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General Assembly Substitute Bill No. 5382
February Session, 2022
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 Section 38a-129 of the general statutes is repealed and the 1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
(2) "Commissioner" means the Insurance Commissioner and any 16
assistant to the Insurance Commissioner designated and authorized by 17 Substitute Bill No. 5382
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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 and Reporting Template as adopted by the 32
NAIC and as amended by the NAIC from time to time in accordance 33
with the procedures adopted by 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 Liquidity 44
Stress Test Framework publication which includes a history of the 45
NAIC's development of regulatory liquidity stress testing, the scope 46
criteria applicable for a specific data year, and the liquidity stress test 47 Substitute Bill No. 5382
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instructions and reporting templates for a specific data year, such scope 48
criteria, instructions, and reporting template being as adopted by the 49
NAIC and as amended by the NAIC from time to time in accordance 50
with the procedures adopted 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; and 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 such registration an annual group capital 74
calculation not later than June first of each year, with the lead state 75
commissioner. The report shall be completed in accordance with the 76 Substitute Bill No. 5382
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NAIC group capital calculation instructions, which may permit the lead 77
state commissioner to allow a controlling person that is not the ultimate 78
controlling person to file the group capital calculation. The report shall 79
be filed with the lead state commissioner of the insurance holding 80
company system as determined by the lead state commissioner in 81
accordance with the procedures contained in 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 subject to the group 90
capital requirements applicable to an insurance group that owns a 91
depository institution or institutions by the United States Federal 92
Reserve Board. The lead state commissioner shall request such group 93
capital requirements applicable to the insurance group from the United 94
States Federal Reserve Board under the terms of information sharing 95
agreements in effect. If the United States Federal Reserve Board cannot 96
share the calculation with the lead state commissioner, the insurance 97
holding company system shall not be exempt from the group capital 98
calculation filing; 99
(C) An insurance holding company system whose non-United States 100
group-wide supervisor is located within a reciprocal jurisdiction as 101
described in section 38a-85 that recognizes the United States regulatory 102
approach to group supervision and group capital; or 103
(D) An insurance holding company system: 104
(i) That provides information to the lead state commissioner that 105
meets the requirements for accreditation under the NAIC financial 106
standards and accreditation program, either directly or indirectly 107 Substitute Bill No. 5382
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through the group-wide supervisor, who has determined such 108
information is satisfactory to allow the lead state commissioner to 109
comply with the NAIC group supervision approach, as detailed in the 110
NAIC Financial Analysis Handbook; and 111
(ii) Whose non-United States group-wide supervisor that is not in a 112
reciprocal jurisdiction recognizes and accepts, as specified by the lead 113
state commissioner in regulation, the group capital calculation as the 114
world-wide group capital assessment for United States insurance 115
groups who operate in that jurisdiction. 116
(3) Notwithstanding subparagraphs (C) and (D) of subdivision (2) of 117
this subsection, a lead state commissioner shall require the group capital 118
calculation for the United States operations of any non-United States 119
based insurance holding company system where, after any necessary 120
consultation with other supervisors or officials, it is determined 121
appropriate by the lead state commissioner for prudential oversight and 122
solvency monitoring purposes or for ensuring competitiveness of the 123
insurance marketplace. 124
(4) Notwithstanding subparagraphs (A) and (D) of subdivision (2) of 125
this subsection, the lead state commissioner shall have the discretion to 126
exempt the ultimate controlling person from filing the annual group 127
capital calculation or to accept a limited group capital filing or report in 128
accordance with criteria as specified by the lead state commissioner in 129
regulation. 130
(5) If the lead state commissioner determines that an insurance 131
holding company system no longer meets one or more of the 132
requirements for an exemption for filing the group capital calculation 133
under subdivision (2) of this subsection, the insurance holding company 134
system shall file the group capital calculation at the next annual filing 135
date unless given an extension by the lead state commissioner based on 136
reasonable grounds shown. 137
(6) The information reported and provided to the lead state 138 Substitute Bill No. 5382
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commissioner by an insurance holding company, including an 139
insurance holding company supervised by the United States Federal 140
Reserve Board pursuant to this subsection, shall: 141
(A) Be confidential by law and privileged; 142
(B) Not be subject to disclosure under section 1-210; 143
(C) Not be subject to subpoena; and 144
(D) Not be subject to discovery or admissible in any civil action. 145
(7) The group capital calculation and resulting group capital ratio 146
required pursuant to this subsection are regulatory tools for assessing 147
group risks and capital adequacy and are not intended as a means to 148
rank insurers or insurance holding company systems generally. 149
(h) The ultimate controlling person of every insurer subject to 150
registration and also scoped into the NAIC liquidity stress test 151
framework shall file the results of a specific year's liquidity stress test to 152
the lead state insurance commissioner of the insurance holding 153
company system as determined by procedures within the Financial 154
Analysis Handbook adopted by the NAIC. 155
(1) The NAIC liquidity stress test framework includes scope criteria 156
applicable to a specific data year. These scope criteria are reviewed at 157
least annually by the NAIC Financial Stability Task Force or its 158
successor. Any change to the NAIC liquidity stress test framework or to 159
the data year for which the scope criteria are to be measured shall be 160
effective on January first of the year following the calendar year when 161
such changes are adopted. Insurers meeting at least one threshold of the 162
scope criteria shall be considered scoped into the NAIC liquidity stress 163
test framework for the specified data year unless the lead state 164
commissioner, in consultation with the NAIC Financial Stability Task 165
Force or its successor, determines the insurer should not be scoped into 166
the NAIC liquidity stress test framework for that data year. Insurers that 167
do not trigger at least one threshold of the scope criteria shall be 168 Substitute Bill No. 5382
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considered scoped out of the NAIC liquidity stress test framework for 169
the specified data year, unless the lead state insurance commissioner, in 170
consultation with the NAIC Financial Stability Task Force or its 171
successor, determines the insurer should be scoped into the NAIC 172
liquidity stress test framework for that data year. 173
(2) The performance of, and filing of the results from, a specific year's 174
liquidity stress test shall comply with the NAIC liquidity stress test 175
framework's instructions and reporting templates for that year and any 176
lead state insurance commissioner determinations, in conjunction with 177
the NAIC Financial Stability Task Force or its successor, provided 178
within the NAIC liquidity stress test framework. 179
(3) The information reported and provided to the lead state 180
commissioner by an insurance holding company, including an 181
insurance holding company supervised by the United States Federal 182
Reserve Board pursuant to this subsection, shall: 183
(A) Be confidential by law and privileged; 184
(B) Not be subject to disclosure under section 1-210; 185
(C) Not be subject to subpoena; and 186
(D) Not be subject to discovery or admissible in any civil action. 187
(4) The liquidity stress test along with its results and supporting 188
disclosures required pursuant to this subsection are regulatory tools for 189
assessing group liquidity risks and are not intended as a means to rank 190
insurers or insurance holding company systems generally. 191
[(g)] (i) The commissioner shall terminate the registration of any 192
insurance company that demonstrates that it no longer is a member of 193
an insurance holding company system. 194
[(h)] (j) The commissioner may require or allow two or more affiliated 195
insurance companies subject to registration hereunder to file a 196 Substitute Bill No. 5382
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consolidated registration statement. 197
[(i)] (k) The commissioner may allow an insurance company that is 198
authorized to do business in this state and is part of an insurance 199
holding company system to register on behalf of any affiliated insurer 200
that is required to register under subsection (a) of this section and to file 201
all information and materials required to be filed under this section. 202
[(j)] (l) Any person may file with the commissioner a disclaimer of 203
affiliation with any insurance company and any insurance company 204
may file a disclaimer of affiliation with any other person. The disclaimer 205
shall fully disclose all material relationships and bases for affiliation 206
between such person and such insurance company as well as the basis 207
for disclaiming such affiliation. After a disclaimer has been filed, the 208
insurance company shall be relieved of any duty to register or report 209
under this section that may arise out of the insurance company's 210
relationship with such person unless the commissioner disallows such 211
disclaimer. The commissioner shall disallow such disclaimer only after 212
furnishing all parties in interest with notice and an opportunity to be 213
heard, and after making specific findings of fact to support such 214
disallowance. 215
[(k)] (m) The failure to file a registration statement or any 216
amendment, addition thereto or summary or an enterprise risk report 217
required by this section within the time specified for such filing shall be 218
a violation of sections 38a-129 to 38a-140, inclusive, as amended by this 219
act. 220
[(l)] (n) The commissioner may by regulation or order exempt any 221
insurance company or class of insurance companies from registration 222
under this section if, in the commissioner's judgment, registration by 223
such company or class of companies is not necessary to effectuate the 224
purposes of said sections. 225
[(m)] (o) A foreign or alien insurer shall not be required to register 226
pursuant to this section if it is (1) subject to disclosure requirements and 227 Substitute Bill No. 5382
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standards adopted by statute or regulation in the jurisdiction of its 228
domicile that are substantially similar to those contained in this section 229
and subsections (a), (b), (f) and (g) of section 38a-136, as amended by 230
this act, or (2) admitted in the domiciliary jurisdiction of the principal 231
insurer in its holding company system and in said jurisdiction is subject 232
to disclosure requirements and standards adopted by statute or 233
regulation that are substantially similar to those contained in this section 234
and subsections (a), (b), (f) and (g) of section 38a-136, as amended by 235
this act. The commissioner may require any authorized insurer that is a 236
member of a holding company system not subject to registration under 237
this section to furnish a copy of the registration statement or other 238
information filed by such insurance company with the insurance 239
regulatory authority of its domicile or the domicile of the principal 240
insurer in its holding company system, as the case may be. 241
[(n)] (p) (1) To assess the business strategy, financial, legal or 242
regulatory position risk exposure, risk management or governance 243
processes of a domestic insurance company registered under this 244
section that is part of an insurance holding company system that has 245
international operations, and as part of the examination pursuant to 246
section 38a-14a of such insurance company, the commissioner may 247
initiate, be a member of or participate in a supervisory college, which 248
shall be a temporary or permanent forum for communication between 249
and cooperation among state, federal and international regulatory 250
officials. 251
(2) If the commissioner initiates a supervisory college, the 252
commissioner shall (A) establish the membership of, and participation 253
by state, federal or international regulatory officials in, such supervisory 254
college, (B) establish the functions of the supervisory college and the role 255
of members and participants, and select a chairperson for such 256
supervisory college, (C) coordinate the activities of the supervisory 257
college, including meeting planning and processes for information 258
sharing that comply with the applicable confidentiality provisions set 259
forth in section 38a-137, as amended by this act, and (D) establish a crisis 260 Substitute Bill No. 5382
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management plan for such supervisory college. 261
(3) The commissioner may enter into written agreements with state, 262
federal or international regulatory officials for the governing of the 263
activities of a supervisory college. Any such agreements shall maintain 264
the confidentiality requirements under section 38a-137, as amended by 265
this act. 266
(4) Each insurance company subject to registration under this section 267
shall be assessed for and shall pay to the commissioner its share of the 268
reasonable costs, including reasonable travel expenses, of the 269
commissioner's participation in a supervisory college. Such payment 270
shall be in addition to any other taxes, fees and moneys otherwise 271
payable to the state. The commissioner shall establish the assessment 272
method for such costs and provide reasonable notice to each insurance 273
company subject to any such assessment. 274
(5) Nothing in this subsection shall be construed to limit the authority 275
of the commissioner to regulate an insurance company or its affiliate 276
under the commissioner's jurisdiction or to delegate any regulatory 277
authority of the commissioner to a supervisory college. 278
[(o)] (q) (1) As used in this subsection: (A) "Group-wide supervisor" 279
means the regulatory official (i) authorized by such official's jurisdiction 280
to conduct and coordinate group-wide supervisory activities, and (ii) 281
who is determined or acknowledged to be the group-wide supervisor of 282
an internationally active insurance group pursuant to this subsection; 283
and (B) "internationally active insurance group" means any insurance 284
holding company system that (i) includes an insurance company 285
registered pursuant to this section, and (ii) meets the following criteria: 286
(I) Premiums are written in at least three countries; (II) the percentage 287
of gross premiums written, including, for purposes of this subsection, 288
administrative service fees, associated expenses and claims payments, 289
without such amounts transacted in the United States is at least ten per 290
cent of the insurance holding company system's total gross written 291
premiums; and (III) based on a three-year rolling average, the total 292 Substitute Bill No. 5382
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assets of the insurance holding company system are at least fifty billion 293
dollars or the total gross written premiums of the insurance holding 294
company system are at least ten billion dollars. 295
(2) (A) The commissioner, in cooperation with other state, federal and 296
international regulatory agencies of the jurisdictions where members of 297
the internationally active insurance group are domiciled, shall 298
determine a single group-wide supervisor for an internationally active 299
insurance group. An insurance holding company system that does not 300
qualify as an internationally active insurance group may request that 301
the commissioner make a determination or acknowledgment of a group-302
wide supervisor as set forth in this subsection. 303
(B) The commissioner may determine that the commissioner is the 304
appropriate group-wide supervisor for an internationally active 305
insurance group that conducts substantial insurance business 306
operations in this state and may act as a group-wide supervisor for any 307
internationally active insurance group in accordance with the 308
provisions of this subsection. 309
(C) The commissioner may acknowledge that the regulatory official 310
of another jurisdiction is an appropriate group-wide supervisor for an 311
internationally active insurance group that (i) does not conduct 312
substantial insurance business operations in the United States, (ii) 313
conducts substantial insurance business operations in the United States 314
but not in this state, or (iii) conducts substantial insurance business 315
operations in the United States and in this state but the commissioner 316
has determined, pursuant to the factors set forth in subdivision (3) of 317
this subsection, that the regulatory official of another jurisdiction is the 318
appropriate group-wide supervisor. 319
(D) When another regulatory official is acting as the group-wide 320
supervisor of an internationally active insurance group, the 321
commissioner shall acknowledge such official as the group-wide 322
supervisor, except that the commissioner shall make a determination or 323
acknowledgment of a group-wide supervisor for such insurance group 324 Substitute Bill No. 5382
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if a material change in such insurance group results in (i) the largest 325
share of such insurance group's premiums, assets or liabilities being 326
held by member insurance companies domiciled in this state, or (ii) this 327
state being the place of domicile of the top-tiered insurance company or 328
companies in such insurance group. 329
(E) A regulatory official determined or acknowledged to be a group-330
wide supervisor of an internationally active insurance group may 331
determine, after considering the factors set forth in subdivision (3) of 332
this subsection, that it is appropriate to acknowledge another regulatory 333
official to serve as the group-wide supervisor of such insurance group. 334
Such acknowledgment shall be made (i) in cooperation with and subject 335
to the acknowledgment of other regulatory officials of the jurisdictions 336
where members of such insurance group are domiciled, and (ii) in 337
consultation with such insurance group. 338
(3) The commissioner shall consider the following factors in making 339
a determination or acknowledgment under subdivision (2) of this 340
subsection: 341
(A) The place of domicile of the member insurance companies of the 342
internationally active insurance group that holds the largest share of 343
such insurance group's premiums, assets or liabilities; 344
(B) The place of domicile of the top-tiered insurance company or 345
companies in the internationally active insurance group; 346
(C) The locations of the executive offices or the largest operational 347
offices of the internationally active insurance group; and 348
(D) Whether (i) a regulatory official of another jurisdiction is acting 349
or seeking to act as the group-wide supervisor under a regulatory 350
system the commissioner determines to be substantially similar to that 351
provided under the laws of this state or is otherwise sufficient in terms 352
of group-wide supervision, enterprise risk analysis and cooperation 353
with other regulatory officials, and (ii) such regulatory official acting or 354
seeking to act as the group-wide supervisor provides the commissioner 355 Substitute Bill No. 5382
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with reasonably reciprocal recognition and cooperation. 356
(4) The commissioner may collect, pursuant to section 38a-14a, from 357
any insurance company registered pursuant to this section any 358
information necessary for the commissioner to determine whether the 359
commissioner may act as the group -wide supervisor of an 360
internationally active insurance group of which such company is a 361
member or whether the commissioner may acknowledge t hat a 362
regulatory official of another jurisdiction should act as the group-wide 363
supervisor of such insurance group. 364
(5) Prior to issuing any determination or acknowledgment under this 365
subsection, the commissioner shall notify the member insurance 366
company registered pursuant to this section and the ultimate controlling 367
person of the internationally active insurance group of such pending 368
determination or acknowledgment. The commissioner shall provide the 369
internationally active insurance group at least thirty calendar days to 370
submit any additional information pertinent to such determination or 371
acknowledgment that is requested by the commissioner or that such 372
insurance group chooses to submit. The commissioner shall publish in 373
the Connecticut Law Journal and post on the Insurance Department's 374
Internet web site a current list of internationally active insurance groups 375
that the commissioner has determined are subject to group-wide 376
supervision by the commissioner. 377
(6) The commissioner may conduct and coordinate the following 378
group-wide supervision activities for an internationally active insurance 379
group for which the commissioner is determined to be the group-wide 380
supervisor: 381
(A) Assess the enterprise risks within the internationally active 382
insurance group to ensure that material financial conditions of and 383
liquidity risks to the members of such insurance group that are engaged 384
in the business of insurance are identified by management and that 385
reasonable and effective mitigation measures are in place; 386 Substitute Bill No. 5382
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(B) Request from members of such insurance group information 387
necessary and appropriate to assess enterprise risk, including, but not 388
limited to, information about governance, risk assessment and 389
management, capital adequacy and material intercompany transactions; 390
(C) Coordinate and, through the authority of the regulatory officials 391
of the jurisdictions where members of the internationally active 392
insurance group are domiciled, compel the development and 393
implementation of reasonable measures designed to ensure the 394
internationally active insurance group is able to timely recognize and 395
mitigate material enterprise risks to the members of such insurance 396
group that are engaged in the business of insurance; 397
(D) Communicate with other state, federal and international 398
regulatory agencies of the jurisdictions where members of the 399
internationally active insurance group are domiciled and share relevant 400
information, subject to the confidentiality provisions of section 38a-137, 401
as amended by this act, through a supervisory college, as set forth in 402
subsection [(n)] (p) of this section; 403
(E) Enter into agreements with or obtain documentation from any 404
member insurance company registered under this section, any other 405
member of the internationally active insurance group and any other 406
state, federal and international regulatory agencies of the jurisdictions 407
where members of the internationally active insurance group are 408
domiciled, to establish or clarify the commissioner's role as group-wide 409
supervisor and that may include provisions for resolving disputes with 410
other regulatory officials. No such agreement or documentation shall 411
serve as evidence that an insurance company or person within an 412
insurance company holding system that is not domiciled or 413
incorporated in this state is doing business in this state or is otherwise 414
subject to the jurisdiction of this state; and 415
(F) Other activities necessary to effectuate the group-wide 416
supervisory purposes of this section and sections 38a-129 to 38a-140, 417
inclusive, as amended by this act, and within the authority granted in 418 Substitute Bill No. 5382
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said sections. 419
(7) If the commissioner acknowledges that a regulatory official of a 420
jurisdiction not accredited by NAIC is the group-wide supervisor of an 421
internationally active insurance group, the commissioner shall 422
reasonably cooperate through a supervisory college or otherwise with 423
group supervision undertaken by such group -wide supervisor, 424
provided such cooperation is in compliance with the laws of this state 425
and such group-wide supervisor recognizes and cooperates with the 426
commissioner's activities as a group-wide supervisor for other 427
internationally active insurance groups, where applicable. The 428
commissioner may refuse to cooperate if the commissioner determines 429
such recognition and cooperation are not reasonably reciprocated. The 430
commissioner may enter into agreements with or obtain documentation 431
from any member insurance company registered pursuant to this 432
section, any affiliate of such insurance company and any other state, 433
federal and international regulatory agencies of the jurisdictions where 434
members of the internationally active insurance group are domiciled, to 435
establish or clarify such official's role as group-wide supervisor. 436
(8) The commissioner may adopt regulations, in accordance with the 437
provisions of chapter 54, to carry out the provisions of this subsection. 438
(9) Each insurance company registered pursuant to this section shall 439
be liable for and shall pay the reasonable expenses of the commissioner's 440
administration of this subsection, including the engagement of the 441
services of attorneys, actuaries and other professionals and all 442
reasonable travel expenses. 443
Sec. 3. Section 38a-136 of the general statutes is repealed and the 444
following is substituted in lieu thereof (Effective July 1, 2022): 445
(a) Transactions within an insurance holding company system to 446
which an insurance company subject to registration under section 38a-447
135, as amended by this act, is a party shall be subject to the following 448
requirements: 449 Substitute Bill No. 5382
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(1) The terms shall be fair and reasonable; 450
(2) [charges] Charges or fees for services performed shall be 451
reasonable; 452
(3) [expenses] Expenses incurred and payment received shall be 453
allocated to the insurance company in conformity with customary 454
insurance accounting practices consistently applied; 455
(4) [the] The books, accounts and records of each party shall be so 456
maintained as to clearly and accurately disclose the precise nature and 457
details of the transactions, including such accounting information as is 458
necessary to support the reasonableness of the charges or fees to the 459
respective parties; 460
(5) [the] The insurance company's surplus shall be reasonable in 461
relation to such company's outstanding liabilities and adequate to its 462
financial needs; [and] 463
(6) [agreements] Agreements for cost-sharing services and 464
management shall include such provisions as may be required by 465
regulations adopted by the commissioner; [.] 466
(7) If an insurance company subject to sections 38a-129 to 38a-140, 467
inclusive, as amended by this act, is determined by the commissioner to 468
be in a hazardous financial condition as set forth in sections 38a-8-101 to 469
38a-8-104, inclusive, of the regulations of Connecticut state agencies or 470
a condition that would be grounds for supervision, conservation or a 471
delinquency proceeding as set forth in chapter 704c, the commissioner 472
may require the insurance company to secure and maintain either a 473
deposit, held by the commissioner, or a bond, as determined by the 474
insurance company at the insurance company's discretion, for the 475
protection of the insurance company for the duration of the contracts or 476
agreements, or the existence of the condition for which the 477
commissioner required the deposit or the bond. In determining whether 478
the bond is required, the commissioner shall consider whether concerns 479
exist with respect to affiliates of the insurance company to fulfill the 480 Substitute Bill No. 5382
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contracts or agreements if the insurance company were to be put into 481
liquidation. Once the insurance company is determined to be in a 482
hazardous financial condition or a condition that is grounds for 483
supervision, conservation or a delinquency proceeding, and a deposit 484
or bond is necessary, the commissioner may determine the amount of 485
the deposit or bond, not to exceed the value of the contracts or 486
agreements in any one year, and whether such deposit or bond shall be 487
required for a single contract, multiple contracts or a contract only with 488
a specific affiliate of the insurance company; 489
(8) All records and data of the insurance company held by an affiliate 490
shall remain the property of the insurance company and shall be subject 491
to control of the insurance company, identifiable, and segregated or 492
readily capable of segregation, at no additional cost to the insurance 493
company, from all other persons' records and data, including, but not 494
limited to, all records and data that are otherwise the property of the 495
insurance company, in whatever form maintained, including, but not 496
limited to, claims and claim files, policyholder lists, application files, 497
litigation files, premium records, rate books, underwriting manuals, 498
personnel records, financial records or similar records within the 499
possession, custody or control of the affiliate. At the request of the 500
insurance company, the affiliate shall provide that the receiver can 501
obtain a complete set of all records of any type that pertain to the 502
insurance company's business; obtain access to the operating systems 503
on which the data is maintained; obtain the software that runs such 504
systems either through assumption of licensing agreements or 505
otherwise; and restrict the use of the data by the affiliate if it is not 506
operating the insurance company's business. The affiliate shall provide 507
a waiver of any landlord lien or other encumbrance to give the insurance 508
company access to all records and data in the event of the affiliate's 509
default under a lease or other agreement; and 510
(9) Premiums or other funds that belong to the insurance company 511
that are collected by or held by an affiliate or affiliates are the exclusive 512
property of the insurance company and shall be subject to the control of 513 Substitute Bill No. 5382
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the insurance company. Any right of offset of amounts due to or due 514
from the insurance company and an affiliate or affiliates in the event an 515
insurance company is placed into receivership shall be subject to chapter 516
704c. 517
(b) (1) The following transactions involving a domestic insurance 518
company and any person in its holding company system, including 519
amendments to or modifications of affiliate agreements previously filed 520
pursuant to this section and that are subject to any materiality standards 521
specified in subparagraphs (A) to (G), inclusive, of this subdivision, may 522
not be entered into unless the insurance company has notified the 523
commissioner in writing of its intention to enter into such transaction at 524
least thirty days prior thereto, or such shorter period as the 525
commissioner may permit, and the commissioner has approved or not 526
disapproved it within such period. The written notice for such 527
amendments or modifications shall specify the reasons for the change 528
and the financial impact on the domestic insurance company. Not later 529
than thirty days after the termination of a previously filed agreement, 530
the domestic insurance company shall notify the commissioner of such 531
termination for the commissioner's determination of what written notice 532
or filing shall be required, if any: 533
(A) Sales, purchases, exchanges, loans or extensions of credit, or 534
investments, provided such transactions are equal to or exceed: (i) With 535
respect to nonlife insurance companies, the lesser of three per cent of the 536
insurance company's admitted assets or twenty-five per cent of surplus; 537
or (ii) with respect to life insurance companies, three per cent of the 538
insurance company's admitted assets; each as of the thirty-first day of 539
December next preceding; 540
(B) Loans or extensions of credit to any person who is not an affiliate, 541
where the insurance company makes such loans or extensions of credit 542
with the agreement or understanding that the proceeds of such 543
transactions, in whole or in substantial part, are to be used to make loans 544
or extensions of credit to, to purchase assets of, or to make investments 545
in, any affiliate of the insurance company making such loans or 546 Substitute Bill No. 5382
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extensions of credit, provided such transactions are equal to or exceed: 547
(i) With respect to nonlife insurance companies, the lesser of three per 548
cent of the insurance company's admitted assets or twenty-five per cent 549
of surplus; or (ii) with respect to life insurance companies, three per cent 550
of the insurance company's admitted assets; each as of the thirty-first 551
day of December next preceding; 552
(C) Reinsurance agreements or modifications thereto, including (i) all 553
reinsurance pooling agreements, and (ii) agreements in which the 554
reinsurance premium or a change in the insurance company's liabilities, 555
or the projected reinsurance premium or a projected change in the 556
insurance company's liabilities in any of the next three years, equals or 557
exceeds five per cent of the insurance company's surplus, as of the 558
thirty-first day of December next preceding, including those agreements 559
that may require as consideration the transfer of assets from an 560
insurance company to a nonaffiliate, if an agreement or understanding 561
exists between the insurance company and nonaffiliate that any portion 562
of such assets will be transferred to one or more affiliates of the 563
insurance company; 564
(D) All management agreements, service contracts, tax allocation 565
agreements and cost-sharing arrangements; 566
(E) Guarantees by a domestic insurance company, except that a 567
guarantee that is (i) quantifiable as to amount, and (ii) does not exceed 568
the lesser of one-half of one per cent of the insurance company's 569
admitted assets or ten per cent of surplus with regard to policyholders, 570
as of the thirty-first day of December next preceding, shall not be subject 571
to the notice requirement of this subsection; 572
(F) Direct or indirect acquisitions or investments in a person that 573
controls the domestic insurance company or in an affiliate of the 574
insurance company in an amount that, together with the insurance 575
company's present holdings in such investments, exceeds two and one-576
half per cent of the insurance company's surplus with regard to 577
policyholders. This subsection shall not apply to direct or indirect 578 Substitute Bill No. 5382
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acquisitions of or investments in (i) subsidiaries acquired pursuant to 579
section 38a-102d or authorized pursuant to any section of this title other 580
than sections 38a-129 to 38a-140, inclusive, as amended by this act, or (ii) 581
nonsubsidiary affiliates that are subject to the provisions of sections 38a-582
129 to 38a-140, inclusive, as amended by this act; and 583
(G) Any material transactions, specified by regulation, that the 584
commissioner determines may adversely affect the interests of the 585
insurance company's policyholders. 586
(2) Nothing contained in this section shall be deemed to authorize or 587
permit any transactions that, in the case of an insurance company not a 588
member of the same insurance holding company system, would be 589
otherwise contrary to law. 590
(c) A domestic insurance company may not enter into transactions 591
that are part of a plan or series of like transactions with persons within 592
the insurance holding company system if the purpose of those separate 593
transactions is to avoid the statutory threshold amount and thus avoid 594
the review that would otherwise occur. If the commissioner determines 595
that such separate transactions were entered into over any twelve-596
month period for such purpose, the commissioner may exercise 597
authority under section 38a-140. 598
(d) The commissioner, in reviewing transactions pursuant to 599
subsection (b) of this section, shall consider whether the transactions 600
comply with the standards set forth in subsection (a) of this section and 601
whether they may adversely affect the interests of policyholders. 602
(e) Except as may be exempted pursuant to regulations adopted, in 603
accordance with the provisions of chapter 54, by the commissioner or 604
otherwise waived by the commissioner, the commissioner shall be 605
notified not later than thirty days after any material investment of the 606
domestic insurance company in any one corporation if the total 607
investment in such corporation by such insurance company's insurance 608
holding company system exceeds ten per cent of such corporation's 609 Substitute Bill No. 5382
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voting securities. 610
(f) (1) No insurance company subject to registration under section 611
38a-135, as amended by this act, shall pay any extraordinary dividend 612
or make any other extraordinary distribution to its stockholders until 613
the commissioner has approved such payment or until thirty days after 614
the commissioner has received notice from such company of the 615
declaration thereof within which period the commissioner has not 616
disapproved such payment, whichever is sooner. For the purposes of 617
this subsection, an extraordinary dividend or distribution is any 618
dividend or distribution of cash or other property, whose fair market 619
value together with that of other dividends or distributions made within 620
the preceding twelve months, exceeds the greater of (A) ten per cent of 621
such insurance company's surplus as of the thirty-first day of December 622
last preceding, or (B) the net gain from operations of such insurance 623
company, if such company is a life insurance company, or the net 624
income, if such company is not a life insurance company, for the twelve-625
month period ending the thirty-first day of December last preceding, 626
but shall not include pro rata distributions of any class of the insurance 627
company's own securities. 628
(2) Notwithstanding any other provision of law, an insurance 629
company may declare an extraordinary dividend or distribution that is 630
conditional upon the commissioner's approval thereof, but such a 631
declaration shall confer no rights upon stockholders until (A) the 632
commissioner has approved the payment of such dividend or 633
distribution, or (B) until thirty days after such declaration thereof within 634
which period the commissioner has not disapproved such declaration, 635
whichever is sooner. 636
(g) For purposes of sections 38a-129 to 38a-140, inclusive, as amended 637
by this act, in determining whether an insurance company's surplus is 638
reasonable in relation to the insurance company's outstanding liabilities 639
and adequate to its financial needs, the following factors, in addition to 640
others, shall be considered: (1) The size of the insurance company as 641
measured by its assets, capital and surplus, reserves, premium writings, 642 Substitute Bill No. 5382
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insurance in force and other appropriate criteria; (2) the extent to which 643
the insurance company's business is diversified among the several lines 644
of insurance; (3) the number and size of risks insured in each line of 645
business; (4) the nature of the geographical dispersion of the insurance 646
company's insured risks; (5) the nature and extent of the insurance 647
company's reinsurance program; (6) the quality, diversification and 648
liquidity of the insurance company's investment portfolio; (7) the recent 649
past and projected future trend in the size of the insurance company's 650
surplus; (8) the surplus maintained by other comparable insurance 651
companies; (9) the adequacy of the insurance company's reserves; (10) 652
the quality of the company's earnings and the extent to which the 653
reported earnings include extraordinary items; and (11) the quality and 654
liquidity of investments in affiliates. The commissioner may discount 655
any such investment or treat any such investment as a disallowed asset 656
for purposes of determining the adequacy of surplus whenever, in the 657
commissioner's judgment, such investment warrants. 658
(h) (1) Any domestic insurance company that is affiliated with an 659
insurance holding company system shall report for informational 660
purposes to the Insurance Commissioner all dividends and other 661
distributions to securityholders, not later than five business days after 662
the declaration and at least ten days, commencing from the date of 663
receipt by the Insurance Department, prior to payment thereof. 664
(2) No dividend or other distribution may be paid when the surplus 665
of the insurance company is less than the surplus required by section 666
38a-72 for the kind or kinds of business authorized to be transacted by 667
such company, nor when the payment of a dividend or other 668
distribution would reduce its surplus to less than such amount. 669
(3) Except as otherwise provided by law, no dividend or other 670
distribution exceeding an amount equal to an insurance company's 671
earned surplus may be paid without the Insurance Commissioner's 672
prior approval. For purposes of this subsection, "earned surplus" means 673
"unassigned funds-surplus", as defined in the annual report of the 674
insurance company that was most recently submitted pursuant to 675 Substitute Bill No. 5382
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section 38a-53, reduced by twenty-five per cent of unrealized 676
appreciation in value or revaluation of assets or unrealized profits on 677
investments, as defined in such report. 678
(i) (1) The commissioner may require a domestic insurance company 679
of which control has been acquired pursuant to section 38a-130 to 680
submit to a financial examination and a market conduct examination 681
within thirty days after such acquisition in accordance with procedures 682
set forth by NAIC's examiner's handbook and such regulations as the 683
commissioner may adopt. 684
(2) No domestic insurance company of which control has been 685
acquired pursuant to section 38a-130 shall, without the prior approval 686
of the commissioner: (A) Pay or propose to pay any dividend during the 687
period of two years from the date of acquisition of control of such 688
insurance company; (B) acquire or enter into an agreement or 689
understanding to acquire control, during the period of three years after 690
the date of acquisition of control of such insurance company, of any 691
other person or persons whose assets exceed twenty-five million dollars; 692
(C) provide or propose to provide directly or indirectly, during the 693
period of three years after the date of acquisition of control of such 694
insurance company, any loans, advances, guarantees, pledges or other 695
financial assistance; or (D) engage in any material transaction with any 696
person during the period of three years after the date of acquisition of 697
such insurance company. For purposes of this subsection, a "material 698
transaction" shall include, but not be limited to, any transfer or 699
encumbrance of assets not in the ordinary course of business that, 700
together with all other transfers or encumbrances made within the 701
preceding twelve months, exceeds in value the greater of (i) ten per cent 702
of such insurance company's surplus as of the December thirty-first last 703
preceding, or (ii) the net gain from operations of such insurance 704
company, if such company is a life insurance company, or the net 705
investment income of such company, if such company is not a life 706
insurance company, for the twelve-month period ending the December 707
thirty-first last preceding. 708 Substitute Bill No. 5382
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(3) The commissioner shall, upon a written request from the 709
controlled domestic insurance company and, upon public hearing after 710
notice to all interested parties, determine whether any limitations 711
contained in subdivision (2) of this subsection shall be continued, or 712
whether and on what conditions they may be waived. Such 713
determination shall be predicated on the results of the examinations 714
under subdivision (1) of this subsection and such further examinations, 715
if any, the commissioner may require concerning the adequacy of the 716
insurance company's reserves, the effect any proposed transaction will 717
have on the insurance company's surplus, its cash flow needs and its 718
ability to satisfy any reasonably anticipated obligations in the 719
foreseeable future, and any other effect the proposed transaction would 720
have on the financial stability or solvency of the insurance company and 721
the quality and liquidity of its assets. All fees and expenses relating to 722
such examinations shall be paid by the insurance company. 723
(4) Nothing in this subsection shall be interpreted to prohibit any 724
transactions between a domestic insurance company and any of its 725
subsidiaries in the ordinary course of business. 726
(j) (1) Any affiliate that is a party to an agreement or contract with a 727
domestic insurance company that is subject to subparagraph (D) of 728
subdivision (1) of subsection (b) of this section shall be subject to the 729
jurisdiction of any order of rehabilitation or liquidation against the 730
insurance company and to the authority of any rehabilitator or 731
liquidator for the insurance company appointed pursuant to chapter 732
704c, for the purpose of interpreting, enforcing and overseeing the 733
affiliate's obligations under the agreements or contracts to perform 734
services for the insurance company that: 735
(A) Are an integral part of the insurance company's operations, 736
including, but not limited to, management, administration, accounting, 737
data processing, marketing, underwriting, claims handling, investment 738
or any other similar functions; or 739
(B) Are essential to the insurance company's ability to fulfill its 740 Substitute Bill No. 5382
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obligations under insurance policies. 741
(2) The commissioner may require that an agreement or contract 742
pursuant to subparagraph (D) of subdivision (1) of subsection (b) of this 743
section for provisions or services set forth in subparagraphs (A) and (B) 744
of subdivision (1) of this subsection specify that the affiliate consents to 745
the jurisdiction described in subdivision (1) of this subsection. 746
Sec. 4. Section 38a-137 of the general statutes is repealed and the 747
following is substituted in lieu thereof (Effective July 1, 2022): 748
(a) All information, documents, materials and copies thereof obtained 749
by or disclosed to the commissioner or any other person in the course of 750
an examination or investigation made pursuant to section 38a-14a and 751
all information reported, furnished or filed pursuant to sections 38a-131, 752
38a-135, as amended by this act, and 38a-136, as amended by this act, 753
shall (1) be confidential by law and privileged, (2) not be subject to 754
disclosure under section 1-210, (3) not be subject to subpoena, and (4) 755
not be subject to discovery or admissible in evidence in any civil action. 756
The commissioner shall not make such information, documents, 757
materials or copies public without the prior written consent of the 758
insurance company to which it pertains unless the commissioner, after 759
giving the insurance company and its affiliates who would be affected 760
thereby notice and opportunity to be heard, determines that the interests 761
of policyholders, securityholders or the public will be served by the 762
publication thereof, in which event the commissioner may publish all or 763
any part thereof in such manner as the commissioner may deem 764
appropriate. The commissioner may use such information, documents, 765
materials or copies in the furtherance of any regulatory or legal action 766
brought as part of the commissioner's official duties. 767
(b) Neither the commissioner nor any person who receives 768
information, documents, materials or copies as set forth in subsection 769
(a) of this section or with whom such information, documents, materials 770
or copies are shared, while acting under the authority of the 771
commissioner, shall testify or be required to testify in any civil action 772 Substitute Bill No. 5382
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concerning such information, documents, materials or copies. 773
(c) Except as specified in subdivision (2) of subsection (f) of section 774
38a-135, as amended by this act, to assist the commissioner in the 775
performance of the commissioner's duties, the commissioner: 776
(1) May share information, documents, materials or copies thereof, 777
including information, documents, materials or copies deemed 778
confidential and privileged pursuant to subsection (a) of this section, 779
with (A) other state, federal and international regulatory officials, (B) 780
the NAIC [or its affiliate or subsidiaries] and any third-party consultants 781
designated by the commissioner, (C) the International Association of 782
Insurance Supervisors, (D) the Bank for International Settlements, (E) 783
the Federal Insurance Office, (F) state, federal and international law 784
enforcement authorities, and (G) members or participants of a 785
supervisory college, as described in subsection [(n)] (p) of section 38a-786
135, as amended by this act, of which the commissioner is a member or 787
a participant, provided the recipient of any such information, 788
documents, materials or copies agrees, in writing, to maintain the 789
confidentiality and privileged status of such information, documents, 790
materials and copies, and has verified, in writing, the recipient's legal 791
authority to maintain confidentiality; 792
(2) May receive information, documents, materials or copies thereof, 793
including confidential and privileged information, documents, 794
materials or copies, from the NAIC [or its affiliates or subsidiaries] and 795
any third-party consultants designated by the commissioner, the 796
International Association of Insurance Supervisors, the Bank for 797
International Settlements, the Federal Insurance Office, or state, federal 798
and international law enforcement authorities. The commissioner shall 799
maintain as confidential and privileged any information, documents, 800
materials or copies received with notice or the understanding that such 801
information, documents, materials or copies are confidential and 802
privileged under the laws of the jurisdiction that is the source of such 803
information, documents, materials or copies; and 804 Substitute Bill No. 5382
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(3) Shall enter into written agreements consistent with this subsection 805
with the NAIC and any third-party consultants designated by the 806
commissioner, and may enter into written agreements consistent with 807
this subsection with the International Association of Insurance 808
Supervisors or the Bank for International Settlements, governing the 809
sharing and use of information, documents, materials or copies thereof 810
shared or received pursuant to sections 38a-129 to 38a-140, inclusive, as 811
amended by this act. Any such agreement consistent with this 812
subsection shall (A) specify the procedures and protocols regarding the 813
confidentiality and security of information shared (i) with the NAIC [or 814
its affiliates or subsidiaries] or a third-party consultant designated by 815
the commissioner, the International Association of Insurance 816
Supervisors or the Bank for International Settlements pursuant to 817
sections 38a-129 to 38a-140, inclusive, as amended by this act, and (ii) by 818
the NAIC [or its affiliates or subsidiaries] or a third-party consultant 819
designated by the commissioner, the International Association of 820
Insurance Supervisors or the Bank for International Settlements with 821
other state, federal or international regulatory officials, (B) provide that 822
the recipient agrees in writing to maintain the confidentiality and 823
privileged status of the documents, materials or other information and 824
has verified in writing the recipient's legal authority to maintain such 825
confidentiality or privilege, (C) specify that the commissioner shall 826
retain ownership of such information and that the use of such 827
information by the NAIC [or its affiliates or subsidiaries] or a third-party 828
consultant, the International Association of Insurance Supervisors or the 829
Bank for International Settlements is subject to the commissioner's 830
discretion, [(C)] (D) excluding documents, material or information 831
reported pursuant to subsection (h) of section 38a-135, as amended by 832
this act, prohibit the NAIC or third-party consultant designated by the 833
commissioner from storing such information shared pursuant to 834
sections 38a-129 to 38a-140, inclusive, as amended by this act, in a 835
permanent database after the underlying analysis is completed, (E) 836
require prompt notice to be given to an insurance company whose 837
confidential information is in the possession of the NAIC or [its affiliates 838
or subsidiaries] a third-party consultant designated by the 839 Substitute Bill No. 5382
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commissioner, the International Association of Insurance Supervisors or 840
the Bank for International Settlements, if the NAIC or [its affiliates or 841
subsidiaries] a third-party consultant designated by the commissioner, 842
the International Association of Insurance Supervisors or the Bank for 843
International Settlements is subject to a request or subpoena for 844
disclosure or production of such information, [and (D)] (F) require the 845
NAIC or [its affiliates or subsidiaries] a third-party consultant 846
designated by the commissioner, the International Association of 847
Insurance Supervisors or the Bank for International Settlements, if any 848
said entity [or such affiliate or subsidiary] is subject to disclosure of an 849
insurance company's confidential information that has been shared with 850
said entity, [or such affiliate or subsidiary,] to allow such insurance 851
company to intervene in any judicial or administrative action regarding 852
such disclosure or information, and (G) for documents, material or 853
information reported pursuant to subsection (h) of section 38a-135, as 854
amended by this act, in the case of an agreement involving a third-party 855
consultant, provide for notification of the identity of the consultant to 856
the applicable insurer. 857
(d) No waiver of any applicable privilege or claim of confidentiality 858
in any information, documents, materials or copies thereof shall occur 859
as a result of disclosure to the commissioner or of sharing in accordance 860
with this section. Nothing in this section shall be construed to delegate 861
any regulatory authority of the commissioner to any person or entity 862
with which any information, documents, materials or copies thereof 863
have been shared. 864
(e) Any information, documents, materials or copies thereof in the 865
possession of the NAIC or [its affiliates or subsidiaries] a third-party 866
consultant designated by the commissioner, the International 867
Association of Insurance Supervisors or the Bank for International 868
Settlements pursuant to this section shall be confidential by law and 869
privileged and shall not be subject to discovery or admissible in 870
evidence in any civil action in this state. 871 Substitute Bill No. 5382
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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
INS Joint Favorable Subst.