LCO No. 2192 1 of 29
General Assembly Raised Bill No. 5382
February Session, 2022
LCO No. 2192
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT CONCERNING THE INSURANCE HOLDING COMPANY ACT.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Section 38a-129 of the general statutes is repealed and the 1
following is substituted in lieu thereof (Effective July 1, 2022): 2
(a) It shall be the purpose of sections 38a-129 to 38a-140, inclusive, to 3
safeguard the financial security of Connecticut domestic insurance 4
companies by empowering the Insurance Commissioner to supervise 5
the activities of insurance companies doing business within this state 6
which are affiliated with an insurance holding company system, to 7
review the acquisition of control over the management of domestic 8
insurance companies, however effectuated, and to provide standards 9
for such supervision and review. 10
(b) As used in sections 38a-129 to 38a-140, inclusive, the following 11
terms shall have the respective meanings hereinafter set forth, unless the 12
context shall otherwise require: 13
(1) "Affiliate" or "affiliated" has the same meaning as provided in 14
section 38a-1; 15 Raised Bill No. 5382
LCO No. 2192 2 of 29
(2) "Commissioner" means the Insurance Commissioner and any 16
assistant to the Insurance Commissioner designated and authorized by 17
the commissioner while acting under such designation; 18
(3) "Control", "controlled by" or "under common control with" has the 19
same meaning as provided in section 38a-1; 20
(4) "Enterprise risk" means any activity, circumstance, event or series 21
of events involving one or more affiliates of an insurer that, if not 22
remedied promptly, is likely to have a material adverse effect upon the 23
financial condition or liquidity of the insurer or the insurer's insurance 24
holding company system as a whole, including, but not limited to, any 25
activity, circumstance, event or series of events that would cause an 26
insurer's risk-based capital to fall below minimum threshold levels, as 27
described in subsection (d) of section 38a-72 or, for a health care center, 28
in subdivision (2) of subsection (a) of section 38a-193, or would cause 29
the insurer to be in a hazardous financial condition; 30
(5) "Group capital calculation instructions" means the group capital 31
calculation instructions as adopted by the NAIC and as amended by the 32
NAIC from time to time in accordance with the procedures adopted by 33
the NAIC; 34
[(5)] (6) "Insurance holding company system" means two or more 35
affiliated persons, one or more of which is an insurance company; 36
[(6)] (7) "Insurance company" or "insurer" has the same meaning as 37
provided in section 38a-1, except that it does not include agencies, 38
authorities or instrumentalities of the United States, its possessions and 39
territories, the Commonwealth of Puerto Rico, the District of Columbia, 40
or a state or political subdivision of a state; 41
[(7)] (8) "NAIC" means the National Association of Insurance 42
Commissioners; 43
(9) "NAIC liquidity stress test framework" means the NAIC 44
publication which includes a history of the NAIC's development of 45 Raised Bill No. 5382
LCO No. 2192 3 of 29
regulatory liquidity stress testing, the scope criteria applicable for a 46
specific data year, and the liquidity stress test instructions and reporting 47
templates for a specific data year, such scope criteria, instructions, and 48
reporting template being as adopted by the NAIC and as amended by 49
the NAIC from time to time in accordance with the procedures adopted 50
by the NAIC; 51
[(8)] (10) "Person" has the same meaning as provided in section 38a-52
1, or any combination of persons so defined acting in concert; 53
(11) "Scope criteria" means the designated exposure bases along with 54
minimum magnitudes thereof for the specified data year used to 55
establish a preliminary list of insurers considered scoped into the NAIC 56
liquidity stress test framework for that data year; 57
[(9)] (12) A "securityholder" of a specified person means one who 58
owns any security of such person, including common stock, preferred 59
stock, debt obligations and any other security convertible into or 60
evidencing the right to acquire any of the foregoing; 61
[(10)] (13) "Subsidiary" has the same meaning as provided in section 62
38a-1; 63
[(11)] (14) "Voting security" includes any security convertible into or 64
evidencing a right to acquire a voting security. 65
(c) The provisions of sections 38a-129 to 38a-140, inclusive, shall 66
apply to captive insurance companies, as defined in section 38a-91aa, as 67
specified in section 38a-91oo. 68
Sec. 2. Subsections (g) to (o), inclusive, of section 38a-135 of the 69
general statutes are repealed and the following is substituted in lieu 70
thereof (Effective July 1, 2022): 71
(g) (1) Except as provided in subdivision (2) of this subsection, the 72
ultimate controlling person of every insurer subject to registration shall 73
concurrently file with the registration an annual group capital 74
calculation as directed by the lead state commissioner of the insurance 75 Raised Bill No. 5382
LCO No. 2192 4 of 29
holding company system. The report shall be completed in accordance 76
with the NAIC group capital calculation instructions, which may permit 77
the lead state commissioner to allow a controlling person that is not the 78
ultimate controlling person to file the group capital calculation. The 79
report shall be filed with the lead state commissioner of the insurance 80
holding company system as determined by the lead state commissioner 81
in accordance with the procedures within the Financial Analysis 82
Handbook adopted by the NAIC. 83
(2) An insurance holding company system shall be exempt from filing 84
the group capital calculation if it is: 85
(A) An insurance holding company system that has only one insurer 86
within its holding company structure, that only writes business and is 87
only licensed in its domestic state and assumes no business from any 88
other insurer; 89
(B) An insurance holding company system that is required to perform 90
a group capital calculation specified by the United States Federal 91
Reserve Board. The lead state commissioner shall request such group 92
capital calculation from the United States Federal Reserve Board under 93
the terms of information sharing agreements in effect. If the United 94
States Federal Reserve Board cannot share the calculation with the lead 95
state commissioner, the insurance holding company system shall not be 96
exempt from the group capital calculation filing; 97
(C) An insurance holding company system whose non-United States 98
group-wide supervisor is located within a reciprocal jurisdiction as 99
described in section 38a-85 that recognizes the United States regulatory 100
approach to group supervision and group capital; or 101
(D) An insurance holding company system: 102
(i) That provides information to the lead state commissioner that 103
meets the requirements for accreditation under the NAIC financial 104
standards and accreditation program, either directly or indirectly 105
through the group-wide supervisor, who has determined such 106 Raised Bill No. 5382
LCO No. 2192 5 of 29
information is satisfactory to allow the lead state commissioner to 107
comply with the NAIC group supervision approach, as detailed in the 108
NAIC Financial Analysis Handbook; and 109
(ii) Whose non-United States group-wide supervisor that is not in a 110
reciprocal jurisdiction recognizes and accepts, as specified by the 111
commissioner in regulations adopted in accordance with the provisions 112
of chapter 54, the group capital calculation as the world-wide group 113
capital assessment for United States insurance groups who operate in 114
that jurisdiction. 115
(3) Notwithstanding subparagraphs (C) and (D) of subdivision (2) of 116
this subsection, a lead state commissioner shall require the group capital 117
calculation for the United States operations of any non-United States 118
based insurance holding company system where, after any necessary 119
consultation with other supervisors or officials, it is determined 120
appropriate by the lead state commissioner for prudential oversight and 121
solvency monitoring purposes or for ensuring competitiveness of the 122
insurance marketplace. 123
(4) Notwithstanding subparagraphs (A) and (D) of subdivision (2) of 124
this subsection, the lead state commissioner shall have the discretion to 125
exempt the ultimate controlling person from filing the annual group 126
capital calculation or to accept a limited group capital filing or report in 127
accordance with criteria as specified by the commissioner in regulations 128
adopted in accordance with the provisions of chapter 54. 129
(5) If the lead state commissioner determines that an insurance 130
holding company system no longer meets one or more of the 131
requirements for an exemption for filing the group capital calculation 132
under subdivision (2) of this subsection, the insurance holding company 133
system shall file the group capital calculation at the next annual filing 134
date unless given an extension by the lead state commissioner based on 135
reasonable grounds shown. 136
(6) The information reported and provided to the lead state 137
commissioner by an insurance holding company supervised by the 138 Raised Bill No. 5382
LCO No. 2192 6 of 29
United States Federal Reserve Board or any United States group-wide 139
supervisor pursuant to this subsection, shall: 140
(A) Be confidential by law and privileged; 141
(B) Not be subject to disclosure under section 1-210; 142
(C) Not be subject to subpoena; and 143
(D) Not be subject to discovery or admissible in any civil action. 144
(7) The group capital calculation and resulting group capital ratio 145
required pursuant to this subsection are regulatory tools for assessing 146
group risks and capital adequacy and are not intended as a means to 147
rank insurers or insurance holding company systems generally. 148
(h) The ultimate controlling person of every insurer subject to 149
registration and also scoped into the NAIC liquidity stress test 150
framework shall file the results of a specific year's liquidity stress test to 151
the lead state insurance commissioner of the insurance holding 152
company system as determined by procedures within the Financial 153
Analysis Handbook adopted by the NAIC. 154
(1) The NAIC liquidity stress test framework includes scope criteria 155
applicable to a specific data year. These scope criteria are reviewed at 156
least annually by the NAIC Financial Stability Task Force or its 157
successor. Any change to the NAIC liquidity stress test framework or to 158
the data year for which the scope criteria are to be measured shall be 159
effective on January first of the year following the calendar year when 160
such changes are adopted. Insurers meeting at least one threshold of the 161
scope criteria shall be considered scoped into the NAIC liquidity stress 162
test framework for the specified data year unless the lead state 163
commissioner, in consultation with the NAIC Financial Stability Task 164
Force or its successor, determines the insurer should not be scoped into 165
the NAIC liquidity stress test framework for that data year. Insurers that 166
do not trigger at least one threshold of the scope criteria shall be 167
considered scoped out of the NAIC liquidity stress test framework for 168 Raised Bill No. 5382
LCO No. 2192 7 of 29
the specified data year, unless the lead state insurance commissioner, in 169
consultation with the NAIC Financial Stability Task Force or its 170
successor, determines the insurer should be scoped into the NAIC 171
liquidity stress test framework for that data year. 172
(2) The performance of, and filing of the results from, a specific year's 173
liquidity stress test shall comply with the NAIC liquidity stress test 174
framework's instructions and reporting templates for that year and any 175
lead state insurance commissioner determinations, in conjunction with 176
the NAIC Financial Stability Task Force or its successor, provided 177
within the NAIC liquidity stress test framework. 178
(3) The information reported and provided to the lead state 179
commissioner by an insurance holding company supervised by the 180
United States Federal Reserve Board and non-United States group-wide 181
supervisor pursuant to this subsection, shall: 182
(A) Be confidential by law and privileged; 183
(B) Not be subject to disclosure under section 1-210; 184
(C) Not be subject to subpoena; and 185
(D) Not be subject to discovery or admissible in any civil action. 186
(4) The liquidity stress test along with its results and supporting 187
disclosures required pursuant to this subsection are regulatory tools for 188
assessing group liquidity risks and are not intended as a means to rank 189
insurers or insurance holding company systems generally. 190
[(g)] (i) The commissioner shall terminate the registration of any 191
insurance company that demonstrates that it no longer is a member of 192
an insurance holding company system. 193
[(h)] (j) The commissioner may require or allow two or more affiliated 194
insurance companies subject to registration hereunder to file a 195
consolidated registration statement. 196 Raised Bill No. 5382
LCO No. 2192 8 of 29
[(i)] (k) The commissioner may allow an insurance company that is 197
authorized to do business in this state and is part of an insurance 198
holding company system to register on behalf of any affiliated insurer 199
that is required to register under subsection (a) of this section and to file 200
all information and materials required to be filed under this section. 201
[(j)] (l) Any person may file with the commissioner a disclaimer of 202
affiliation with any insurance company and any insurance company 203
may file a disclaimer of affiliation with any other person. The disclaimer 204
shall fully disclose all material relationships and bases for affiliation 205
between such person and such insurance company as well as the basis 206
for disclaiming such affiliation. After a disclaimer has been filed, the 207
insurance company shall be relieved of any duty to register or report 208
under this section that may arise out of the insurance company's 209
relationship with such person unless the commissioner disallows such 210
disclaimer. The commissioner shall disallow such disclaimer only after 211
furnishing all parties in interest with notice and an opportunity to be 212
heard, and after making specific findings of fact to support such 213
disallowance. 214
[(k)] (m) The failure to file a registration statement or any 215
amendment, addition thereto or summary or an enterprise risk report 216
required by this section within the time specified for such filing shall be 217
a violation of sections 38a-129 to 38a-140, inclusive, as amended by this 218
act. 219
[(l)] (n) The commissioner may by regulation or order exempt any 220
insurance company or class of insurance companies from registration 221
under this section if, in the commissioner's judgment, registration by 222
such company or class of companies is not necessary to effectuate the 223
purposes of said sections. 224
[(m)] (o) A foreign or alien insurer shall not be required to register 225
pursuant to this section if it is (1) subject to disclosure requirements and 226
standards adopted by statute or regulation in the jurisdiction of its 227
domicile that are substantially similar to those contained in this section 228 Raised Bill No. 5382
LCO No. 2192 9 of 29
and subsections (a), (b), (f) and (g) of section 38a-136, as amended by 229
this act, or (2) admitted in the domiciliary jurisdiction of the principal 230
insurer in its holding company system and in said jurisdiction is subject 231
to disclosure requirements and standards adopted by statute or 232
regulation that are substantially similar to those contained in this section 233
and subsections (a), (b), (f) and (g) of section 38a-136, as amended by 234
this act. The commissioner may require any authorized insurer that is a 235
member of a holding company system not subject to registration under 236
this section to furnish a copy of the registration statement or other 237
information filed by such insurance company with the insurance 238
regulatory authority of its domicile or the domicile of the principal 239
insurer in its holding company system, as the case may be. 240
[(n)] (p) (1) To assess the business strategy, financial, legal or 241
regulatory position risk exposure, risk management or governance 242
processes of a domestic insurance company registered under this 243
section that is part of an insurance holding company system that has 244
international operations, and as part of the examination pursuant to 245
section 38a-14a of such insurance company, the commissioner may 246
initiate, be a member of or participate in a supervisory college, which 247
shall be a temporary or permanent forum for communication between 248
and cooperation among state, federal and international regulatory 249
officials. 250
(2) If the commissioner initiates a supervisory college, the 251
commissioner shall (A) establish the membership of, and participation 252
by state, federal or international regulatory officials in, such supervisory 253
college, (B) establish the functions of the supervisory college and the role 254
of members and participants, and select a chairperson for such 255
supervisory college, (C) coordinate the activities of the supervisory 256
college, including meeting planning and processes for information 257
sharing that comply with the applicable confidentiality provisions set 258
forth in section 38a-137, as amended by this act, and (D) establish a crisis 259
management plan for such supervisory college. 260
(3) The commissioner may enter into written agreements with state, 261 Raised Bill No. 5382
LCO No. 2192 10 of 29
federal or international regulatory officials for the governing of the 262
activities of a supervisory college. Any such agreements shall maintain 263
the confidentiality requirements under section 38a-137, as amended by 264
this act. 265
(4) Each insurance company subject to registration under this section 266
shall be assessed for and shall pay to the commissioner its share of the 267
reasonable costs, including reasonable travel expenses, of the 268
commissioner's participation in a supervisory college. Such payment 269
shall be in addition to any other taxes, fees and moneys otherwise 270
payable to the state. The commissioner shall establish the assessment 271
method for such costs and provide reasonable notice to each insurance 272
company subject to any such assessment. 273
(5) Nothing in this subsection shall be construed to limit the authority 274
of the commissioner to regulate an insurance company or its affiliate 275
under the commissioner's jurisdiction or to delegate any regulatory 276
authority of the commissioner to a supervisory college. 277
[(o)] (q) (1) As used in this subsection: (A) "Group-wide supervisor" 278
means the regulatory official (i) authorized by such official's jurisdiction 279
to conduct and coordinate group-wide supervisory activities, and (ii) 280
who is determined or acknowledged to be the group-wide supervisor of 281
an internationally active insurance group pursuant to this subsection; 282
and (B) "internationally active insurance group" means any insurance 283
holding company system that (i) includes an insurance company 284
registered pursuant to this section, and (ii) meets the following criteria: 285
(I) Premiums are written in at least three countries; (II) the percentage 286
of gross premiums written, including, for purposes of this subsection, 287
administrative service fees, associated expenses and claims payments, 288
without the United States is at least ten per cent of the insurance holding 289
company system's total gross written premiums; and (III) based on a 290
three-year rolling average, the total assets of the insurance holding 291
company system are at least fifty billion dollars or the total gross written 292
premiums of the insurance holding company system are at least ten 293
billion dollars. 294 Raised Bill No. 5382
LCO No. 2192 11 of 29
(2) (A) The commissioner, in cooperation with other state, federal and 295
international regulatory agencies of the jurisdictions where members of 296
the internationally active insurance group are domiciled, shall 297
determine a single group-wide supervisor for an internationally active 298
insurance group. An insurance holding company system that does not 299
qualify as an internationally active insurance group may request that 300
the commissioner make a determination or acknowledgment of a group-301
wide supervisor as set forth in this subsection. 302
(B) The commissioner may determine that the commissioner is the 303
appropriate group-wide supervisor for an internationally active 304
insurance group that conducts substantial insurance business 305
operations in this state and may act as a group-wide supervisor for any 306
internationally active insurance group in accordance with the 307
provisions of this subsection. 308
(C) The commissioner may acknowledge that the regulatory official 309
of another jurisdiction is an appropriate group-wide supervisor for an 310
internationally active insurance group that (i) does not conduct 311
substantial insurance business operations in the United States, (ii) 312
conducts substantial insurance business operations in the United States 313
but not in this state, or (iii) conducts substantial insurance business 314
operations in the United States and in this state but the commissioner 315
has determined, pursuant to the factors set forth in subdivision (3) of 316
this subsection, that the regulatory official of another jurisdiction is the 317
appropriate group-wide supervisor. 318
(D) When another regulatory official is acting as the group-wide 319
supervisor of an internationally active insurance group, the 320
commissioner shall acknowledge such official as the group-wide 321
supervisor, except that the commissioner shall make a determination or 322
acknowledgment of a group-wide supervisor for such insurance group 323
if a material change in such insurance group results in (i) the largest 324
share of such insurance group's premiums, assets or liabilities being 325
held by member insurance companies domiciled in this state, or (ii) this 326
state being the place of domicile of the top-tiered insurance company or 327 Raised Bill No. 5382
LCO No. 2192 12 of 29
companies in such insurance group. 328
(E) A regulatory official determined or acknowledged to be a group-329
wide supervisor of an internationally active insurance group may 330
determine, after considering the factors set forth in subdivision (3) of 331
this subsection, that it is appropriate to acknowledge another regulatory 332
official to serve as the group-wide supervisor of such insurance group. 333
Such acknowledgment shall be made (i) in cooperation with and subject 334
to the acknowledgment of other regulatory officials of the jurisdictions 335
where members of such insurance group are domiciled, and (ii) in 336
consultation with such insurance group. 337
(3) The commissioner shall consider the following factors in making 338
a determination or acknowledgment under subdivision (2) of this 339
subsection: 340
(A) The place of domicile of the member insurance companies of the 341
internationally active insurance group that holds the largest share of 342
such insurance group's premiums, assets or liabilities; 343
(B) The place of domicile of the top-tiered insurance company or 344
companies in the internationally active insurance group; 345
(C) The locations of the executive offices or the largest operational 346
offices of the internationally active insurance group; and 347
(D) Whether (i) a regulatory official of another jurisdiction is acting 348
or seeking to act as the group-wide supervisor under a regulatory 349
system the commissioner determines to be substantially similar to that 350
provided under the laws of this state or is otherwise sufficient in terms 351
of group-wide supervision, enterprise risk analysis and cooperation 352
with other regulatory officials, and (ii) such regulatory official acting or 353
seeking to act as the group-wide supervisor provides the commissioner 354
with reasonably reciprocal recognition and cooperation. 355
(4) The commissioner may collect, pursuant to section 38a-14a, from 356
any insurance company registered pursuant to this section any 357 Raised Bill No. 5382
LCO No. 2192 13 of 29
information necessary for the commissioner to determine whether the 358
commissioner may act as the group -wide supervisor of an 359
internationally active insurance group of which such company is a 360
member or whether the commissioner may acknowledge that a 361
regulatory official of another jurisdiction should act as the group-wide 362
supervisor of such insurance group. 363
(5) Prior to issuing any determination or acknowledgment under this 364
subsection, the commissioner shall notify the member insurance 365
company registered pursuant to this section and the ultimate controlling 366
person of the internationally active insurance group of such pending 367
determination or acknowledgment. The commissioner shall provide the 368
internationally active insurance group at least thirty calendar days to 369
submit any additional information pertinent to such determination or 370
acknowledgment that is requested by the commissioner or that such 371
insurance group chooses to submit. The commissioner shall publish in 372
the Connecticut Law Journal and post on the Insurance Department's 373
Internet web site a current list of internationally active insurance groups 374
that the commissioner has determined are subject to group-wide 375
supervision by the commissioner. 376
(6) The commissioner may conduct and coordinate the following 377
group-wide supervision activities for an internationally active insurance 378
group for which the commissioner is determined to be the group-wide 379
supervisor: 380
(A) Assess the enterprise risks within the internationally active 381
insurance group to ensure that material financial conditions of and 382
liquidity risks to the members of such insurance group that are engaged 383
in the business of insurance are identified by management and that 384
reasonable and effective mitigation measures are in place; 385
(B) Request from members of such insurance group information 386
necessary and appropriate to assess enterprise risk, including, but not 387
limited to, information about governance, risk assessment and 388
management, capital adequacy and material intercompany transactions; 389 Raised Bill No. 5382
LCO No. 2192 14 of 29
(C) Coordinate and, through the authority of the regulatory officials 390
of the jurisdictions where members of the internationally active 391
insurance group are domiciled, compel the development and 392
implementation of reasonable measures designed to ensure the 393
internationally active insurance group is able to timely recognize and 394
mitigate material enterprise risks to the members of such insurance 395
group that are engaged in the business of insurance; 396
(D) Communicate with other state, federal and international 397
regulatory agencies of the jurisdictions where members of the 398
internationally active insurance group are domiciled and share relevant 399
information, subject to the confidentiality provisions of section 38a-137, 400
as amended by this act, through a supervisory college, as set forth in 401
subsection [(n)] (p) of this section; 402
(E) Enter into agreements with or obtain documentation from any 403
member insurance company registered under this section, any other 404
member of the internationally active insurance group and any other 405
state, federal and international regulatory agencies of the jurisdictions 406
where members of the internationally active insurance group are 407
domiciled, to establish or clarify the commissioner's role as group-wide 408
supervisor and that may include provisions for resolving disputes with 409
other regulatory officials. No such agreement or documentation shall 410
serve as evidence that an insurance company or person within an 411
insurance company holding system that is not domiciled or 412
incorporated in this state is doing business in this state or is otherwise 413
subject to the jurisdiction of this state; and 414
(F) Other activities necessary to effectuate the group-wide 415
supervisory purposes of this section and sections 38a-129 to 38a-140, 416
inclusive, as amended by this act, and within the authority granted in 417
said sections. 418
(7) If the commissioner acknowledges that a regulatory official of a 419
jurisdiction not accredited by NAIC is the group-wide supervisor of an 420
internationally active insurance group, the commissioner shall 421 Raised Bill No. 5382
LCO No. 2192 15 of 29
reasonably cooperate through a supervisory college or otherwise with 422
group supervision undertaken by such group -wide supervisor, 423
provided such cooperation is in compliance with the laws of this state 424
and such group-wide supervisor recognizes and cooperates with the 425
commissioner's activities as a group-wide supervisor for other 426
internationally active insurance groups, where applicable. The 427
commissioner may refuse to cooperate if the commissioner determines 428
such recognition and cooperation are not reasonably reciprocated. The 429
commissioner may enter into agreements with or obtain documentation 430
from any member insurance company registered pursuant to this 431
section, any affiliate of such insurance company and any other state, 432
federal and international regulatory agencies of the jurisdictions where 433
members of the internationally active insurance group are domiciled, to 434
establish or clarify such official's role as group-wide supervisor. 435
(8) The commissioner may adopt regulations, in accordance with the 436
provisions of chapter 54, to carry out the provisions of this subsection. 437
(9) Each insurance company registered pursuant to this section shall 438
be liable for and shall pay the reasonable expenses of the commissioner's 439
administration of this subsection, including the engagement of the 440
services of attorneys, actuaries and other professionals and all 441
reasonable travel expenses. 442
Sec. 3. Section 38a-136 of the general statutes is repealed and the 443
following is substituted in lieu thereof (Effective July 1, 2022): 444
(a) Transactions within an insurance holding company system to 445
which an insurance company subject to registration under section 38a-446
135, as amended by this act, is a party shall be subject to the following 447
requirements: 448
(1) The terms shall be fair and reasonable; 449
(2) [charges] Charges or fees for services performed shall be 450
reasonable; 451 Raised Bill No. 5382
LCO No. 2192 16 of 29
(3) [expenses] Expenses incurred and payment received shall be 452
allocated to the insurance company in conformity with customary 453
insurance accounting practices consistently applied; 454
(4) [the] The books, accounts and records of each party shall be so 455
maintained as to clearly and accurately disclose the precise nature and 456
details of the transactions, including such accounting information as is 457
necessary to support the reasonableness of the charges or fees to the 458
respective parties; 459
(5) [the] The insurance company's surplus shall be reasonable in 460
relation to such company's outstanding liabilities and adequate to its 461
financial needs; [and] 462
(6) [agreements] Agreements for cost-sharing services and 463
management shall include such provisions as may be required by 464
regulations adopted by the commissioner; [.] 465
(7) If an insurance company subject to sections 38a-129 to 38a-140, 466
inclusive, as amended by this act, is determined by the commissioner to 467
be in a hazardous financial condition as set forth in sections 38a-8-101 to 468
38a-8-104, inclusive, of the regulations of Connecticut state agencies or 469
a condition that would be grounds for supervision, conservation or a 470
delinquency proceeding as set forth in chapter 704c, the commissioner 471
may require the insurance company to secure and maintain either a 472
deposit, held by the commissioner, or a bond, as determined by the 473
insurance company at the insurance company's discretion, for the 474
protection of the insurance company for the duration of the contracts or 475
agreements, or the existence of the condition for which the 476
commissioner required the deposit or the bond. In determining whether 477
the bond is required, the commissioner shall consider whether concerns 478
exist with respect to affiliates of the insurance company to fulfill the 479
contracts or agreements if the insurance company were to be put into 480
liquidation. Once the insurance company is determined to be in a 481
hazardous financial condition or a condition that would be grounds for 482
supervision, conservation or a delinquency proceeding, and a deposit 483 Raised Bill No. 5382
LCO No. 2192 17 of 29
or bond is necessary, the commissioner may determine the amount of 484
the deposit or bond, not to exceed the value of the contracts or 485
agreements in any one year, and whether such deposit or bond shall be 486
required for a single contract, multiple contracts or a contract only with 487
a specific affiliate of the insurance company; 488
(8) All records and data of the insurance company held by an affiliate 489
shall remain the property of the insurance company and shall be subject 490
to control of the insurance company, identifiable, and segregated or 491
readily capable of segregation, at no additional cost to the insurance 492
company, from all other persons' records and data, including, but not 493
limited to, all records and data that are otherwise the property of the 494
insurance company, in whatever form maintained, including, but not 495
limited to, claims and claim files, policyholder lists, application files, 496
litigation files, premium records, rate books, underwriting manuals, 497
personnel records, financial records or similar records within the 498
possession, custody or control of the affiliate. At the request of the 499
insurance company, the affiliate shall provide that the receiver can 500
obtain a complete set of all records of any type that pertain to the 501
insurance company's business; obtain access to the operating systems 502
on which the data is maintained; obtain the software that runs such 503
systems either through assumption of licensing agreements or 504
otherwise; and restrict the use of the data by the affiliate if it is not 505
operating the insurance company's business. The affiliate shall provide 506
a waiver of any landlord lien or other encumbrance to give the insurance 507
company access to all records and data in the event of the affiliate's 508
default under a lease or other agreement; and 509
(9) Premiums or other funds that belong to the insurance company 510
that are collected by or held by an affiliate are the exclusive property of 511
the insurance company and shall be subject to the control of the 512
insurance company. Any right of offset in the event an insurance 513
company is placed into receivership shall be subject to chapter 704c. 514
(b) (1) The following transactions involving a domestic insurance 515
company and any person in its holding company system, including 516 Raised Bill No. 5382
LCO No. 2192 18 of 29
amendments to or modifications of affiliate agreements previously filed 517
pursuant to this section and that are subject to any materiality standards 518
specified in subparagraphs (A) to (G), inclusive, of this subdivision, may 519
not be entered into unless the insurance company has notified the 520
commissioner in writing of its intention to enter into such transaction at 521
least thirty days prior thereto, or such shorter period as the 522
commissioner may permit, and the commissioner has approved or not 523
disapproved it within such period. The written notice for such 524
amendments or modifications shall specify the reasons for the change 525
and the financial impact on the domestic insurance company. Not later 526
than thirty days after the termination of a previously filed agreement, 527
the domestic insurance company shall notify the commissioner of such 528
termination for the commissioner's determination of what written notice 529
or filing shall be required, if any: 530
(A) Sales, purchases, exchanges, loans or extensions of credit, or 531
investments, provided such transactions are equal to or exceed: (i) With 532
respect to nonlife insurance companies, the lesser of three per cent of the 533
insurance company's admitted assets or twenty-five per cent of surplus; 534
or (ii) with respect to life insurance companies, three per cent of the 535
insurance company's admitted assets; each as of the thirty-first day of 536
December next preceding; 537
(B) Loans or extensions of credit to any person who is not an affiliate, 538
where the insurance company makes such loans or extensions of credit 539
with the agreement or understanding that the proceeds of such 540
transactions, in whole or in substantial part, are to be used to make loans 541
or extensions of credit to, to purchase assets of, or to make investments 542
in, any affiliate of the insurance company making such loans or 543
extensions of credit, provided such transactions are equal to or exceed: 544
(i) With respect to nonlife insurance companies, the lesser of three per 545
cent of the insurance company's admitted assets or twenty-five per cent 546
of surplus; or (ii) with respect to life insurance companies, three per cent 547
of the insurance company's admitted assets; each as of the thirty-first 548
day of December next preceding; 549 Raised Bill No. 5382
LCO No. 2192 19 of 29
(C) Reinsurance agreements or modifications thereto, including (i) all 550
reinsurance pooling agreements, and (ii) agreements in which the 551
reinsurance premium or a change in the insurance company's liabilities, 552
or the projected reinsurance premium or a projected change in the 553
insurance company's liabilities in any of the next three years, equals or 554
exceeds five per cent of the insurance company's surplus, as of the 555
thirty-first day of December next preceding, including those agreements 556
that may require as consideration the transfer of assets from an 557
insurance company to a nonaffiliate, if an agreement or understanding 558
exists between the insurance company and nonaffiliate that any portion 559
of such assets will be transferred to one or more affiliates of the 560
insurance company; 561
(D) All management agreements, service contracts, tax allocation 562
agreements and cost-sharing arrangements; 563
(E) Guarantees by a domestic insurance company, except that a 564
guarantee that is (i) quantifiable as to amount, and (ii) does not exceed 565
the lesser of one-half of one per cent of the insurance company's 566
admitted assets or ten per cent of surplus with regard to policyholders, 567
as of the thirty-first day of December next preceding, shall not be subject 568
to the notice requirement of this subsection; 569
(F) Direct or indirect acquisitions or investments in a person that 570
controls the domestic insurance company or in an affiliate of the 571
insurance company in an amount that, together with the insurance 572
company's present holdings in such investments, exceeds two and one-573
half per cent of the insurance company's surplus with regard to 574
policyholders. This subsection shall not apply to direct or indirect 575
acquisitions of or investments in (i) subsidiaries acquired pursuant to 576
section 38a-102d or authorized pursuant to any section of this title other 577
than sections 38a-129 to 38a-140, inclusive, as amended by this act, or (ii) 578
nonsubsidiary affiliates that are subject to the provisions of sections 38a-579
129 to 38a-140, inclusive, as amended by this act; and 580
(G) Any material transactions, specified by regulation, that the 581 Raised Bill No. 5382
LCO No. 2192 20 of 29
commissioner determines may adversely affect the interests of the 582
insurance company's policyholders. 583
(2) Nothing contained in this section shall be deemed to authorize or 584
permit any transactions that, in the case of an insurance company not a 585
member of the same insurance holding company system, would be 586
otherwise contrary to law. 587
(c) A domestic insurance company may not enter into transactions 588
that are part of a plan or series of like transactions with persons within 589
the insurance holding company system if the purpose of those separate 590
transactions is to avoid the statutory threshold amount and thus avoid 591
the review that would otherwise occur. If the commissioner determines 592
that such separate transactions were entered into over any twelve-593
month period for such purpose, the commissioner may exercise 594
authority under section 38a-140. 595
(d) The commissioner, in reviewing transactions pursuant to 596
subsection (b) of this section, shall consider whether the transactions 597
comply with the standards set forth in subsection (a) of this section and 598
whether they may adversely affect the interests of policyholders. 599
(e) Except as may be exempted pursuant to regulations adopted, in 600
accordance with the provisions of chapter 54, by the commissioner or 601
otherwise waived by the commissioner, the commissioner shall be 602
notified not later than thirty days after any material investment of the 603
domestic insurance company in any one corporation if the total 604
investment in such corporation by such insurance company's insurance 605
holding company system exceeds ten per cent of such corporation's 606
voting securities. 607
(f) (1) No insurance company subject to registration under section 608
38a-135, as amended by this act, shall pay any extraordinary dividend 609
or make any other extraordinary distribution to its stockholders until 610
the commissioner has approved such payment or until thirty days after 611
the commissioner has received notice from such company of the 612
declaration thereof within which period the commissioner has not 613 Raised Bill No. 5382
LCO No. 2192 21 of 29
disapproved such payment, whichever is sooner. For the purposes of 614
this subsection, an extraordinary dividend or distribution is any 615
dividend or distribution of cash or other property, whose fair market 616
value together with that of other dividends or distributions made within 617
the preceding twelve months, exceeds the greater of (A) ten per cent of 618
such insurance company's surplus as of the thirty-first day of December 619
last preceding, or (B) the net gain from operations of such insurance 620
company, if such company is a life insurance company, or the net 621
income, if such company is not a life insurance company, for the twelve-622
month period ending the thirty-first day of December last preceding, 623
but shall not include pro rata distributions of any class of the insurance 624
company's own securities. 625
(2) Notwithstanding any other provision of law, an insurance 626
company may declare an extraordinary dividend or distribution that is 627
conditional upon the commissioner's approval thereof, but such a 628
declaration shall confer no rights upon stockholders until (A) the 629
commissioner has approved the payment of such dividend or 630
distribution, or (B) until thirty days after such declaration thereof within 631
which period the commissioner has not disapproved such declaration, 632
whichever is sooner. 633
(g) For purposes of sections 38a-129 to 38a-140, inclusive, as amended 634
by this act, in determining whether an insurance company's surplus is 635
reasonable in relation to the insurance company's outstanding liabilities 636
and adequate to its financial needs, the following factors, in addition to 637
others, shall be considered: (1) The size of the insurance company as 638
measured by its assets, capital and surplus, reserves, premium writings, 639
insurance in force and other appropriate criteria; (2) the extent to which 640
the insurance company's business is diversified among the several lines 641
of insurance; (3) the number and size of risks insured in each line of 642
business; (4) the nature of the geographical dispersion of the insurance 643
company's insured risks; (5) the nature and extent of the insurance 644
company's reinsurance program; (6) the quality, diversification and 645
liquidity of the insurance company's investment portfolio; (7) the recent 646
past and projected future trend in the size of the insurance company's 647 Raised Bill No. 5382
LCO No. 2192 22 of 29
surplus; (8) the surplus maintained by other comparable insurance 648
companies; (9) the adequacy of the insurance company's reserves; (10) 649
the quality of the company's earnings and the extent to which the 650
reported earnings include extraordinary items; and (11) the quality and 651
liquidity of investments in affiliates. The commissioner may discount 652
any such investment or treat any such investment as a disallowed asset 653
for purposes of determining the adequacy of surplus whenever, in the 654
commissioner's judgment, such investment warrants. 655
(h) (1) Any domestic insurance company that is affiliated with an 656
insurance holding company system shall report for informational 657
purposes to the Insurance Commissioner all dividends and other 658
distributions to securityholders, not later than five business days after 659
the declaration and at least ten days, commencing from the date of 660
receipt by the Insurance Department, prior to payment thereof. 661
(2) No dividend or other distribution may be paid when the surplus 662
of the insurance company is less than the surplus required by section 663
38a-72 for the kind or kinds of business authorized to be transacted by 664
such company, nor when the payment of a dividend or other 665
distribution would reduce its surplus to less than such amount. 666
(3) Except as otherwise provided by law, no dividend or other 667
distribution exceeding an amount equal to an insurance company's 668
earned surplus may be paid without the Insurance Commissioner's 669
prior approval. For purposes of this subsection, "earned surplus" means 670
"unassigned funds-surplus", as defined in the annual report of the 671
insurance company that was most recently submitted pursuant to 672
section 38a-53, reduced by twenty-five per cent of unrealized 673
appreciation in value or revaluation of assets or unrealized profits on 674
investments, as defined in such report. 675
(i) (1) The commissioner may require a domestic insurance company 676
of which control has been acquired pursuant to section 38a-130 to 677
submit to a financial examination and a market conduct examination 678
within thirty days after such acquisition in accordance with procedures 679 Raised Bill No. 5382
LCO No. 2192 23 of 29
set forth by NAIC's examiner's handbook and such regulations as the 680
commissioner may adopt. 681
(2) No domestic insurance company of which control has been 682
acquired pursuant to section 38a-130 shall, without the prior approval 683
of the commissioner: (A) Pay or propose to pay any dividend during the 684
period of two years from the date of acquisition of control of such 685
insurance company; (B) acquire or enter into an agreement or 686
understanding to acquire control, during the period of three years after 687
the date of acquisition of control of such insurance company, of any 688
other person or persons whose assets exceed twenty-five million dollars; 689
(C) provide or propose to provide directly or indirectly, during the 690
period of three years after the date of acquisition of control of such 691
insurance company, any loans, advances, guarantees, pledges or other 692
financial assistance; or (D) engage in any material transaction with any 693
person during the period of three years after the date of acquisition of 694
such insurance company. For purposes of this subsection, a "material 695
transaction" shall include, but not be limited to, any transfer or 696
encumbrance of assets not in the ordinary course of business that, 697
together with all other transfers or encumbrances made within the 698
preceding twelve months, exceeds in value the greater of (i) ten per cent 699
of such insurance company's surplus as of the December thirty-first last 700
preceding, or (ii) the net gain from operations of such insurance 701
company, if such company is a life insurance company, or the net 702
investment income of such company, if such company is not a life 703
insurance company, for the twelve-month period ending the December 704
thirty-first last preceding. 705
(3) The commissioner shall, upon a written request from the 706
controlled domestic insurance company and, upon public hearing after 707
notice to all interested parties, determine whether any limitations 708
contained in subdivision (2) of this subsection shall be continued, or 709
whether and on what conditions they may be waived. Such 710
determination shall be predicated on the results of the examinations 711
under subdivision (1) of this subsection and such further examinations, 712
if any, the commissioner may require concerning the adequacy of the 713 Raised Bill No. 5382
LCO No. 2192 24 of 29
insurance company's reserves, the effect any proposed transaction will 714
have on the insurance company's surplus, its cash flow needs and its 715
ability to satisfy any reasonably anticipated obligations in the 716
foreseeable future, and any other effect the proposed transaction would 717
have on the financial stability or solvency of the insurance company and 718
the quality and liquidity of its assets. All fees and expenses relating to 719
such examinations shall be paid by the insurance company. 720
(4) Nothing in this subsection shall be interpreted to prohibit any 721
transactions between a domestic insurance company and any of its 722
subsidiaries in the ordinary course of business. 723
(j) (1) Any affiliate that is a party to an agreement or contract with a 724
domestic insurance company that is subject to subparagraph (D) of 725
subdivision (1) of subsection (b) of this section shall be subject to the 726
jurisdiction of any order of rehabilitation or liquidation against the 727
insurance company and to the authority of any rehabilitator or 728
liquidator for the insurance company appointed pursuant to chapter 729
704c, for the purpose of interpreting, enforcing and overseeing the 730
affiliate's obligations under the agreements or contracts to perform 731
services for the insurance company that: 732
(A) Are an integral part of the insurance company's operations, 733
including, but not limited to, management, administration, accounting, 734
data processing, marketing, underwriting, claims handling, investment 735
or any other similar functions; or 736
(B) Are essential to the insurance company's ability to fulfill its 737
obligations under insurance policies. 738
(2) The commissioner may require that an agreement or contract 739
pursuant to subparagraph (D) of subdivision (1) of subsection (b) of this 740
section for provisions or services set forth in subparagraphs (A) and (B) 741
of subdivision (1) of this subsection specify that the affiliate consents to 742
the jurisdiction described in subdivision (1) of this subsection. 743
Sec. 4. Section 38a-137 of the general statutes is repealed and the 744 Raised Bill No. 5382
LCO No. 2192 25 of 29
following is substituted in lieu thereof (Effective July 1, 2022): 745
(a) All information, documents, materials and copies thereof obtained 746
by or disclosed to the commissioner or any other person in the course of 747
an examination or investigation made pursuant to section 38a-14a and 748
all information reported, furnished or filed pursuant to sections 38a-131, 749
38a-135, as amended by this act, and 38a-136, as amended by this act, 750
shall (1) be confidential by law and privileged, (2) not be subject to 751
disclosure under section 1-210, (3) not be subject to subpoena, and (4) 752
not be subject to discovery or admissible in evidence in any civil action. 753
The commissioner shall not make such information, documents, 754
materials or copies public without the prior written consent of the 755
insurance company to which it pertains unless the commissioner, after 756
giving the insurance company and its affiliates who would be affected 757
thereby notice and opportunity to be heard, determines that the interests 758
of policyholders, securityholders or the public will be served by the 759
publication thereof, in which event the commissioner may publish all or 760
any part thereof in such manner as the commissioner may deem 761
appropriate. The commissioner may use such information, documents, 762
materials or copies in the furtherance of any regulatory or legal action 763
brought as part of the commissioner's official duties. 764
(b) Neither the commissioner nor any person who receives 765
information, documents, materials or copies as set forth in subsection 766
(a) of this section or with whom such information, documents, materials 767
or copies are shared, while acting under the authority of the 768
commissioner, shall testify or be required to testify in any civil action 769
concerning such information, documents, materials or copies. 770
(c) Except as specified in subdivision (2) of subsection (f) of section 771
38a-135, as amended by this act, to assist the commissioner in the 772
performance of the commissioner's duties, the commissioner: 773
(1) May share information, documents, materials or copies thereof, 774
including information, documents, materials or copies deemed 775
confidential and privileged pursuant to subsection (a) of this section, 776 Raised Bill No. 5382
LCO No. 2192 26 of 29
with (A) other state, federal and international regulatory officials, (B) 777
the NAIC [or its affiliate or subsidiaries] and any third-party consultants 778
designated by the commissioner, (C) the International Association of 779
Insurance Supervisors, (D) the Bank for International Settlements, (E) 780
the Federal Insurance Office, (F) state, federal and international law 781
enforcement authorities, and (G) members or participants of a 782
supervisory college, as described in subsection [(n)] (p) of section 38a-783
135, as amended by this act, of which the commissioner is a member or 784
a participant, provided the recipient of any such information, 785
documents, materials or copies agrees, in writing, to maintain the 786
confidentiality and privileged status of such information, documents, 787
materials and copies, and has verified, in writing, the recipient's legal 788
authority to maintain confidentiality; 789
(2) May receive information, documents, materials or copies thereof, 790
including confidential and privileged information, documents, 791
materials or copies, from the NAIC [or its affiliates or subsidiaries] and 792
any third-party consultants designated by the commissioner, the 793
International Association of Insurance Supervisors, the Bank for 794
International Settlements, the Federal Insurance Office, or state, federal 795
and international law enforcement authorities. The commissioner shall 796
maintain as confidential and privileged any information, documents, 797
materials or copies received with notice or the understanding that such 798
information, documents, materials or copies are confidential and 799
privileged under the laws of the jurisdiction that is the source of such 800
information, documents, materials or copies; and 801
(3) Shall enter into written agreements consistent with this subsection 802
with the NAIC and any third-party consultants designated by the 803
commissioner, and may enter into written agreements consistent with 804
this subsection with the International Association of Insurance 805
Supervisors or the Bank for International Settlements, governing the 806
sharing and use of information, documents, materials or copies thereof 807
shared or received pursuant to sections 38a-129 to 38a-140, inclusive, as 808
amended by this act. Any such agreement consistent with this 809
subsection shall (A) specify the procedures and protocols regarding the 810 Raised Bill No. 5382
LCO No. 2192 27 of 29
confidentiality and security of information shared (i) with the NAIC [or 811
its affiliates or subsidiaries] or a third-party consultant designated by 812
the commissioner, the International Association of Insurance 813
Supervisors or the Bank for International Settlements pursuant to 814
sections 38a-129 to 38a-140, inclusive, as amended by this act, and (ii) by 815
the NAIC [or its affiliates or subsidiaries] or a third-party consultant 816
designated by the commissioner, the International Association of 817
Insurance Supervisors or the Bank for International Settlements with 818
other state, federal or international regulatory officials, (B) provide that 819
the recipient agrees in writing to maintain the confidentiality and 820
privileged status of the documents, materials or other information and 821
has verified in writing the recipient's legal authority to maintain such 822
confidentiality or privilege, (C) specify that the commissioner shall 823
retain ownership of such information and that the use of such 824
information by the NAIC [or its affiliates or subsidiaries] or a third-party 825
consultant, the International Association of Insurance Supervisors or the 826
Bank for International Settlements is subject to the commissioner's 827
discretion, [(C)] (D) excluding documents, material or information 828
reported pursuant to subsection (h) of section 38a-135, as amended by 829
this act, prohibit the NAIC or third-party consultant designated by the 830
commissioner from storing such information shared pursuant to 831
sections 38a-129 to 38a-140, inclusive, as amended by this act, in a 832
permanent database after the underlying analysis is completed, (E) 833
require prompt notice to be given to an insurance company whose 834
confidential information is in the possession of the NAIC or [its affiliates 835
or subsidiaries] a third-party consultant designated by the 836
commissioner, the International Association of Insurance Supervisors or 837
the Bank for International Settlements, if the NAIC or [its affiliates or 838
subsidiaries] a third-party consultant designated by the commissioner, 839
the International Association of Insurance Supervisors or the Bank for 840
International Settlements is subject to a request or subpoena for 841
disclosure or production of such information, [and (D)] (F) require the 842
NAIC or [its affiliates or subsidiaries] a third-party consultant 843
designated by the commissioner, the International Association of 844
Insurance Supervisors or the Bank for International Settlements, if any 845 Raised Bill No. 5382
LCO No. 2192 28 of 29
said entity [or such affiliate or subsidiary] is subject to disclosure of an 846
insurance company's confidential information that has been shared with 847
said entity, [or such affiliate or subsidiary,] to allow such insurance 848
company to intervene in any judicial or administrative action regarding 849
such disclosure or information, and (G) for documents, material or 850
information reported pursuant to subsection (h) of section 38a-135, as 851
amended by this act, in the case of an agreement involving a third-party 852
consultant, provide for notification of the identity of the consultant to 853
the applicable insurer. 854
(d) No waiver of any applicable privilege or claim of confidentiality 855
in any information, documents, materials or copies thereof shall occur 856
as a result of disclosure to the commissioner or of sharing in accordance 857
with this section. Nothing in this section shall be construed to delegate 858
any regulatory authority of the commissioner to any person or entity 859
with which any information, documents, materials or copies thereof 860
have been shared. 861
(e) Any information, documents, materials or copies thereof in the 862
possession of the NAIC or [its affiliates or subsidiaries] a third-party 863
consultant designated by the commissioner, the International 864
Association of Insurance Supervisors or the Bank for International 865
Settlements pursuant to this section shall be confidential by law and 866
privileged and shall not be subject to discovery or admissible in 867
evidence in any civil action in this state. 868
This act shall take effect as follows and shall amend the following
sections:
Section 1 July 1, 2022 38a-129
Sec. 2 July 1, 2022 38a-135(g) to (o)
Sec. 3 July 1, 2022 38a-136
Sec. 4 July 1, 2022 38a-137
Raised Bill No. 5382
LCO No. 2192 29 of 29
Statement of Purpose:
To adopt the most recent amendments made by the National
Association of Insurance Commissioners to the Model Insurance
Holding Company Act regarding group capital calculation.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
underlined.]