Alabama 2022 Regular Session

Alabama Senate Bill SB166 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	1 SB166
2	2	2 216113-1
3	3	3 By Senator Shelnutt
4	4	4 RFD: Banking and Insurance
5	5	5 First Read: 02-FEB-22
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7	7	Page 0 1 216113-1:n:01/07/2022:FC/ma LSA2022-30
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14	14	8 SYNOPSIS: Under existing law, the standard
15	15	9 nonforfeiture law for individual deferred annuities
16	16	10 requires a minimum interest rate on individual
17	17	11 deferred annuities of one percent.
18	18	12 This bill would set the minimum interest
19	19	13 rate for individual deferred annuities at 15 basis
20	20	14 points (0.15%).
21	21	15 This bill would exempt contingent deferred
22	22	16 annuities from the standard nonforfeiture law for
23	23	17 individual deferred annuities and authorize the
24	24	18 Commissioner of Insurance to prescribe by rule the
25	25	19 nonforfeiture benefits for contingent deferred
26	26	20 annuities.
27	27	21 Under existing law, the Commissioner of
28	28	22 Insurance regulates insurance holding company
29	29	23 systems pursuant to the Insurance Holding Company
30	30	24 System Regulatory Act. The members of an insurance
31	31	25 holding company system are required to meet certain
32	32	26 capital and liquidity requirements to protect the
33	33	27 solvency of the insurers within the holding
34	34	Page 1 1 company. Based on reporting to the commissioner,
35	35	2 the commissioner performs group analysis of an
36	36	3 insurance holding company, but without the benefit
37	37	4 of a consolidated statutory accounting system and
38	38	5 financial statements.
39	39	6 This bill would provide for a group capital
40	40	7 calculation and related reporting requirements to
41	41	8 the Commissioner of Insurance regarding an
42	42	9 insurance holding company. The group capital
43	43	10 calculation would include a group capital ratio.
44	44	11 This bill would further provide for a
45	45	12 liquidity stress test of an insurance holding
46	46	13 company. The ultimate controlling person of every
47	47	14 insurer subject to holding company registration, if
48	48	15 determined to meet certain conditions, would be
49	49	16 required to file the results of a specific year's
50	50	17 liquidity stress test to the lead state insurance
51	51	18 commissioner to assist in the group regulation of
52	52	19 the insurance holding company.
53	53	20 This bill would further provide for the
54	54	21 confidentiality of information in the possession of
55	55	22 the Commissioner of Insurance and third party
56	56	23 consultants designated by the commissioner relating
57	57	24 to insurance holding company regulation and would
58	58	25 include the group capital calculation and resulting
59	59	26 group capital ratio and the liquidity stress test
60	60	27 and its results and supporting documentation as
61	61	Page 2 1 filed with the commissioner within the
62	62	2 confidentiality provisions.
63	63	3 Also under existing law, the Standard
64	64	4 Valuation Law requires the Commissioner of
65	65	5 Insurance to annually value the reserves for
66	66	6 outstanding life insurance policies and annuity and
67	67	7 endowment contracts of life insurance companies
68	68	8 doing business in this state. The law provides for
69	69	9 an alternative valuation for small companies that
70	70	10 meet certain conditions, including certain dollar
71	71	11 figures of premiums.
72	72	12 This bill would revise the conditions for
73	73	13 the Commissioner of Insurance to use the small
74	74	14 company alternative valuation provisions for the
75	75	15 valuation of the reserves of certain small
76	76	16 companies meeting certain requirements.
77	77	17
78	78	18 A BILL
79	79	19 TO BE ENTITLED
80	80	20 AN ACT
81	81	21
82	82	22 Relating to insurance; to amend Section 27-15-28.2,
83	83	23 Code of Alabama 1975, relating to the standard nonforfeiture
84	84	24 law for individual deferred annuities, to decrease the minimum
85	85	25 interest rate to 15 basis points (0.15%); and to exempt
86	86	26 contingent deferred annuities from the standard nonforfeiture
87	87	27 law and to authorize the Commissioner of Insurance to adopt by
88	88	Page 3 1 rule the nonforfeiture benefits for contingent deferred
89	89	2 annuities; to amend Sections 27-29-1, 27-29-3, 27-29-4, and
90	90	3 27-29-7 of the Code of Alabama 1975, to revise the Alabama
91	91	4 Insurance Holding Company System Regulatory Act and the
92	92	5 regulation of insurance holding company systems by the
93	93	6 Commissioner of Insurance; to provide for a group capital
94	94	7 calculation and a liquidity stress test within the insurance
95	95	8 holding company system; to further provide for the
96	96	9 confidentiality of information in the possession of the
97	97	10 Commissioner of Insurance and third party consultants
98	98	11 designated by the commissioner relating to insurance holding
99	99	12 company regulation and would include the group capital
100	100	13 calculation and resulting group capital ratio and for the
101	101	14 liquidity stress test and its results and supporting
102	102	15 documentation as filed with the commissioner within the
103	103	16 confidentiality provisions; and to amend Section 27-36A-20,
104	104	17 Code of Alabama 1975, as amended by Act 2021-397, 2021 Regular
105	105	18 Session, the Standard Valuation Law, which requires the
106	106	19 Commissioner of Insurance to annually value the reserves for
107	107	20 outstanding life insurance policies and other contracts of
108	108	21 life insurance companies doing business in this state; and to
109	109	22 revise the small company alternative valuation provisions.
110	110	23 BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
111	111	24 Section 1. Section 27-15-28.2 of the Code of Alabama
112	112	25 1975, is amended to read as follows:
113	113	26 "§27-15-28.2.
114	114	Page 4 1 "(a) This section shall be known as the standard
115	115	2 nonforfeiture law for individual deferred annuities.
116	116	3 "(b)(1) This section shall not apply to any
117	117	4 reinsurance group annuity purchased under a retirement plan or
118	118	5 plan of deferred compensation established or maintained by an
119	119	6 employer (including a partnership or sole proprietorship) or
120	120	7 by an employee organization, or by both, other than a plan
121	121	8 providing individual retirement accounts or individual
122	122	9 retirement annuities under Section 408 of the Internal Revenue
123	123	10 Code, as now or hereafter amended, premium deposit fund,
124	124	11 variable annuity, investment annuity, immediate annuity, any
125	125	12 deferred annuity contract after annuity payments have
126	126	13 commenced or reversionary annuity, nor to any contract which
127	127	14 shall be delivered outside this state through an agent or
128	128	15 other representative of the company issuing the contract.
129	129	16 "(2) Subsections (c) through (h) shall not apply to
130	130	17 contingent deferred annuities.
131	131	18 "(3) Notwithstanding subdivision (2), the
132	132	19 commissioner may adopt by rule nonforfeiture benefits for
133	133	20 contingent deferred annuities that, in the opinion of the
134	134	21 commissioner, are equitable to the policy holder, appropriate
135	135	22 given the risks insured, and to the extent possible,
136	136	23 consistent with the general intent of this section.
137	137	24 "(c)(1) In the case of contracts issued on or after
138	138	25 the operative date of this section as defined in subsection
139	139	26 (l) no contract of annuity, except as stated in subsection
140	140	27 (b), shall be delivered or issued for delivery in this state
141	141	Page 5 1 unless it contains in substance the following provisions, or
142	142	2 corresponding provisions which in the opinion of the
143	143	3 commissioner are at least as favorable to the contract holder,
144	144	4 upon cessation of payment of considerations under the
145	145	5 contract:
146	146	6 "a. That upon cessation of payment of considerations
147	147	7 under a contract, or upon the written request of the contract
148	148	8 owner, the company shall grant a paid-up annuity benefit on a
149	149	9 plan stipulated in the contract of such value as is specified
150	150	10 in subsections (e), (f), (g), (h), and (j).
151	151	11 "b. If a contract provides for a lump sum settlement
152	152	12 at maturity, or at any other time, that upon surrender of the
153	153	13 contract at or prior to the commencement of any annuity
154	154	14 payments, the company shall pay in lieu of any paid-up annuity
155	155	15 benefit a cash surrender benefit of such amount as is
156	156	16 specified in subsections (e), (f), (h), and (j). The company
157	157	17 may reserve the right to defer the payment of such cash
158	158	18 surrender benefit for a period not to exceed six months after
159	159	19 demand therefor with surrender of the contract after making
160	160	20 written request and receiving written approval of the
161	161	21 commissioner. The request shall address the necessity and
162	162	22 equitability to all policyholders of the deferral.
163	163	23 "c. A statement of the mortality table, if any, and
164	164	24 interest rates used in calculating any minimum paid-up
165	165	25 annuity, cash surrender or death benefits that are guaranteed
166	166	26 under the contract, together with sufficient information to
167	167	27 determine the amounts of such benefits.
168	168	Page 6 1 "d. A statement that any paid-up annuity, cash
169	169	2 surrender or death benefits that may be available under the
170	170	3 contract are not less than the minimum benefits required by
171	171	4 any statute of the state in which the contract is delivered
172	172	5 and an explanation of the manner in which such benefits are
173	173	6 altered by the existence of any additional amounts credited by
174	174	7 the company to the contract, any indebtedness to the company
175	175	8 on the contract or any prior withdrawals from or partial
176	176	9 surrenders of the contract.
177	177	10 "(2) Notwithstanding the requirements of this
178	178	11 section, any deferred annuity contract may provide that if no
179	179	12 considerations have been received under a contract for a
180	180	13 period of two full years and the portion of the paid-up
181	181	14 annuity benefit at maturity on the plan stipulated in the
182	182	15 contract arising from considerations paid prior to such period
183	183	16 would be less than twenty dollars ($20) monthly, the company
184	184	17 may at its option terminate such contract by payment in cash
185	185	18 of the then present value of such portion of the paid-up
186	186	19 annuity benefit, calculated on the basis of the mortality
187	187	20 table, if any, and interest rate specified in the contract for
188	188	21 determining the paid-up annuity benefit, and by such payment
189	189	22 shall be relieved of any further obligation under such
190	190	23 contract.
191	191	24 "(d) The minimum values as specified in subsections
192	192	25 (e), (f), (g), (h), and (j) of any paid-up annuity, cash
193	193	26 surrender or death benefits available under an annuity
194	194	Page 7 1 contract shall be based upon minimum nonforfeiture amounts as
195	195	2 defined in this subsection.
196	196	3 "(1)a. The minimum nonforfeiture amount at any time
197	197	4 at, or prior to, the commencement of any annuity payments
198	198	5 shall be equal to an accumulation up to such time at rates of
199	199	6 interest as indicated in subdivision (2) of the net
200	200	7 considerations (as hereinafter defined) paid prior to such
201	201	8 time, decreased by the sum of subparagraphs 1, 2, 3, and 4:
202	202	9 "1. Any prior withdrawals from or partial surrenders
203	203	10 of the contract accumulated at rates of interest as indicated
204	204	11 in subdivision (2).
205	205	12 "2. An annual contract charge of fifty dollars
206	206	13 ($50), accumulated at rates of interest as indicated in
207	207	14 subdivision (2).
208	208	15 "3. Any premium tax paid by the company for the
209	209	16 contract, accumulated at rates of interest as indicated in
210	210	17 subdivision (2).
211	211	18 "4. The amount of any indebtedness to the company on
212	212	19 the contract, including interest due and accrued.
213	213	20 "b. The net consideration for a given contract year
214	214	21 used to define the minimum nonforfeiture amount shall be an
215	215	22 amount equal to eighty-seven and one-half percent (87.5%) of
216	216	23 the gross considerations credited to the contract during that
217	217	24 contract year.
218	218	25 "(2) The interest rate used in determining minimum
219	219	26 nonforfeiture amounts shall be an annual rate of interest
220	220	27 determined as the lesser of three percent per annum and the
221	221	Page 8 1 following, which shall be specified in the contract if the
222	222	2 interest rate will be reset:
223	223	3 "a. The five-year constant maturity treasury rate
224	224	4 reported by the Federal Reserve as of a date, or average over
225	225	5 a period, rounded to the nearest 1/20th of one percent,
226	226	6 specified in the contract no longer than 15 months prior to
227	227	7 the contract issue date or redetermination date under
228	228	8 paragraph d.
229	229	9 "b. Reduced by 125 basis points (1.25%).
230	230	10 "c. Where the resulting interest rate is not less
231	231	11 than one percent 15 basis points (0.15%).
232	232	12 "d. The interest rate shall apply for an initial
233	233	13 period and may be redetermined for additional periods. The
234	234	14 redetermination date, basis and period, if any, shall be
235	235	15 stated in the contract. The basis is the date or average over
236	236	16 a specified period that produces the value of the five-year
237	237	17 constant maturity treasury rate to be used at each
238	238	18 redetermination date.
239	239	19 "(3) During the period or term that a contract
240	240	20 provides substantive participation in an equity indexed
241	241	21 benefit, it may increase the reduction described in paragraph
242	242	22 b. of subdivision (2) by up to an additional 100 basis points
243	243	23 to reflect the value of the equity index benefit. The present
244	244	24 value at the contract issue date, and at each redetermination
245	245	25 date thereafter, of the additional reduction shall not exceed
246	246	26 the market value of the benefit. The commissioner may require
247	247	27 a demonstration that the present value of the additional
248	248	Page 9 1 reduction does not exceed the market value of the benefit.
249	249	2 Lacking such a demonstration that is acceptable to the
250	250	3 commissioner, the commissioner may disallow or limit the
251	251	4 additional reduction.
252	252	5 "(4) The commissioner may adopt rules to implement
253	253	6 subdivision (3) and to provide for further adjustments to the
254	254	7 calculation of minimum nonforfeiture amounts for contracts
255	255	8 that provide substantive participation in an equity index
256	256	9 benefit and for other contracts that the commissioner
257	257	10 determines adjustments are justified.
258	258	11 "(e) Any paid-up annuity benefit available under a
259	259	12 contract shall be such that its present value on the date
260	260	13 annuity payments are to commence is at least equal to the
261	261	14 minimum nonforfeiture amount on that date. Such present value
262	262	15 shall be computed using the mortality table, if any, and the
263	263	16 interest rate specified in the contract for determining the
264	264	17 minimum paid-up annuity benefits guaranteed in the contract.
265	265	18 "(f) For contracts which provide cash surrender
266	266	19 benefits, such cash surrender benefits available prior to
267	267	20 maturity shall not be less than the present value as of the
268	268	21 date of surrender of that portion of the maturity value of the
269	269	22 paid-up annuity benefit which would be provided under the
270	270	23 contract at maturity arising from considerations paid prior to
271	271	24 the time of cash surrender reduced by the amount appropriate
272	272	25 to reflect any prior withdrawals from or partial surrender of
273	273	26 the contract, such present value being calculated on the basis
274	274	27 of an interest rate not more than one percent (1%) higher than
275	275	Page 10 1 the interest rate specified in the contract for accumulating
276	276	2 the net considerations to determine such maturity value,
277	277	3 decreased by the amount of any indebtedness to the company on
278	278	4 the contract, including interest due and accrued, and
279	279	5 increased by any existing additional amounts credited by the
280	280	6 company to the contract. In no event shall any cash surrender
281	281	7 benefit be less than the minimum nonforfeiture amount at that
282	282	8 time. The death benefit under such contracts shall be at least
283	283	9 equal to the cash surrender benefit.
284	284	10 "(g) For contracts which do not provide cash
285	285	11 surrender benefits, the present value of any paid-up annuity
286	286	12 benefit available as a nonforfeiture option at any time prior
287	287	13 to maturity shall not be less than the present value of that
288	288	14 portion of the maturity value of the paid-up annuity benefit
289	289	15 provided under the contract arising from considerations paid
290	290	16 prior to the time the contract is surrendered in exchange for,
291	291	17 or changed to, a deferred paid-up annuity, such present value
292	292	18 being calculated for the period prior to the maturity date on
293	293	19 the basis of the interest rate specified in the contract for
294	294	20 accumulating the net considerations to determine such maturity
295	295	21 value, and increased by any existing additional amounts
296	296	22 credited by the company to the contract. For contracts which
297	297	23 do not provide any death benefits prior to the commencement of
298	298	24 any annuity payments, such present values shall be calculated
299	299	25 on the basis of such interest rate and mortality table
300	300	26 specified in the contract for determining the maturity value
301	301	27 of the paid-up annuity benefit. However, in no event shall the
302	302	Page 11 1 present value of the paid-up annuity benefit be less than the
303	303	2 minimum nonforfeiture amount at that time.
304	304	3 "(h) For the purpose of determining the benefits
305	305	4 calculated under subsections (f) and (g) in the case of
306	306	5 annuity contracts under which an election may be made to have
307	307	6 annuity payments commence at optional maturity dates, the
308	308	7 maturity date shall be deemed to be the latest date for which
309	309	8 election shall be permitted by the contract, but shall not be
310	310	9 deemed to be later than the anniversary of the contract next
311	311	10 following the annuitant's seventieth birthday or the tenth
312	312	11 anniversary of the contract, whichever is later.
313	313	12 "(i) Any contract which does not provide cash
314	314	13 surrender benefits or does not provide death benefits at least
315	315	14 equal to the minimum nonforfeiture amount prior to the
316	316	15 commencement of any annuity payments shall include a statement
317	317	16 in a prominent place in the contract that such benefits are
318	318	17 not provided.
319	319	18 "(j) Any paid-up annuity, cash surrender or death
320	320	19 benefits available at any time, other than on the contract
321	321	20 anniversary under any contract with fixed scheduled
322	322	21 considerations, shall be calculated with allowance for the
323	323	22 lapse of time and the payment of any scheduled considerations
324	324	23 beyond the beginning of the contract year in which cessation
325	325	24 of payment of considerations under the contract occurs.
326	326	25 "(k) For any contract which provides, within the
327	327	26 same contract by rider or supplemental contract provisions,
328	328	27 both annuity benefits and life insurance benefits that are in
329	329	Page 12 1 excess of the greater cash surrender benefits or a return of
330	330	2 the gross considerations with interest, the minimum
331	331	3 nonforfeiture benefits shall be equal to the sum of the
332	332	4 minimum nonforfeiture benefits for the annuity portion and the
333	333	5 minimum nonforfeiture benefits, if any, for the life insurance
334	334	6 portion computed as if each portion were a separate contract.
335	335	7 Notwithstanding the provisions of subsections (e), (f), (g),
336	336	8 (h), and (j) additional benefits payable (1) in the event of
337	337	9 total and permanent disability, (2) as reversionary annuity or
338	338	10 deferred reversionary annuity benefits or, (3) as other policy
339	339	11 benefits additional to life insurance, endowment and annuity
340	340	12 benefits, and considerations for all such additional benefits
341	341	13 shall be disregarded in ascertaining the minimum nonforfeiture
342	342	14 amounts, paid-up annuity, cash surrender and death benefits
343	343	15 that may be required by this section. The inclusion of such
344	344	16 additional benefits, unless such additional benefits
345	345	17 separately would require minimum nonforfeiture amounts,
346	346	18 paid-up annuity, cash surrender, and death benefits.
347	347	19 "(1) After June 30, 2004, any company may elect to
348	348	20 apply the provisions of this section to annuity contracts on a
349	349	21 contract form-by-contract form basis before July 1, 2006. In
350	350	22 all other instances, this section shall become operative with
351	351	23 respect to annuity contracts issued by the company after June
352	352	24 30, 2006.
353	353	25 "(m) The commissioner may adopt rules to implement
354	354	26 the provisions of this section."
355	355	Page 13 1 Section 2. Sections 27-29-1, 27-29-3, 27-29-4, and
356	356	2 27-29-7 of the Code of Alabama 1975, are amended to read as
357	357	3 follows:
358	358	4 "§27-29-1.
359	359	5 "For purposes of this chapter, unless otherwise
360	360	6 stated, the following terms shall have the meanings
361	361	7 respectively ascribed to them by this section:
362	362	8 "(1) AFFILIATE. The term shall include an affiliate
363	363	9 of, or person affiliated with, a specific person, and shall
364	364	10 mean a person that directly, or indirectly through one or more
365	365	11 intermediaries, controls, or is controlled by, or is under
366	366	12 common control with, the person specified.
367	367	13 "(2) COMMISSIONER. The Commissioner of Insurance,
368	368	14 his or her deputies, or the Insurance Department as
369	369	15 appropriate.
370	370	16 "(3) CONTROL. The term shall include controlling,
371	371	17 controlled by, or under common control with and shall mean the
372	372	18 possession, direct or indirect, of the power to direct or
373	373	19 cause the direction of the management and policies of a
374	374	20 person, whether through the ownership of voting securities, by
375	375	21 contract other than a commercial contract for goods or
376	376	22 nonmanagement services, or otherwise, unless the power is the
377	377	23 result of an official position with or corporate office held
378	378	24 by the person. Control shall be presumed to exist if any
379	379	25 person, directly or indirectly, owns, controls, holds with the
380	380	26 power to vote, or holds proxies representing five percent or
381	381	27 more of the voting securities of any other person. This
382	382	Page 14 1 presumption may be rebutted by a showing made in the manner
383	383	2 provided by subsection (k) of Section 27-29-4 that control
384	384	3 does not exist in fact. The commissioner may determine, after
385	385	4 furnishing all persons in interest notice and opportunity to
386	386	5 be heard and making a specific finding of fact to support such
387	387	6 determination, that control exists in fact, notwithstanding
388	388	7 the absence of a presumption to that effect.
389	389	8 "(4) ENTERPRISE RISK. Any activity, circumstance,
390	390	9 event, or series of events involving one or more affiliates of
391	391	10 an insurer that, if not remedied promptly, is likely to have a
392	392	11 material adverse effect upon the financial condition or
393	393	12 liquidity of the insurer or its insurance holding company
394	394	13 system as a whole, including, but not limited to, anything
395	395	14 that would cause the insurer's risk-based capital to fall into
396	396	15 company action level as set forth in Section 27-2B-4 or would
397	397	16 cause the insurer to be in hazardous financial condition.
398	398	17 "(5) GROUP-WIDE SUPERVISOR. The regulatory official
399	399	18 authorized to engage in conducting and coordinating group-wide
400	400	19 supervision activities who is determined or acknowledged by
401	401	20 the commissioner under this chapter to have sufficient
402	402	21 significant contacts with the internationally active insurance
403	403	22 group.
404	404	23 "(6) GROUP CAPITAL CALCULATION INSTRUCTIONS. The
405	405	24 group capital calculation instructions as adopted and amended
406	406	25 by the NAIC, from time to time, in accordance with the
407	407	26 procedures adopted by the NAIC.
408	408	Page 15 1 "(6) (7) INSURANCE HOLDING COMPANY SYSTEM. A system
409	409	2 which consists of two or more affiliated persons, one or more
410	410	3 of which is an insurer.
411	411	4 "(7) (8) INSURER. An insurance company as set forth
412	412	5 in Section 27-1-2, including, without limitation, any
413	413	6 fraternal benefit society, health care service plan, and
414	414	7 health maintenance organization, except that it shall not
415	415	8 include agencies, authorities, or instrumentalities of the
416	416	9 United States, its possessions and territories, the
417	417	10 Commonwealth of Puerto Rico, the District of Columbia, or a
418	418	11 state or political subdivision of a state.
419	419	12 "(8) (9) INTERNATIONALLY ACTIVE INSURANCE GROUP. An
420	420	13 insurance holding company system that incudes an insurer
421	421	14 registered under Section 27-29-4 that meets all of the
422	422	15 following criteria:
423	423	16 "a. Premiums are written in at least three
424	424	17 countries.
425	425	18 "b. The percentage of gross premiums written outside
426	426	19 the United States is at least 10 percent of the insurance
427	427	20 holding company system's total gross written premiums.
428	428	21 "c. Based on a three-year rolling average, the total
429	429	22 assets of the insurance holding company system are at least
430	430	23 fifty billion dollars ($50,000,000,000) or the total gross
431	431	24 written premiums of the insurance holding company system are
432	432	25 at least ten billion dollars ($10,000,000,000).
433	433	Page 16 1 "(10) NATIONAL ASSOCIATION OF INSURANCE
434	434	2 COMMISSIONERS OR NAIC. The National Association of Insurance
435	435	3 Commissioners.
436	436	4 "(11) NAIC LIQUIDITY STRESS TEST FRAMEWORK. A
437	437	5 separate NAIC publication which includes a history of the
438	438	6 NAIC's development of regulatory liquidity stress testing, the
439	439	7 scope criteria applicable for a specific data year, and the
440	440	8 liquidity stress test instructions and reporting templates for
441	441	9 a specific data year, the scope criteria, instructions, and
442	442	10 reporting template as adopted and amended by the NAIC, from
443	443	11 time to time, in accordance with the procedures adopted by the
444	444	12 NAIC.
445	445	13 "(9) (12) PERSON. An individual, a corporation, a
446	446	14 limited liability company, a partnership, an association, a
447	447	15 joint-stock company, a trust, an unincorporated organization,
448	448	16 or any similar entity or any combination of the foregoing
449	449	17 acting in concert, but shall not include any joint venture
450	450	18 partnership exclusively engaged in owning, managing, leasing,
451	451	19 or developing real or tangible personal property.
452	452	20 "(13) SCOPE CRITERIA. As detailed in the NAIC
453	453	21 Liquidity Stress Test Framework, the designated exposure bases
454	454	22 along with minimum magnitudes thereof for the specified data
455	455	23 year, used to establish a preliminary list of insurers
456	456	24 considered scoped into the NAIC Liquidity Stress Test
457	457	25 Framework for that data year.
458	458	26 "(10) (14) SECURITYHOLDER. One who owns any security
459	459	27 of such person, including common stock, preferred stock, debt
460	460	Page 17 1 obligations, and other security convertible into, or
461	461	2 evidencing, the right to acquire any of the foregoing.
462	462	3 "(11) (15) SUBSIDIARY. An affiliate controlled by
463	463	4 such person, directly or indirectly, through one or more
464	464	5 intermediaries.
465	465	6 "(12) (16) VOTING SECURITY. The term shall include
466	466	7 any security convertible into, or evidencing, a right to
467	467	8 acquire a voting security.
468	468	9 "§27-29-3.
469	469	10 "(a)(1) No person other than the issuer shall make a
470	470	11 tender offer for or a request or invitation for tenders of, or
471	471	12 enter into any agreement to exchange securities for, seek to
472	472	13 acquire, or acquire in the open market any voting security of
473	473	14 a domestic insurer if, after the consummation thereof, such
474	474	15 person would, directly or indirectly, or by conversion or by
475	475	16 exercise of any right to acquire, be in control of such
476	476	17 insurer, and no person shall enter into an agreement to merge
477	477	18 with or otherwise to acquire control of a domestic insurer, or
478	478	19 any person controlling a domestic insurer unless, at the time
479	479	20 any such offer, request, or invitation is made or any such
480	480	21 agreement is entered into, or prior to the acquisition of such
481	481	22 securities if no offer or agreement is involved such person
482	482	23 has filed with the commissioner and has sent to such insurer a
483	483	24 statement containing the information required by this section
484	484	25 and such offer, request, invitation, agreement, or acquisition
485	485	26 has been approved by the commissioner in the manner prescribed
486	486	27 in this section.
487	487	Page 18 1 "(2) For purposes of this section, any controlling
488	488	2 person of a domestic insurer seeking to divest its controlling
489	489	3 interest in the domestic insurer, in any manner, shall file
490	490	4 with the commissioner, with a copy to the insurer,
491	491	5 confidential notice of its proposed divestiture at least 30
492	492	6 days prior to the cessation of control. The commissioner shall
493	493	7 determine those instances in which the party or parties
494	494	8 seeking to divest or to acquire a controlling interest in an
495	495	9 insurer, will be required to file for and obtain approval of
496	496	10 the transaction. The information shall remain confidential
497	497	11 until the conclusion of the transaction unless the
498	498	12 commissioner, in his or her discretion, determines that
499	499	13 confidential treatment will interfere with enforcement of this
500	500	14 section. If the statement referred to in subdivision (1) is
501	501	15 otherwise filed, this subdivision shall not apply.
502	502	16 "(3) With respect to a transaction subject to this
503	503	17 section, the acquiring person must also file a pre-acquisition
504	504	18 notification with the commissioner, which shall contain the
505	505	19 information set forth in subdivision (1) of subsection (c) of
506	506	20 Section 27-29-3.1. A failure to file the notification may be
507	507	21 subject to penalty specified in subdivision of (3) of
508	508	22 subsection (e) of Section 27-29-3.1.
509	509	23 "(4) For purposes of this section:
510	510	24 "a. A domestic insurer includes any person
511	511	25 controlling a domestic insurer unless the person, as
512	512	26 determined by the commissioner, is either directly or through
513	513	Page 19 1 its affiliates primarily engaged in business other than the
514	514	2 business of insurance.
515	515	3 "b. Person does not include any securities broker
516	516	4 holding, in the usual and customary broker's function, less
517	517	5 than 20 percent of the voting securities of an insurance
518	518	6 company or of any person which controls an insurance company.
519	519	7 "(b)(1) The statement to be filed with the
520	520	8 commissioner under this section shall be made under oath or
521	521	9 affirmation and shall contain all of the following
522	522	10 information:
523	523	11 "a. The name and address of each person by whom, or
524	524	12 on whose behalf, the merger or other acquisition of control
525	525	13 referred to in subsection (a) is to be effected (hereinafter
526	526	14 called "acquiring party"), and either of the following:
527	527	15 "1. If the person is an individual, his or her
528	528	16 principal occupation and all offices and positions held during
529	529	17 the past five years, and any conviction of crimes other than
530	530	18 minor traffic violations during the past 10 years.
531	531	19 "2. If the person is not an individual, a report of
532	532	20 the nature of its business operations during the past five
533	533	21 years or for the lesser period as such person and any
534	534	22 predecessors thereof shall have been in existence; an
535	535	23 informative description of the business intended to be done by
536	536	24 the person and the person's subsidiaries; and a list of all
537	537	25 individuals who are, or who have been selected to become,
538	538	26 directors or executive officers of the person or who perform,
539	539	27 or will perform, functions appropriate to the positions. The
540	540	Page 20 1 list shall include for each individual the information
541	541	2 required by subparagraph 1.
542	542	3 "b. The source, nature, and amount of the
543	543	4 consideration used, or to be used, in effecting the merger or
544	544	5 other acquisition of control, a description of any transaction
545	545	6 wherein funds were, or are to be, obtained for any such
546	546	7 purpose, including any pledge of the insurer's stock, or the
547	547	8 stock of any of its subsidiaries or controlling affiliates,
548	548	9 and the identity of persons furnishing such consideration;
549	549	10 provided, however, that where a source of such consideration
550	550	11 is a loan made in the lender's ordinary course of business,
551	551	12 the identity of the lender shall remain confidential if the
552	552	13 person filing such statement so requests.
553	553	14 "c. Fully audited financial information as to the
554	554	15 earnings and financial condition of each acquiring party for
555	555	16 the preceding five fiscal years of each such acquiring party,
556	556	17 or for such lesser period as such acquiring party and any
557	557	18 predecessors thereof shall have been in existence, and similar
558	558	19 unaudited information as of a date not earlier than 90 days
559	559	20 prior to the filing of the statement.
560	560	21 "d. Any plans or proposals which each acquiring
561	561	22 party may have to liquidate such insurer, to sell its assets,
562	562	23 or to merge or consolidate it with any person or to make any
563	563	24 other material change in its business or corporate structure
564	564	25 or management.
565	565	26 "e. The number of shares of any security referred to
566	566	27 in subsection (a) which each acquiring party proposes to
567	567	Page 21 1 acquire, the terms of the offer, request, invitation,
568	568	2 agreement, or acquisition referred to in subsection (a), and a
569	569	3 statement as to the method by which the fairness of the
570	570	4 proposal was arrived at.
571	571	5 "f. The amount of each class of any security
572	572	6 referred to in subsection (a) which is beneficially owned or
573	573	7 concerning which there is a right to acquire beneficial
574	574	8 ownership by each acquiring party.
575	575	9 "g. A full description of any contracts,
576	576	10 arrangements, or understandings with respect to any security
577	577	11 referred to in subsection (a) in which any acquiring party is
578	578	12 involved, including, but not limited to, transfer of any of
579	579	13 the securities, joint ventures, loan or option arrangements,
580	580	14 puts or calls, guarantees of loans, guarantees against loss or
581	581	15 guarantees of profits, division of losses or profits, or the
582	582	16 giving or withholding of proxies. Such description shall
583	583	17 identify the persons with whom such contracts, arrangements,
584	584	18 or understandings have been entered.
585	585	19 "h. A description of the purchase of any security
586	586	20 referred to in subsection (a) during the 12 calendar months
587	587	21 preceding the filing of the statement by any acquiring party,
588	588	22 including the dates of purchase, names of the purchasers, and
589	589	23 consideration paid, or agreed to be paid, therefor.
590	590	24 "i. A description of any recommendations to purchase
591	591	25 any security referred to in subsection (a) made during the 12
592	592	26 calendar months preceding the filing of the statement by any
593	593	Page 22 1 acquiring party or by anyone based upon interviews or at the
594	594	2 suggestion of such acquiring party.
595	595	3 "j. Copies of all tender offers for, requests or
596	596	4 invitations for tenders of, exchange offers for and agreements
597	597	5 to acquire or exchange any securities referred to in
598	598	6 subsection (a) and, if distributed, of additional soliciting
599	599	7 material relating thereto.
600	600	8 "k. The terms of any agreement, contract, or
601	601	9 understanding made with or proposed to be made with any
602	602	10 broker-dealer as to solicitation of securities referred to in
603	603	11 subsection (a) for tender and the amount of any fees,
604	604	12 commissions, or other compensation to be paid to
605	605	13 broker-dealers with regard thereto.
606	606	14 "l. An agreement by the person required to file the
607	607	15 statement referred to in subsection (a) that it will provide
608	608	16 the annual report, specified in subdivision (1) of subsection
609	609	17 (l) of Section 27-29-4, for so long as control exists.
610	610	18 "m. An acknowledgement by the person required to
611	611	19 file the statement referred to in subsection (a) that the
612	612	20 person and all subsidiaries within its control in the
613	613	21 insurance holding company system will provide information to
614	614	22 the commissioner upon request as necessary to evaluate
615	615	23 enterprise risk to the insurer.
616	616	24 "n. Such additional information as the commissioner
617	617	25 may, by rule or regulation, prescribe as necessary or
618	618	26 appropriate for the protection of policyholders of the insurer
619	619	27 or in the public interest.
620	620	Page 23 1 "(2) If the person required to file the statement
621	621	2 referred to in subsection (a) is a partnership, limited
622	622	3 partnership, syndicate, or other group, the commissioner may
623	623	4 require that the information called for by paragraphs a.
624	624	5 through n. of subdivision (1) shall be given with respect to
625	625	6 each partner of such partnership or limited partnership, each
626	626	7 member of such syndicate or group, and each person who
627	627	8 controls such partner or member. If any such partner, member,
628	628	9 or person is a corporation or the person required to file the
629	629	10 statement referred to in subsection (a) is a corporation, the
630	630	11 commissioner may require that the information called for by
631	631	12 paragraphs a. through n. of subdivision (1) shall be given
632	632	13 with respect to such corporation, each officer and director of
633	633	14 such corporation, and each person who is, directly or
634	634	15 indirectly, the beneficial owner of more than 10 percent of
635	635	16 the outstanding voting securities of such corporation. If any
636	636	17 material change occurs in the facts set forth in the statement
637	637	18 filed with the commissioner and sent to such insurer pursuant
638	638	19 to this section, an amendment setting forth such change,
639	639	20 together with copies of all documents and other materials
640	640	21 relevant to such change, shall be filed with the commissioner
641	641	22 and sent to such insurer within two business days after the
642	642	23 person learns of such change.
643	643	24 "(c) If any offer, request, invitation, agreement,
644	644	25 or acquisition referred to in subsection (a) is proposed to be
645	645	26 made by means of a registration statement under the Securities
646	646	27 Act of 1933, or in circumstances requiring the disclosure of
647	647	Page 24 1 similar information under the Securities Exchange Act of 1934,
648	648	2 or under a state law requiring similar registration or
649	649	3 disclosure, the person required to file the statement referred
650	650	4 to in subsection (a) may utilize such documents in furnishing
651	651	5 the information called for by that statement.
652	652	6 "(d)(1) The commissioner shall approve any merger or
653	653	7 other acquisition of control referred to in subsection (a)
654	654	8 unless, after a public hearing thereon, he or she finds any of
655	655	9 the following:
656	656	10 "a. After the change of control, the domestic
657	657	11 insurer referred to in subsection (a) would not be able to
658	658	12 satisfy the requirements for the issuance of a license to
659	659	13 write the line, or lines, of insurance for which it is
660	660	14 presently licensed.
661	661	15 "b. The effect of the merger or other acquisition of
662	662	16 control would be substantially to lessen competition in
663	663	17 insurance in this state or to create a monopoly therein. In
664	664	18 applying the competitive standard in this paragraph:
665	665	19 "1. The informational requirements of subdivision
666	666	20 (1) of subsection (c) of Section 27-29-3.1 and the standards
667	667	21 of subdivision (2) of subsection (d) of Section 27-29-3.1
668	668	22 shall apply.
669	669	23 "2. The merger or other acquisition shall not be
670	670	24 disapproved if the commissioner finds that any of the
671	671	25 situations meeting the criteria provided by subdivision (3) of
672	672	26 subsection (d) of Section 27-29-3.1 exist.
673	673	Page 25 1 "3. The commissioner may condition the approval of
674	674	2 the merger or other acquisition on the removal of the basis of
675	675	3 disapproval within a specified period of time.
676	676	4 "c. The financial condition of any acquiring party
677	677	5 is such as might jeopardize the financial stability of the
678	678	6 insurer or prejudice the interest of its policyholders.
679	679	7 "d. The plans or proposals which the acquiring party
680	680	8 has to liquidate the insurer, to sell its assets, or to
681	681	9 consolidate or merge it with any person or to make any other
682	682	10 material change in its business or corporate structure or
683	683	11 management are unfair and unreasonable to policyholders of the
684	684	12 insurer and not in the public interest.
685	685	13 "e. The competence, experience, and integrity of
686	686	14 those persons who would control the operation of the insurer
687	687	15 are such that it would not be in the interest of policyholders
688	688	16 of the insurer and of the public to permit the merger or other
689	689	17 acquisition of control.
690	690	18 "f. The acquisition is likely to be hazardous or
691	691	19 prejudicial to the insurance-buying public.
692	692	20 "(2) The public hearing referred to in subdivision
693	693	21 (1) shall be held within 30 days after the statement required
694	694	22 by subsection (a) is filed, and at least 20 days' notice
695	695	23 thereof shall be given by the commissioner to the person
696	696	24 filing the statement. Not less than seven days' notice of such
697	697	25 public hearing shall be given by the person filing the
698	698	26 statement to the insurer and to such other persons as may be
699	699	27 designated by the commissioner. The commissioner shall make a
700	700	Page 26 1 determination within the 60-day period preceding the effective
701	701	2 date of the proposed transaction. At such hearing, the person
702	702	3 filing the statement, the insurer, any person to whom notice
703	703	4 of hearing was sent, and any other person whose interest may
704	704	5 be affected thereby shall have the right to present evidence,
705	705	6 examine and cross-examine witnesses and offer oral and written
706	706	7 arguments and, in connection therewith, shall be entitled to
707	707	8 conduct discovery proceedings in the same manner as is
708	708	9 presently allowed in the circuit courts of this state. All
709	709	10 discovery proceedings shall be concluded not later than three
710	710	11 days prior to the commencement of the public hearing.
711	711	12 "(3) If the proposed acquisition of control will
712	712	13 require the approval of more than one commissioner, the public
713	713	14 hearing referred to in subdivision (2) may be held on a
714	714	15 consolidated basis upon request of the person filing the
715	715	16 statement referred to in subsection (a). The person shall file
716	716	17 the statement referred to in subsection (a) with the National
717	717	18 Association of Insurance Commissioners NAIC within five days
718	718	19 of making the request for a public hearing. A commissioner may
719	719	20 opt out of a consolidated hearing, and shall provide notice to
720	720	21 the applicant of the opt-out within 10 days of the receipt of
721	721	22 the statement referred to in subsection (a). A hearing
722	722	23 conducted on a consolidated basis shall be public and shall be
723	723	24 held within the United States before the commissioners of the
724	724	25 states in which the insurers are domiciled. The commissioners
725	725	26 shall hear and receive evidence. A commissioner may attend the
726	726	27 hearing in person or by telecommunication.
727	727	Page 27 1 "(4) In connection with a change of control of a
728	728	2 domestic insurer, any determination by the commissioner that
729	729	3 the person acquiring control of the insurer shall be required
730	730	4 to maintain or restore the capital of the insurer to the level
731	731	5 required by the laws and regulations of this state shall be
732	732	6 made not later than 60 days after the date of notification of
733	733	7 the change in control submitted pursuant to subdivision (1) of
734	734	8 subsection (a).
735	735	9 "(5) The commissioner may retain any attorneys,
736	736	10 actuaries, accountants, and other experts not otherwise a part
737	737	11 of the commissioner's staff as may be reasonably necessary to
738	738	12 assist the commissioner in reviewing the proposed acquisition
739	739	13 of control, the reasonable expenses of which shall be borne by
740	740	14 the acquiring person.
741	741	15 "(e) The provisions of this section shall not apply
742	742	16 to:
743	743	17 "(1) Any transaction which is subject to the
744	744	18 provisions of Sections 27-27-45 and 27-27-46, dealing with the
745	745	19 merger or consolidation of two or more insurers.
746	746	20 "(2) Any offer, request, invitation, agreement, or
747	747	21 acquisition which the commissioner by order shall exempt
748	748	22 therefrom as either of the following:
749	749	23 "a. Not having been made or entered into for the
750	750	24 purpose and not having the effect of changing or influencing
751	751	25 the control of a domestic insurer.
752	752	26 "b. As otherwise not comprehended within the
753	753	27 purposes of this section.
754	754	Page 28 1 "(f) The following shall be violations of this
755	755	2 section:
756	756	3 "(1) The failure to file any statement, amendment,
757	757	4 or other material required to be filed pursuant to subsections
758	758	5 (a) or (b).
759	759	6 "(2) The effectuation, or any attempt to effectuate,
760	760	7 an acquisition of control of, or merger with, a domestic
761	761	8 insurer unless the commissioner has given his or her approval
762	762	9 thereto.
763	763	10 "(g) The courts of this state are hereby vested with
764	764	11 jurisdiction over every person not resident, domiciled, or
765	765	12 authorized to do business in this state who files a statement
766	766	13 with the commissioner under this section and over all actions
767	767	14 involving such person arising out of violations of this
768	768	15 section, and each such person shall be deemed to have
769	769	16 performed acts equivalent to and constituting an appointment
770	770	17 by such a person of the commissioner to be his or her true and
771	771	18 lawful attorney upon whom may be served all lawful process in
772	772	19 any action or proceeding arising out of violations of this
773	773	20 section. Copies of all such lawful process shall be served on
774	774	21 the commissioner and transmitted by registered or certified
775	775	22 mail by the commissioner to such person at his or her last
776	776	23 known address.
777	777	24 "§27-29-4.
778	778	25 "(a)(1) Every insurer which is authorized to do
779	779	26 business in this state and which is a member of an insurance
780	780	27 holding company system shall register with the commissioner,
781	781	Page 29 1 except a foreign insurer subject to registration requirements
782	782	2 and standards adopted by statute or regulation in the
783	783	3 jurisdiction of its domicile which are substantially similar
784	784	4 to those contained in this section and both of the following:
785	785	5 "a. Subdivision (1) of subsection (a) of Section
786	786	6 27-29-5, and subsections (b) and (d) of Section 27-29-5.
787	787	7 "b. Either subdivision (2) of subsection (a) of
788	788	8 Section 27-29-5 or a provision such as the following: Each
789	789	9 registered insurer shall keep current the information required
790	790	10 to be disclosed in its registration statement by reporting all
791	791	11 material changes or additions within 15 days after the end of
792	792	12 the month in which it learns of each change or addition.
793	793	13 "(2) Any insurer which is subject to registration
794	794	14 under this section shall register within 15 days after it
795	795	15 becomes subject to registration, and annually thereafter by
796	796	16 June 1 of each year for the previous calendar year, unless the
797	797	17 commissioner for good cause shown extends the time for
798	798	18 registration and, then, within such extended time. The
799	799	19 commissioner may require any authorized insurer which is a
800	800	20 member of an insurance holding company system which is not
801	801	21 subject to registration under this section to furnish a copy
802	802	22 of the registration statement, the summary specified in
803	803	23 subsection (c), or other information filed by such insurance
804	804	24 company with the insurance regulatory authority of domiciliary
805	805	25 jurisdiction.
806	806	26 "(b) Every insurer subject to registration shall
807	807	27 file a registration statement on a form prescribed by the
808	808	Page 30 1 commissioner by rule which shall contain the following current
809	809	2 information:
810	810	3 "(1) The capital structure, general financial
811	811	4 condition, ownership, and management of the insurer and any
812	812	5 person controlling the insurer.
813	813	6 "(2) The identity of every member of the insurance
814	814	7 holding company system.
815	815	8 "(3) The following agreements in force, and
816	816	9 transactions currently outstanding or which have occurred
817	817	10 during the last calendar year between such insurer and its
818	818	11 affiliates:
819	819	12 "a. Loans, other investments or purchases, sales or
820	820	13 exchanges of securities of the affiliates by the insurer or of
821	821	14 the insurer by its affiliates.
822	822	15 "b. Purchases, sales, or exchanges of assets.
823	823	16 "c. Transactions not in the ordinary course of
824	824	17 business.
825	825	18 "d. Guarantees or undertakings for the benefit of an
826	826	19 affiliate which result in an actual contingent exposure of the
827	827	20 insurer's assets to liability, other than insurance contracts
828	828	21 entered into in the ordinary course of the insurer's business.
829	829	22 "e. All management agreements and service contracts
830	830	23 and all cost-sharing arrangements.
831	831	24 "f. Reinsurance agreements.
832	832	25 "g. Dividends and other distributions to
833	833	26 shareholders.
834	834	27 "h. Consolidated tax allocation agreements.
835	835	Page 31 1 "(4) Any pledge of the insurer's stock, including
836	836	2 stock of any subsidiary or controlling affiliate, for a loan
837	837	3 made to any member of the insurance holding company system.
838	838	4 "(5) If requested by the commissioner, financial
839	839	5 statements of or within an insurance holding company system,
840	840	6 including all affiliates. Financial statements may include,
841	841	7 but are not limited to, annual audited financial statements
842	842	8 filed with the U.S. Securities and Exchange Commission
843	843	9 pursuant to the Securities Act of 1933, as amended, or the
844	844	10 Securities Exchange Act of 1934, as amended. An insurer
845	845	11 required to file financial statements pursuant to this
846	846	12 subdivision may satisfy the request by providing the
847	847	13 commissioner with the most recently filed parent corporation
848	848	14 financial statements that have been filed with the Securities
849	849	15 Exchange Commission. Financial statements of insurer's
850	850	16 affiliates required to be filed with the commissioner may be
851	851	17 filed by the insurer in the accounting standard utilized by
852	852	18 the affiliate in its usual course of business at the time of
853	853	19 the filing.
854	854	20 "(6) Other matters concerning transactions between
855	855	21 registered insurers and any affiliates as may be included,
856	856	22 from time to time, in any registration forms adopted or
857	857	23 approved by the commissioner.
858	858	24 "(7) Statements that the insurer's board of
859	859	25 directors or an appropriate committee of the board oversees
860	860	26 corporate governance and internal controls and that the
861	861	27 insurer's officers or senior management have approved,
862	862	Page 32 1 implemented, and continue to maintain and monitor corporate
863	863	2 governance and internal control procedures.
864	864	3 "(8) Any other information required by the
865	865	4 commissioner by rule.
866	866	5 "(c) All registration statements shall contain a
867	867	6 summary outlining all items in the current registration
868	868	7 statement representing changes from the prior registration
869	869	8 statement.
870	870	9 "(d) No information need be disclosed on the
871	871	10 registration statement filed pursuant to subsection (b) if
872	872	11 such information is not material for the purposes of this
873	873	12 section. Unless the commissioner by rule, regulation, or order
874	874	13 provides otherwise, sales, purchases, exchanges, loans, or
875	875	14 extensions of credit or investments involving one-half of one
876	876	15 percent or less of an insurer's admitted assets as of December
877	877	16 31, next preceding, shall not be deemed material for purposes
878	878	17 of this section. The definition of materiality provided in
879	879	18 this subsection shall not apply for purposes of the Group
880	880	19 Capital Calculation or the Liquidity Stress Test Framework.
881	881	20 "(e) Subject to subsection (b) of Section 27-29-5,
882	882	21 each registered insurer shall so report all dividends and
883	883	22 other distributions to shareholders within 15 business days
884	884	23 following the declaration thereof.
885	885	24 "(f) Any person within an insurance holding company
886	886	25 system subject to registration shall be required to provide
887	887	26 complete and accurate information to an insurer, where the
888	888	Page 33 1 information is reasonably necessary to enable the insurer to
889	889	2 comply with the provisions of this chapter.
890	890	3 "(g) The commissioner shall terminate the
891	891	4 registration of any insurer which demonstrated that it no
892	892	5 longer is a member of an insurance holding company system.
893	893	6 "(h) The commissioner may require or allow two or
894	894	7 more affiliated insurers subject to registration under this
895	895	8 section to file a consolidated registration statement.
896	896	9 "(i) The commissioner may allow an insurer which is
897	897	10 authorized to do business in this state and which is part of
898	898	11 an insurance holding company system to register on behalf of
899	899	12 any affiliated insurer which is required to register under
900	900	13 subsection (a) and to file all information and material
901	901	14 required to be filed under this section.
902	902	15 "(j) The provisions of this section shall not apply
903	903	16 to any insurer, information, or transaction if, and to the
904	904	17 extent that, the commissioner by rule, regulation, or order
905	905	18 shall exempt the same from the provisions of this section.
906	906	19 "(k) Any person may file with the commissioner a
907	907	20 disclaimer of affiliation with any authorized insurer or a
908	908	21 disclaimer may be filed by the insurer or any member of an
909	909	22 insurance holding company system. The disclaimer shall fully
910	910	23 disclose all material relationships and bases for affiliation
911	911	24 between the person and the insurer, as well as the basis for
912	912	25 disclaiming such affiliation. A disclaimer of affiliation
913	913	26 shall be deemed to have been granted unless the commissioner,
914	914	27 within 30 days following receipt of a complete disclaimer,
915	915	Page 34 1 notifies the filing party the disclaimer is disallowed. In the
916	916	2 event of disallowance, the disclaiming party may request an
917	917	3 administrative hearing, which shall be granted. The
918	918	4 disclaiming party shall be relieved of its duty to register
919	919	5 under this section if approval of the disclaimer has been
920	920	6 granted by the commissioner, or if the disclaimer is deemed to
921	921	7 have been approved.
922	922	8 "(1) Enterprise Risk Filings.
923	923	9 "(l) Enterprise Risk Report. The ultimate
924	924	10 controlling person of every insurer subject to registration
925	925	11 shall also file an annual enterprise risk report. The report
926	926	12 shall, to the best of the ultimate controlling person's
927	927	13 knowledge and belief, identify the material risks within the
928	928	14 insurance holding company system that could pose enterprise
929	929	15 risk to the insurer. The report shall be filed with the lead
930	930	16 state commissioner of the insurance holding company system as
931	931	17 determined by the procedures within the Financial Analysis
932	932	18 Handbook adopted by the National Association of Insurance
933	933	19 Commissioners NAIC.
934	934	20 "(2) Group Capital Calculation. Except as provided
935	935	21 in this subdivision, the ultimate controlling person of every
936	936	22 insurer subject to registration shall concurrently file with
937	937	23 the registration an annual group capital calculation as
938	938	24 directed by the lead state commissioner. The report shall be
939	939	25 completed in accordance with the NAIC Group Capital
940	940	26 Calculation Instructions, which may permit the lead state
941	941	27 commissioner to allow a controlling person that is not the
942	942	Page 35 1 ultimate controlling person to file the group capital
943	943	2 calculation. The report shall be filed with the lead state
944	944	3 commissioner of the insurance holding company system as
945	945	4 determined by the commissioner in accordance with the
946	946	5 procedures within the Financial Analysis Handbook adopted by
947	947	6 the NAIC. The following insurance holding company systems
948	948	7 described are exempt from filing the group capital
949	949	8 calculation:
950	950	9 "a. An insurance holding company system that has
951	951	10 only one insurer within its holding company structure, that
952	952	11 only writes business and is only licensed in its domestic
953	953	12 state, and assumes no business from any other insurer.
954	954	13 "b. An insurance holding company system that is
955	955	14 required to perform a group capital calculation specified by
956	956	15 the United States Federal Reserve Board. The lead state
957	957	16 commissioner shall request the calculation from the Federal
958	958	17 Reserve Board under the terms of information sharing
959	959	18 agreements in effect. If the Federal Reserve Board cannot
960	960	19 share the calculation with the lead state commissioner, the
961	961	20 insurance holding company system is not exempt from the group
962	962	21 capital calculation filing.
963	963	22 "c. An insurance holding company system whose
964	964	23 non-U.S. group-wide supervisor is located within a Reciprocal
965	965	24 Jurisdiction as described in Section 27-5B-8.1, as added to
966	966	25 the Code of Alabama 1975, by Act 2021-235, 2021 Regular
967	967	26 Session, which recognizes the U.S. state regulatory approach
968	968	27 to group supervision and group capital.
969	969	Page 36 1 "d. An insurance holding company system meeting both
970	970	2 of the following:
971	971	3 "1. That provides information to the lead state that
972	972	4 meets the requirements for accreditation under the NAIC
973	973	5 financial standards and accreditation program, either directly
974	974	6 or indirectly through the group-wide supervisor, who has
975	975	7 determined such information is satisfactory to allow the lead
976	976	8 state to comply with the NAIC group supervision approach, as
977	977	9 detailed in the NAIC Financial Analysis Handbook.
978	978	10 2. Whose non-U.S. group-wide supervisor that is not
979	979	11 in a Reciprocal Jurisdiction recognizes and accepts, as
980	980	12 specified by the commissioner in regulation, the group capital
981	981	13 calculation as the world-wide group capital assessment for
982	982	14 U.S. insurance groups who operate in that jurisdiction.
983	983	15 "e. Notwithstanding the provisions of paragraphs c.
984	984	16 and d., a lead state commissioner shall require the group
985	985	17 capital calculation for U.S. operations of any non-U.S. based
986	986	18 insurance holding company system when, after any necessary
987	987	19 consultation with other supervisors or officials, the lead
988	988	20 state commissioner deems it appropriate for prudential
989	989	21 oversight and solvency monitoring purposes or for ensuring the
990	990	22 competitiveness of the insurance marketplace.
991	991	23 "f. Notwithstanding the exemptions from filing the
992	992	24 group capital calculation stated in paragraphs a. through d.,
993	993	25 the lead state commissioner may exempt the ultimate
994	994	26 controlling person from filing the annual group capital
995	995	27 calculation or to accept a limited group capital filing or
996	996	Page 37 1 report in accordance with criteria as specified by the
997	997	2 commissioner in regulation.
998	998	3 "g. If the lead state commissioner determines that
999	999	4 an insurance holding company system no longer meets one or
1000	1000	5 more of the requirements for an exemption from filing the
1001	1001	6 group capital calculation under this section, the insurance
1002	1002	7 holding company system shall file the group capital
1003	1003	8 calculation at the next annual filing date, unless given an
1004	1004	9 extension by the lead state commissioner based on reasonable
1005	1005	10 grounds shown.
1006	1006	11 "(3) Liquidity Stress Test.
1007	1007	12 "a. The ultimate controlling person of every insurer
1008	1008	13 subject to registration and also scoped into the NAIC
1009	1009	14 Liquidity Stress Test Framework shall file the results of a
1010	1010	15 specific year's liquidity stress test. The filing shall be
1011	1011	16 made to the lead state insurance commissioner of the insurance
1012	1012	17 holding company system as determined by the procedures within
1013	1013	18 the Financial Analysis Handbook adopted by the NAIC.
1014	1014	19 "b. The NAIC Liquidity Stress Test Framework
1015	1015	20 includes scope criteria applicable to a specific data year.
1016	1016	21 These scope criteria are reviewed at least annually by the
1017	1017	22 Financial Stability Task Force or its successor. Any change to
1018	1018	23 the NAIC Liquidity Stress Test Framework, or to the data year
1019	1019	24 for which the scope criteria are to be measured, shall be
1020	1020	25 effective on January 1 of the year following the calendar year
1021	1021	26 when such changes are adopted. Insurers meeting at least one
1022	1022	27 threshold of the scope criteria are considered scoped into the
1023	1023	Page 38 1 NAIC Liquidity Stress Test Framework for the specified data
1024	1024	2 year, unless the lead state insurance commissioner, in
1025	1025	3 consultation with the NAIC Financial Stability Task Force or
1026	1026	4 its successor, determines the insurer should not be scoped
1027	1027	5 into the framework for that data year. Similarly, insurers
1028	1028	6 that do not trigger at least one threshold of the scope
1029	1029	7 criteria are considered scoped out of the NAIC Liquidity
1030	1030	8 Stress Test Framework for the specified data year, unless the
1031	1031	9 lead state insurance commissioner, in consultation with the
1032	1032	10 NAIC Financial Stability Task Force or its successor,
1033	1033	11 determines the insurer should be scoped into the framework for
1034	1034	12 that data year.
1035	1035	13 "c. Regulators should avoid having insurers scoped
1036	1036	14 in and out of the NAIC Liquidity Stress Test Framework on a
1037	1037	15 frequent basis. The lead state insurance commissioner, in
1038	1038	16 consultation with the Financial Stability Task Force or its
1039	1039	17 successor, shall assess this concern as part of the
1040	1040	18 determination for an insurer.
1041	1041	19 "d. The performance of, and filing of the results
1042	1042	20 from, a specific year's liquidity stress test shall comply
1043	1043	21 with the NAIC Liquidity Stress Test Framework's instructions
1044	1044	22 and reporting templates for that year and any lead state
1045	1045	23 insurance commissioner determinations, in conjunction with the
1046	1046	24 Financial Stability Task Force or its successor, provided
1047	1047	25 within the Framework.
1048	1048	26 "(m) The failure to file a registration statement or
1049	1049	27 any summary of the registration statement or enterprise risk
1050	1050	Page 39 1 filing required by this section within the time specified for
1051	1051	2 filing shall be a violation of this section.
1052	1052	3 "§27-29-7.
1053	1053	4 "(a)(1) All documents, materials, or other
1054	1054	5 information, and copies thereof, in the possession or control
1055	1055	6 of the department that are obtained by or disclosed to the
1056	1056	7 commissioner or any other person in the course of an
1057	1057	8 examination or investigation made pursuant to Section 27-29-6
1058	1058	9 and all information reported pursuant to paragraphs l. and m.
1059	1059	10 of subdivision (l) of subsection (b) of Section 27-29-3,
1060	1060	11 Section 27-29-4, Section 27-29-5, and Section 27-29-6.2 are
1061	1061	12 recognized by this state as being proprietary and containing
1062	1062	13 trade secrets, and shall be confidential by law and
1063	1063	14 privileged, shall not be subject to any open records, freedom
1064	1064	15 of information, sunshine or other public record disclosure
1065	1065	16 laws, and shall not be subject to subpoena. The commissioner
1066	1066	17 may use the documents, materials, and other information in the
1067	1067	18 furtherance of any regulatory or legal action in the course of
1068	1068	19 the commissioner's official duties. The documents, materials,
1069	1069	20 and other information shall not be made public by the
1070	1070	21 commissioner or any other person without the prior written
1071	1071	22 consent of the insurer to which it pertains unless the
1072	1072	23 commissioner determines that the interests of policyholders,
1073	1073	24 shareholders, or the public will be served by the publication
1074	1074	25 thereof, in which event the commissioner may publish all, or
1075	1075	26 any part thereof, in such manner as the commissioner may deem
1076	1076	27 appropriate. Prior to making this determination, the
1077	1077	Page 40 1 commissioner shall give the insurer and its affiliates who
1078	1078	2 would be affected thereby no less than 10 days' written notice
1079	1079	3 of the opportunity to request a hearing on the matter.
1080	1080	4 "(2) For purposes of the information reported and
1081	1081	5 provided to the commissioner pursuant to subdivision (2) of
1082	1082	6 subsection (l) of Section 27-29-4, the commissioner shall
1083	1083	7 maintain the confidentiality of the group capital calculation
1084	1084	8 and group capital ratio produced within the calculation and
1085	1085	9 any group capital information received from an insurance
1086	1086	10 holding company supervised by the Federal Reserve Board or any
1087	1087	11 U.S. group-wide supervisor.
1088	1088	12 "(3) For purposes of the information reported and
1089	1089	13 provided to the commissioner pursuant to subdivision (3) of
1090	1090	14 subsection (l) of Section 27-29-4, the commissioner shall
1091	1091	15 maintain the confidentiality of the liquidity stress test
1092	1092	16 results and supporting disclosures and any liquidity stress
1093	1093	17 test information received from an insurance holding company
1094	1094	18 supervised by the Federal Reserve Board and any non-U.S.
1095	1095	19 group-wide supervisors.
1096	1096	20 "(b) Neither the commissioner nor any person who
1097	1097	21 received documents, materials, or other information while
1098	1098	22 acting under the authority of the commissioner or with whom
1099	1099	23 such documents, materials, or other information are shared
1100	1100	24 pursuant to this chapter shall be permitted or required to
1101	1101	25 testify in any private civil action concerning any
1102	1102	26 confidential documents, materials, or information subject to
1103	1103	27 subsection (a).
1104	1104	Page 41 1 "(c) In order to assist in the performance of the
1105	1105	2 commissioner's duties, the commissioner:
1106	1106	3 "(1) May share documents, materials, or other
1107	1107	4 information, including the confidential and privileged
1108	1108	5 documents, materials, or information subject to subsection
1109	1109	6 (a), including proprietary and trade secret documents and
1110	1110	7 materials, with other state, federal, and international
1111	1111	8 regulatory agencies, with the National Association of
1112	1112	9 Insurance Commissioners NAIC, with any third-party consultants
1113	1113	10 designated by the commissioner, and its affiliates and
1114	1114	11 subsidiaries, and with state, federal, and international law
1115	1115	12 enforcement authorities, including members of any supervisory
1116	1116	13 college described in Section 27-29-6.1, provided that the
1117	1117	14 recipient agrees in writing to maintain the confidentiality
1118	1118	15 and privileged status of the document, material, or other
1119	1119	16 information, and has verified in writing the legal authority
1120	1120	17 to maintain confidentiality.
1121	1121	18 "(2) Notwithstanding subdivision (1) above, may
1122	1122	19 share confidential and privileged documents, material, or
1123	1123	20 information reported pursuant to subsection (l) of Section
1124	1124	21 27-29-4 only with commissioners of states having statutes or
1125	1125	22 regulations substantially similar to subsection (a) and who
1126	1126	23 have agreed in writing not to disclose such information.
1127	1127	24 "(3) May receive documents, materials, or
1128	1128	25 information, including otherwise confidential and privileged
1129	1129	26 documents, materials, or information, including proprietary
1130	1130	27 and trade secret information from the National Association of
1131	1131	Page 42 1 Insurance Commissioners NAIC and its affiliates and
1132	1132	2 subsidiaries and from regulatory and law enforcement officials
1133	1133	3 of other foreign or domestic jurisdictions, and shall maintain
1134	1134	4 as confidential or privileged any document, material, or
1135	1135	5 information received with notice or the understanding that it
1136	1136	6 is confidential or privileged under the laws of the
1137	1137	7 jurisdiction that is the source of the document, material, or
1138	1138	8 information.
1139	1139	9 "(4) Shall enter into written agreements with the
1140	1140	10 National Association of Insurance Commissioners NAIC and any
1141	1141	11 third-party consultant designated by the commissioner
1142	1142	12 governing sharing and use of information provided pursuant to
1143	1143	13 this chapter consistent with this subsection that shall:
1144	1144	14 "a. Specify procedures and protocols regarding the
1145	1145	15 confidentiality and security of information shared with the
1146	1146	16 National Association of Insurance Commissioners and its
1147	1147	17 affiliates and subsidiaries NAIC or a third-party consultant
1148	1148	18 designated by the commissioner pursuant to this chapter,
1149	1149	19 including procedures and protocols for sharing by the National
1150	1150	20 Association of Insurance Commissioners NAIC with other state,
1151	1151	21 federal, or international regulators. The agreement shall
1152	1152	22 provide that the recipient agrees in writing to maintain the
1153	1153	23 confidentiality and privileged status of the documents,
1154	1154	24 materials, or other information and has verified in writing
1155	1155	25 the legal authority to maintain the confidentiality.
1156	1156	26 "b. Specify that ownership of information shared
1157	1157	27 with the National Association of Insurance Commissioners NAIC
1158	1158	Page 43 1 or a third-party consultant and its affiliates and
1159	1159	2 subsidiaries pursuant to this chapter remains with the
1160	1160	3 commissioner and the use of the information by the National
1161	1161	4 Association of Insurance Commissioners NAIC or a third-party
1162	1162	5 consultant as designated by the commissioner is subject to the
1163	1163	6 direction of the commissioner.
1164	1164	7 "c. Require at least 10 days' notice to be given to
1165	1165	8 an insurer whose confidential information in the possession of
1166	1166	9 the National Association of Insurance Commissioners NAIC or a
1167	1167	10 third-party consultant designated by the commissioner pursuant
1168	1168	11 to this chapter is subject to a request or subpoena to the
1169	1169	12 National Association of Insurance Commissioners NAIC or a
1170	1170	13 third-party consultant designated by the commissioner for
1171	1171	14 disclosure or production.
1172	1172	15 "d. Require the National Association of Insurance
1173	1173	16 Commissioners and its affiliates and subsidiaries NAIC or a
1174	1174	17 third-party consultant designated by the commissioner to
1175	1175	18 consent to intervention by an insurer in any judicial or
1176	1176	19 administrative action in which the National Association of
1177	1177	20 Insurance Commissioners and its affiliates and subsidiaries
1178	1178	21 NAIC or a third-party consultant designated by the
1179	1179	22 commissioner may be required to disclose confidential
1180	1180	23 information about the insurer shared with the National
1181	1181	24 Association of Insurance Commissioners and its affiliates and
1182	1182	25 subsidiaries NAIC or a third-party consultant designated by
1183	1183	26 the commissioner pursuant to this chapter.
1184	1184	Page 44 1 "e. Excluding documents, materials, or other
1185	1185	2 information reported pursuant to subdivision (3) of subsection
1186	1186	3 (l) of Section 27-29-4, prohibit the NAIC or a third-party
1187	1187	4 consultant designated by the commissioner from storing the
1188	1188	5 information shared pursuant to this chapter in a permanent
1189	1189	6 database after the underlying analysis is completed.
1190	1190	7 "f. For documents, materials, or other information
1191	1191	8 reported pursuant to subdivision (3) of subsection (1) of
1192	1192	9 Section 27-29-4, in the case of an agreement involving a
1193	1193	10 third-party consultant, provide for notification of the
1194	1194	11 identity of the consultant to the applicable insurers.
1195	1195	12 "(d) The sharing of information by the commissioner
1196	1196	13 pursuant to this chapter shall not constitute a delegation of
1197	1197	14 regulatory authority or rulemaking, and the commissioner is
1198	1198	15 solely responsible for the administration, execution, and
1199	1199	16 enforcement of this chapter.
1200	1200	17 "(e) No waiver of any applicable privilege or claim
1201	1201	18 of confidentiality in the documents, materials, or information
1202	1202	19 shall occur as a result of disclosure to the commissioner
1203	1203	20 under this section or as a result of sharing as authorized in
1204	1204	21 subsection (c).
1205	1205	22 "(f) Documents, materials, or other information in
1206	1206	23 the possession or control of the National Association of
1207	1207	24 Insurance Commissioners NAIC or a third-party consultant
1208	1208	25 designated by the commissioner pursuant to this chapter shall
1209	1209	26 be confidential by law and privileged, shall not be subject to
1210	1210	27 open records, freedom of information, sunshine or other public
1211	1211	Page 45 1 records disclosure laws, shall not be subject to subpoena, and
1212	1212	2 shall not be subject to discovery or admissible in evidence in
1213	1213	3 any private civil action.
1214	1214	4 "(g) The group capital calculation and resulting
1215	1215	5 group capital ratio required under subdivision (2) of
1216	1216	6 subsection (1) of Section 27-29-4 and the liquidity stress
1217	1217	7 test along with its results and supporting disclosures
1218	1218	8 required under subdivision (3) of subsection (1) of Section
1219	1219	9 27-29-4 are regulatory tools for assessing group risks and
1220	1220	10 capital adequacy and group liquidity risks, respectively, and
1221	1221	11 are not intended as a means to rank insurers or insurance
1222	1222	12 holding company systems generally. Therefore, except as
1223	1223	13 otherwise may be required under the provisions of this
1224	1224	14 chapter, the making, publishing, disseminating, circulating,
1225	1225	15 or placing before the public, or causing directly or
1226	1226	16 indirectly to be made, published, disseminated, circulated, or
1227	1227	17 placed before the public in a newspaper, magazine, or other
1228	1228	18 publication, or in the form of a notice, circular, pamphlet,
1229	1229	19 letter, or poster, or over any radio or television station, or
1230	1230	20 any electronic means of communication available to the public,
1231	1231	21 or in any other way as an advertisement, announcement, or
1232	1232	22 statement containing a representation or statement with regard
1233	1233	23 to the group capital calculation, group capital ratio, the
1234	1234	24 liquidity stress test result, or supporting disclosures for
1235	1235	25 the liquidity stress test of any insurer or any insurer group,
1236	1236	26 or of any component derived in the calculation by any insurer,
1237	1237	27 broker, or other person engaged in any manner in the insurance
1238	1238	Page 46 1 business would be misleading and is therefore prohibited;
1239	1239	2 provided, however, that if any materially false statement with
1240	1240	3 respect to the group capital calculation, resulting group
1241	1241	4 capital ratio, an inappropriate comparison of any amount to an
1242	1242	5 insurer's or insurance group's group capital calculation or
1243	1243	6 resulting group capital ratio, liquidity stress test result,
1244	1244	7 supporting disclosures for the liquidity stress test, or an
1245	1245	8 inappropriate comparison of any amount to an insurer's or
1246	1246	9 insurance group's liquidity stress test result or supporting
1247	1247	10 disclosures is published in any written publication and the
1248	1248	11 insurer is able to demonstrate to the commissioner with
1249	1249	12 substantial proof the falsity of such statement or the
1250	1250	13 inappropriateness, as the case may be, then the insurer may
1251	1251	14 publish announcements in a written publication if the sole
1252	1252	15 purpose of the announcement is to rebut the materially false
1253	1253	16 statement.
1254	1254	17 Section 3. Section 27-36A-20 of the Code of Alabama
1255	1255	18 1975, is amended to read as follows:
1256	1256	19 "§27-36A-20.
1257	1257	20 "(a) A company calculating reserves under this
1258	1258	21 section shall calculate reserves for ordinary life insurance,
1259	1259	22 accident and health insurance contracts, credit life
1260	1260	23 contracts, group life contracts, annuities, or deposit-type
1261	1261	24 contracts in this state as if the policies were issued before
1262	1262	25 the operative date of the valuation manual Valuation Manual.
1263	1263	26 For policies issued on or after the operative date of the
1264	1264	27 valuation manual Valuation Manual, any mortality and interest
1265	1265	Page 47 1 rates actuarial assumptions defined by the valuation manual
1266	1266	2 Valuation Manual for net premium reserves shall be used. A
1267	1267	3 company calculating reserves under this section shall comply
1268	1268	4 with Section 27-36A-4(a) instead of Section 27-36A-4(b) and
1269	1269	5 meet all, if it meets at least one of the following
1270	1270	6 conditions: set forth in subdivisions (1) or (2), may file a
1271	1271	7 statement of exemption for individual life insurance policies
1272	1272	8 and certificates, except for those policies identified in
1273	1273	9 subsection (c) issued directly or assumed during the current
1274	1274	10 calendar year that would otherwise be subject to Chapter 20 of
1275	1275	11 the Valuation Manual, a statement of exemption is not
1276	1276	12 required.
1277	1277	13 "(1) The company has less than three hundred million
1278	1278	14 dollars ($300,000,000) of ordinary life exemption premium.
1279	1279	15 and, (2) If if the company is a member of a group of that
1280	1280	16 includes other life insurers insurance companies, the group
1281	1281	17 has combined ordinary life exemption premium of less than six
1282	1282	18 hundred million dollars ($600,000,000).
1283	1283	19 "(3) (2) A universal life policy with a secondary
1284	1284	20 guarantee issued after the operative date of the valuation
1285	1285	21 manual meets the definition of a non-material secondary
1286	1286	22 guarantee universal life product as defined in the valuation
1287	1287	23 manual. The only new policies that would otherwise be subject
1288	1288	24 to Chapter 20 of the Valuation Manual being issued or assumed
1289	1289	25 by the company are due to election of policy benefits or
1290	1290	26 features from existing policies valued under Appendix A and
1291	1291	27 Appendix C of the Valuation Manual and the company was
1292	1292	Page 48 1 exempted from, or otherwise not subject to, the requirements
1293	1293	2 of Chapter 20 of the Valuation Manual in the policy year.
1294	1294	3 "(b) The exemption premium is determined under the
1295	1295	4 Valuation Manual as follows:
1296	1296	5 "(1) The amount reported in the prior calendar year
1297	1297	6 life/health annual statement, Exhibit 1, Part 1, Column 3
1298	1298	7 (Ordinary Life Insurance), line 20.1; plus
1299	1299	8 "(2) The portion of the amount in the prior calendar
1300	1300	9 year life/health annual statement, Exhibit 1, Part 1, Column 3
1301	1301	10 (Ordinary Life Insurance), line 20.2 assumed from unaffiliated
1302	1302	11 companies; minus
1303	1303	12 "(3) The amount included in either (1) or (2) that
1304	1304	13 is associated with guaranteed issue insurance policies and/or
1305	1305	14 preneed life insurance policies; minus
1306	1306	15 "(4) The amount included in either a. or b. that
1307	1307	16 represents transfers of reserves in force as of the effective
1308	1308	17 date of a reinsurance assumed transaction; plus
1309	1309	18 "(5) The amount of premium for individual life
1310	1310	19 certificates issued under a group life certificate which meets
1311	1311	20 the conditions defined in Chapter 20 of the Valuation Manual
1312	1312	21 and that are not included in either (1) or (2).
1313	1313	22 "(c) The following policies are excluded from the
1314	1314	23 Life Principal Based Reserving (PBR) Exemption:
1315	1315	24 "(1) Universal Life with Secondary Guarantee (ULSG)
1316	1316	25 policies.
1317	1317	26 "(2) Policies other than ULSG policies that contain
1318	1318	27 a rider with a secondary guarantee, in which the secondary
1319	1319	Page 49 1 guarantee does not meet the Valuation Manual definition of a
1320	1320	2 nonmaterial secondary guarantee.
1321	1321	3 "(b) (d) Each exemption or lack of exemption
1322	1322	4 pursuant to this section applies to policies issued or assumed
1323	1323	5 in the current year and to all future valuation dates for
1324	1324	6 those policies.
1325	1325	7 "(c) For purposes of subdivisions (a)(1) and (a)(2),
1326	1326	8 ordinary life premium is measured as direct premium plus
1327	1327	9 reinsurance assumed from an unaffiliated company, as reported
1328	1328	10 in the prior calendar year annual statement.
1329	1329	11 "(d) (e) An Alabama-domiciled company intending to
1330	1330	12 calculate reserves as described in this section must file a
1331	1331	13 statement with the commissioner prior to July 1 of each year
1332	1332	14 certifying that these at least one of the conditions of
1333	1333	15 subdivisions (1) or (2) of subsection (a) is are met for the
1334	1334	16 current calendar year based on premiums and other values from
1335	1335	17 the prior financial statements. The commissioner may reject
1336	1336	18 the statement prior to September 1 if the commissioner
1337	1337	19 specifically identifies risk in the affected policies that
1338	1338	20 requires a principle-based valuation and require the company
1339	1339	21 to comply with the valuation manual Valuation Manual
1340	1340	22 requirements.
1341	1341	23 "(f) If a filed statement of exemption is not
1342	1342	24 rejected by the commissioner, the filing of subsequent
1343	1343	25 statements of exemption is not required if the company
1344	1344	26 continues to qualify for the exemption. Ongoing statements of
1345	1345	Page 50 1 exemption for each new calendar year shall not be deemed to be
1346	1346	2 rejected, unless both of the following apply:
1347	1347	3 "(1) The company does not meet at least one
1348	1348	4 condition in subdivisions (1) or (2) of subsection (a).
1349	1349	5 "(2) The commissioner notifies the company prior to
1350	1350	6 September 1 that the statement of exemption is rejected.
1351	1351	7 "(g) If an ongoing statement of exemption is
1352	1352	8 rejected, the statement of exemption for the current calendar
1353	1353	9 year is deemed rejected and a new statement of exemption must
1354	1354	10 be filed and not rejected in order for the company to exempt
1355	1355	11 additional policies.
1356	1356	12 "(h) The minimum reserve requirements for life
1357	1357	13 insurance, accident and health insurance contracts, credit
1358	1358	14 life contracts, group life contracts, annuities, or
1359	1359	15 deposit-type contracts issued on or after the operative date
1360	1360	16 of the Valuation Manual for a company calculating reserves
1361	1361	17 under this section are those pursuant to applicable
1362	1362	18 requirements in Appendix A and Appendix C of the Valuation
1363	1363	19 Manual using the mortality as defined in Section 3.C.1 of
1364	1364	20 Chapter 20 and Appendix M of the Valuation Manual.
1365	1365	21 "(e) (i) A company that reports reserves using the
1366	1366	22 alternative valuation shall also be exempt from the
1367	1367	23 principle-based reserves corporate governance requirements,
1368	1368	24 certification of effectiveness of principle-based reserves
1369	1369	25 internal controls, and a principle-based reserves valuation
1370	1370	26 report."
1371	1371	Page 51 1 Section 4. This act shall become effective
1372	1372	2 immediately following its passage and approval by the
1373	1373	3 Governor, or its otherwise becoming law.
1374	1374	Page 52