330, and 38.2-1333 of the Code of N stress test;
VIRGINIA ACTS OF ASSEMBLY -- 2022 SESSION CHAPTER 113 An Act to amend and reenact §§ 38.2-1322, 38.2-1329, 38.2-1330, and 38.2-1333 of the Code of Virginia, relating to insurance holding company systems;
hazardous financial conditions.any systems;
group capital calculation and liquidity stress test;
group capital calculation and liquiRity O [H 82] L Approved L Be it enacted by the General Assembly of Virginia:
hazardous financial conditions.
E 1.
[H 82] Approved April 6, 2022 Be it enacted by the General Assembly of Virginia:
That §§ 38.2-1322, 38.2-1329, 38.2-1330, and 38.2-1333 of the Code of Virginia are amended aDd ree§ 38.2-1322.
1.
That §§ 38.2-1322, 38.2-1329, 38.2-1330, and 38.2-1333 of the Code of Virginia are amended and reenacted as follows:
§ 38.2-1322.
"Acquiring person" means any person by whom or on whose behalf acquisition of control of any domestic insurer is to be effected.
"Acquiring person" means any person by whom or on whose behalf acquisition of control of any dom"Affiliate" of a specific person or a person "affiliated" with a specific person means a person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the person specified.
"Affiliate" of a specific person or a person "affiliated" with a specific person means a person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the person specified.
"Control," including the terms "controlling," "controlled by" and "under common control with," means direct or indirect possession of the power to direct or cause the direction of the management and policies of a person, through (i) the ownership of voting securities, (ii) by contract other than a commercial contract for goods or nonmanagement services, or (iii) otherwise, unless the power is the result of an official position with or corporate office held by the person.
H "Control," including the terms "controlling," "controlled by" and "under common control with8" policies of a person, through (i) the ownership of voting securities, (ii) by contract other than a and commercial contract for goods or nonmanagement services, or (iii) otherwise, unless the power is the result of an official position with or corporate office held by the person.
After giving all interested persons notice and opportunity to be heard and making specific findings to support its determination, the Commission may determine that con"Enterprise risk" means 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 set forth in § 38.2-5503 or would cause the insurer to be in hazardous financial condition pursuant to 14VAC5-290-30 and 14VAC5-290-40 of the Virginia Administrative Code.
After giving all interested persons notice and opportunity to be heard and making specific findings to support its determination, the Commission may determine that control exists, notwithstanding the absence of a presumption to that effect.
"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 Commission group.§ 38.2-1332.2 to have sufficient significant contacts with the internationally active insurance "Insurance holding company system" means two or more affiliated persons, one or more of which is an insurer.
"Enterprise risk" means 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 set forth in § 38.2-5503 or would cause the insurer to be in hazardous financial condition pursuant to 14VAC5-290-30 and 14VAC5-290-40 of the Virginia Administrative Code.
"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 Commission under § 38.2-1332.2 to have sufficient significant contacts with the internationally active insurance group.
"Insurance holding company system" means two or more affiliated persons, one or more of which is an insurer.
(ii) the percentage of gross premiums written outside the United States is at least 10 percent of the insurance holding company system's total gross written premiums;
(ii) the percentage of gross premiums written outside the United States is at least percent of the insurance holding company system's total gross written premiums;
and (iii) based on a billion or (b) the total gross written premiums of the insurance holding company system are at least $100 billion.
and (iii) based on a three year rolling average, (a) the total assets of the insurance holding company system are at least $50 billion or (b) the total gross written premiums of the insurance holding company system are at least $10 billion.
(v) any merger with or by order, rule or regulation determines to be material.
(v) any merger with or acquisition of control of any corporation;
Any series of transactions occurring within asion 12-month period that are sufficiently similar in nature as to be reasonably construed as a single of 9 transaction and that in the aggregate exceed any minimum limits shall be deemed a material transaction.
or (vi) any other transaction or agreement that the Commission by order, rule or regulation determines to be material.
Any series of transactions occurring within a 12-month period that are sufficiently similar in nature as to be reasonably construed as a single transaction and that in the aggregate exceed any minimum limits shall be deemed a material transaction.
"NAIC Group Capital Calculation Instructions" means the group capital calculation instructions as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.
of 8 "NAIC Group Capital Calculation Instructions" means the group capital calculation instructions as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.
Financial statements may include but are not limited to annual audited financial statements filed with the SEC pursuant to the Securities Act of 1933, as amended, or the of 9 Securities Exchange Act of 1934, as amended.
Financial statements may include but are not limited to annual audited financial statements filed with the SEC pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
An insurer required to file financial statements pursuant to this subdivision may satisfy the request by providing the Commission with the most recently Eiled parent corporation financial statements that have been filed with the SEC;
An insurer required to file financial statements pursuant to this subdivision may satisfy the request by providing the Commission with the most recently filed parent corporation financial statements that have been filed with the SEC;
R 7.
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Statements that the corporate governance and internal controls are managed under the direction of that the insurer's officers or senior management have approved, implemented, and continue to maintainand and monitor corporate governance and internal control procedures;
Statements that the corporate governance and internal controls are managed under the direction of the insurer's board of directors in a manner consistent with § 13.1-673 or § 13.1-853 as applicable, and that the insurer's officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures;
and L 8.
and 8.
E E.
E.
Unless the Commission prescribes otherwise and except for the purposes of subsections M and N, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one percent or less of an insurer's admitted section.s of the immediately preceding December 31 shall not be deemed material for purposes of this F.
Unless the Commission prescribes otherwise and except for the purposes of subsections M and N, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one percent or less of an insurer's admitted assets as of the immediately preceding December 31 shall not be deemed material for purposes of this section.
F.
Each insurer shall make its report within 15 days after the end of Hhe month in which it learns of each additional material transaction or material change in materialB transaction.
Each insurer shall make its report within 15 days after the end of the month in which it learns of each additional material transaction or material change in material transaction.
Subject to § 38.2-1330.1, each insurer shall report to the Commission all dividend2 and other distributions to shareholders within five business days following their declaration, and such dRclaration shall confer no rights upon shareholders until:
Subject to § 38.2-1330.1, each insurer shall report to the Commission all dividends and other distributions to shareholders within five business days following their declaration, and such declaration shall confer no rights upon shareholders until:
Thirty days after the Commission has received written notice of the declaration thereof and has notEach registered insurer shall also keep current the information required by subsection C by filing an amendment to its registration statement within 120 days after the end of each fiscal year of the ultimate controlling person of the insurance holding company system.
Thirty days after the Commission has received written notice of the declaration thereof and has not within such period disapproved such payment.
Each registered insurer shall also keep current the information required by subsection C by filing an amendment to its registration statement within 120 days after the end of each fiscal year of the ultimate controlling person of the insurance holding company system.
The Commission may allow an insurer that is authorized to do business in this Commonwealth and required to register under subsection A and to file all information and material required to be filed under this section.
The Commission may allow an insurer that is authorized to do business in this Commonwealth and that is part of an insurance holding company system to register on behalf of any affiliated insurer required to register under subsection A and to file all information and material required to be filed under this section.
A disclaimer of affiliation shall be deemed to have been granted unless the Commission, within 30 days following receipt of a complete disclaiming party may request a hearing.
A disclaimer of affiliation shall be deemed to have been granted unless the Commission, within 30 days following receipt of a complete disclaimer, notifies the filing party the disclaimer is disallowed.
In the event of disallowance, the disclaiming party may request a hearing.
shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner.
M.
The report shall be completed in accordance with the NAIC Group Capital of 9 Calculation Instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation.
Except as provided below, the ultimate controlling person of every insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner.
The report shall be completed in accordance with the NAIC Group Capital Calculation Instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation.
Any insurance holding company system that is required to perform a group capital calculation specified by the Federal Reserve Board.
Any insurance holding company system that is required to perform a group capital calculation of 8 specified by the Federal Reserve Board.
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E 3.
3.
R 5.
5.
The books, accounts, and records of each party shall disclose clearly and accurately the precise the reasonableness of the charges or fees to the respective parties;
The books, accounts, and records of each party shall disclose clearly and accurately the precise 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;
andation as is necessary tO support 6.
and 6.
L 7.
of 8 7.
If an insurer subject to this article is deemed by the Commission to be in a hazardous fiEancial condition as defined by 14VAC5-290 or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, then the Commission may require the insurer to secure and maintain either a deposit held by the Commission or a bond as determined by the insurer at the insurer's discretion, for the protection of the insurer for the duration of the contract, agreement, or exiIn determining if a deposit or bond is required, the Commission shall consider whether concerns exist with respect to the affiliated person's ability to fulfill the contract or agreement if the insurer were to be put into liquidation.
If an insurer subject to this article is deemed by the Commission to be in a hazardous financial condition as defined by 14VAC5-290 or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, then the Commission may require the insurer to secure and maintain either a deposit held by the Commission or a bond as determined by the insurer at the insurer's discretion, for the protection of the insurer for the duration of the contract, agreement, or existence of the condition for which the Commission required deposit or bond.
Once the insurer is deemed to be in a hazardous financial condition or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, andHa deposit or bond is necessary, the Commission has the discretion to determine the amount of the deposit or bond, not to exceed the value of the contract or agreement in any one year, and whether such2 deposit or bond shall be required for a single contract, multiple contracts, or a contract onlyRwith a specific person;
In determining if a deposit or bond is required, the Commission shall consider whether concerns exist with respect to the affiliated person's ability to fulfill the contract or agreement if the insurer were to be put into liquidation.
Once the insurer is deemed to be in a hazardous financial condition or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, and a deposit or bond is necessary, the Commission has the discretion to determine the amount of the deposit or bond, not to exceed the value of the contract or agreement in any one year, and whether such deposit or bond shall be required for a single contract, multiple contracts, or a contract only with a specific person;
All records and data of the insurer held by an affiliate are and remain the property of the insurer, are subject to the control of the insurer, are identifiable, and are segregated or readily capable of all records and data that are otherwise the property of the insurer, in whatever form maintained,ncludes including claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records, or similar records within the possession, custody, or control of the affiliate.
All records and data of the insurer held by an affiliate are and remain the property of the insurer, are subject to the control of the insurer, are identifiable, and are segregated or readily capable of segregation at no additional cost to the insurer from all other persons' records and data.
This includes all records and data that are otherwise the property of the insurer, in whatever form maintained, including claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records, or similar records within the possession, custody, or control of the affiliate.
The affiliate shall provide a waiver of any landlord lien or other encumbrance to give the insurer access to all rec9.
The affiliate shall provide a waiver of any landlord lien or other encumbrance to give the insurer access to all records and data in the event of the affiliate's default under a lease or other agreement;
and 9.
The notice for domestic insurer.
The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer.
Loans or extensions of credit to any person who is not an affiliate, where the insurer makes loans 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 the loans or extensions of credit, of 9 provided the transactions are equal to or exceed:
Loans or extensions of credit to any person who is not an affiliate, where the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the 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 the loans or extensions of credit, provided the transactions are equal to or exceed:
All management agreements, service contracts, tax allocation agreements, guarantees, and cost-sharing arrangements;
All management agreements, service contracts, tax allocation agreements, guarantees, and of 8 cost-sharing arrangements;
The provisions of subdivisions 3 and 4 shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions 3 and 4 with respect to such controlling entity;
The provisions of subdivisions 3 and 4 shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions and 4 with respect to such controlling entity;
of 9 D.
D.
For purposes of this article, in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to meet its financEal needs, the following factors, among others, shall be considered:
For purposes of this article, in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to meet its financial needs, the following factors, among others, shall be considered:
R 2.
2.
3.
The number and size of risks insured in each line of business;
O 5.
5.
L 6.
6.
The recent past and projected future trend in the size of the insurer's investment portfoEio;
The recent past and projected future trend in the size of the insurer's investment portfolio;
D 11.
11.
and classify any investment as a nonadmitted asset for the purpose of determining the adequacy of surplus as regards policyholders.
and 12.
The quality and liquidity of investments in affiliates.
The Commission in its judgment may of 8 classify any investment as a nonadmitted asset for the purpose of determining the adequacy of surplus as regards policyholders.
No domestic insurer shall enter into transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those sHparate transactions is to avoid the statutory threshold amount and thus avoid the review that otherwise would be required.
No domestic insurer shall enter into transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that otherwise would be required.
If the Commission determines that separate transactions were entered into over any2 12-month period for that purpose, the Commission may exercise its authority under § 38.2-1334.2R2.
If the Commission determines that separate transactions were entered into over any 12-month period for that purpose, the Commission may exercise its authority under § 38.2-1334.2:2.
insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation's voting securities.
G.
The Commission shall be notified in writing within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation's voting securities.
Any affiliate that is party to a contract or agreement described in subdivision B 4 with a domestic insurer shall be subject to the jurisdiction of any supervision, seizure, conservatorship, or receivership proceedings against the insurer and to the authority of any supervisor, conservator, rehabilitator, or liquidator for the insurer appointed pursuant to Chapter 15 (§ 38.2-1500 et seq.) for the purpose of interpreting, enforcing, and overseeing the affiliate's obligations under the agreement or contract to perform services for the insurer that are (i) an integral part of the insurer's operation, including management, administrative, accounting, data processing, marketing, underwriting, claims handling, under insurance policies.
Any affiliate that is party to a contract or agreement described in subdivision B 4 with a domestic insurer shall be subject to the jurisdiction of any supervision, seizure, conservatorship, or receivership proceedings against the insurer and to the authority of any supervisor, conservator, rehabilitator, or liquidator for the insurer appointed pursuant to Chapter 15 (§ 38.2-1500 et seq.) for the purpose of interpreting, enforcing, and overseeing the affiliate's obligations under the agreement or contract to perform services for the insurer that are (i) an integral part of the insurer's operation, including management, administrative, accounting, data processing, marketing, underwriting, claims handling, investment, or any other similar functions or (ii) essential to the insurer's ability to fulfill its obligations under insurance policies.
The Commission may require that an agreement or contract described inl its obligations subdivision B 4 for the provision of services described in clause (i) or (ii) specify that the affiliate consents to the jurisdiction as set forth in this subsection.
The Commission may require that an agreement or contract described in subdivision B 4 for the provision of services described in clause (i) or (ii) specify that the affiliate consents to the jurisdiction as set forth in this subsection.
All documents, materials, or other information obtained by or disclosed to the Commission or any other person in the course of an examination or investigation made pursuant to § 38.2-1332, and all information reported or provided to the Commission pursuant to subdivisions A 12 and 13 of § 38.2-1324 and §§ 38.2-1329, 38.2-1330, 38.2-1330.1, and 38.2-1332.2 is declared to be proprietary and to contain trade secrets and shall be confidential by law and privileged, shall not be subject to However, the Commission is authorized to use the documents, materials, or other information in theion.
All documents, materials, or other information obtained by or disclosed to the Commission or any other person in the course of an examination or investigation made pursuant to § 38.2-1332, and all information reported or provided to the Commission pursuant to subdivisions A 12 and 13 of § 38.2-1324 and §§ 38.2-1329, 38.2-1330, 38.2-1330.1, and 38.2-1332.2 is declared to be proprietary and to contain trade secrets and shall be confidential by law and privileged, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
furtherance of any regulatory or legal action brought as a part of the Commission's official duties.
However, the Commission 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 Commission's official duties.
For the purposes of the information reported to the Commission pursuant to subsection M of § 38.2-1329, the Commission shall maintain the confidentiality of the group capital calculation and group capital ratio produced within the calculation and any group capital information received from an supervisor.olding company system supervised by the Federal Reserve Board or U.S.
For the purposes of the information reported to the Commission pursuant to subsection M of § 38.2-1329, the Commission shall maintain the confidentiality of the group capital calculation and group capital ratio produced within the calculation and any group capital information received from an insurance holding company system supervised by the Federal Reserve Board or U.S.
group-wide 2.
For the purposes of the information reported to the Commission pursuant to subsection N of of 9 § 38.2-1329, the Commission shall maintain the confidentiality of the liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company system supervised by the Federal Reserve Board and non-U.S.
2.
For the purposes of the information reported to the Commission pursuant to subsection N of § 38.2-1329, the Commission shall maintain the confidentiality of the liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company system supervised by the Federal Reserve Board and non-U.S.
group-wide supervisor.
3.
of 8 3.
Documents, materials, or other information in the possession or control of the NAIC or a of 9 third-party consultant designated by the Commission pursuant to this article shall be confidential by law and privileged, shall not be subject to subpoena, and shall not be subject to discovery or admiEsible in evidence in any private civil action.
Documents, materials, or other information in the possession or control of the NAIC or a third-party consultant designated by the Commission pursuant to this article shall be confidential by law and privileged, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
N disseminating, circulating, or placing before the public, or causing directly or indirectly to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radOo or television station or any electronic means of communication available to the public, or in any Lther way to the group capital calculation, group capital ratio, liquidity stress test results, or supportingd disclosures for the liquidity stress test, of any insurer or any insurer group, or of any component derived in the calculation by an insurer, broker, or other person engaged in any manner in the E insurance business, shall be prohibited.
G.
However, if any materially false statement with respecD to the to an insurer's or insurance group's group capital calculation or resulting group capital ratio, theunt liquidity stress test result, or supporting disclosures is published in any written publication, and the insurer is able to demonstrate to the Commission with substantial proof the falsity or the inappropriateness of such statement, as the case may be, then the insurer may publish announcements in inappropriate statement.
Except as otherwise provided by the provisions of this article, the making, publishing, disseminating, circulating, or placing before the public, or causing directly or indirectly to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station or any electronic means of communication available to the public, or in any other way as an advertisement, announcement, or statement containing a representation or statement with regard to the group capital calculation, group capital ratio, liquidity stress test results, or supporting disclosures for the liquidity stress test, of any insurer or any insurer group, or of any component derived in the calculation by an insurer, broker, or other person engaged in any manner in the insurance business, shall be prohibited.
the sole purpose of the announcement is to rebut the materially false or H E R
However, if any materially false statement with respect to the group capital calculation, the resulting group capital ratio, an inappropriate comparison of any amount to an insurer's or insurance group's group capital calculation or resulting group capital ratio, the liquidity stress test result, or supporting disclosures is published in any written publication, and the insurer is able to demonstrate to the Commission with substantial proof the falsity or the inappropriateness of such statement, as the case may be, then the insurer may publish announcements in a written publication if the sole purpose of the announcement is to rebut the materially false or inappropriate statement.
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