HB 2006
Initials PRB Page 1 Transmitted
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-sixth Legislature
First Regular Session
House: COM DP 10-0-0-0 | 3
rd
Read 60-0-0-0
Senate: FIN DP 6-0-1-0 | 3
rd
Read 30-0-0-0
HB 2006: insurance; liquidity; financial assessment
Sponsor: Representative Livingston, LD 28
Transmitted to the Governor
Overview
Conforms Insurance Holding Company System statutes to the National Association of Insurance
Commissioners (NAIC) Insurance Holding Company System Regulatory Act.
History
The NAIC is the U.S. standard-setting and regulatory support organization governed by the chief
insurance regulators from each of the 50 states. The NAIC provides expertise, data and analysis
for insurance commissioners to effectively regulate the industry and protect consumers.
According to the NAIC, The Holding Company Act regulates certain activities of entities that are
affiliated with insurance companies that would not otherwise be subject to such regulation as well
as the acquisition of control of an insurer. The Act contains certain reporting requirements,
including the requirement that insurance company subsidiaries file information relating to capital
structure, ownership, financial condition and general business operations.
An insurance holding company system is statutorily defined as two or more affiliated persons, one
or more of whom is an insurer. An insurance holding company system may consist of one
company that directly or indirectly controls one or more other companies (A.R.S. § 20-481).
Provisions
1. Includes additional provisions applicable to enterprise risk filings, including:
a) requiring the ultimate controlling person to file an annual group capital calculation report
and outlines the types of insurance holding companies that are exempt from filing the
report; and
b) requiring certain ultimate controlling persons to file the results of a liquidity stress test and
provides the provisions applicable to the liquidity stress test framework. (Sec. 3)
2. Excludes the group capital calculation and the liquidity stress test framework from the
exemption for nonmaterial items relating to a registration statement. (Sec. 4)
3. Prescribes additional standards relating to certain insurance holding company transactions,
including:
a) permitting the Director of DIFI (Director) to require an insurer that is deemed to be in a
hazardous financial condition to submit a deposit or a bond to protect the insurer;
b) asserting that all records and data of the insurer that are held by an affiliate are the
property of the insurer;
c) allowing, at the request of the insurer, the receiver to obtain specified records and access
to certain operating systems on which the data is maintained; and
d) specifying the insurer's premiums or other funds that are collected or held by an affiliate
are the exclusive property of the insurer. (Sec. 5)
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note HB 2006
Initials PRB Page 2 Transmitted
4. Subjects certain affiliates to the jurisdiction of any supervision, seizure, conservatorship or
receivership proceedings against the insurer and to the authority of any appointed supervisor,
conservator, rehabilitator or liquidator enforcing or overseeing the affiliate's contractual
obligations. (Sec. 5)
5. Allows the Director to require that an agreement or contract for certain services specify that
the insurer consents to the jurisdiction of any supervision, seizure, conservatorship or
receivership proceedings. (Sec. 5)
6. Adds that all insurance holding companies documents and materials that are in the
possession or control of DIFI are considered proprietary and contain trade secrets. (Sec. 6)
7. Directs the Director to maintain the confidentiality of:
a) the group capital calculation, the group capital ratio and any group capital calculation
information received from a supervised insurance holding company system; and
b) the liquidity stress test results and supporting disclosures and any liquidity stress test
framework information received from a supervised insurance holding company system.
(Sec. 6)
8. Permits the Director to share and receive specified documents, materials and information, and
enter into agreements with, third-party consultants designated by the Director rather than
NAIC's affiliates and subsidiaries. (Sec. 6)
9. Allows the Director to prohibit NAIC or a third-party consultant from storing shared information
in a permanent database after an underly analysis is completed. (Sec. 6)
10. Allows the Director to provide notification of the identity of any third-party consultant to all
applicable insurers. (Sec. 6)
11. Clarifies documents, materials or other information in the possession or control of a third-party
consultant designated by the Director, rather than NAIC's affiliates and subsidiaries, are
confidential and privileged. (Sec. 6)
12. Asserts the group capital calculation and the liquidity stress test are regulatory tools for
assessing group risks and capital adequacy and are not a means to rank insurers or insurance
holding companies. (Sec. 6)
13. Specifies publishing or disseminating a statement regarding a group capital calculation or
liquidity stress test results in a newspaper or other publication or over radio or any electronic
means of communication would be misleading and is prohibited. (Sec. 6)
14. Stipulates an insurer may publish written announcements with the sole purpose of rebutting a
materially false statement. (Sec. 6)
15. Defines pertinent terms. (Sec. 1)
16. Makes technical changes. (Sec. 2, 3, 4, 5)