HOUSE BILL No. 2334
AN ACT concerning insurance; relating to captive insurance companies; providing for
incorporated cell captive insurance companies and protected cell captive insurance
companies; enacting the Kansas protected cell captive insurance company act;
providing for the redomestication of a foreign or alien captive insurance company;
providing for a provisional certificate of authority; expanding the types of insurance
that a captive insurance company may provide; extending the period of time in
between financial examinations conducted by the commissioner; exempting a
redomesticated foreign or alien captive insurance company from paying premium tax
for one year; reducing insurance company premium tax rates; discontinuing
remittance and crediting of a portion of the premium tax to the insurance department
service regulation fund; updating the licensing requirements for insurance agents and
public adjusters relating to the suspension, revocation, denial of licensure and license
renewal; authorizing insurers to file certain travel insurance policies under the
accident and health line of insurance; authorizing the commissioner of insurance to
select and announce the version of certain instructions, calculations and documents in
effect for the upcoming calendar year and cause such announcement to be published
in the Kansas register; allowing certain life insurers to follow health financial reports;
adopting certain provisions from the national association of insurance commissioners
holding company system regulatory act relating to group capital calculations and
liquidity stress testing; exempting certain entities from state regulations as health
benefit plans; amending K.S.A. 40-112, 40-202, 40-252, 40-2d01, 40-3302, 40-3305,
40-3306, 40-3307, 40-3308, 40-4304, 40-4312, 40-4314, 40-4602 and 40-5510 and
K.S.A. 2024 Supp. 40-2,239, 40-2c01, 40-4302, 40-4308 and 40-4909 and repealing
the existing sections.
Be it enacted by the Legislature of the State of Kansas:
New Section 1. Sections 1 through 10, and amendments thereto,
shall be known and may be cited as the Kansas protected cell captive
insurance company act.
New Sec. 2. (a) One or more sponsors may form a protected cell
captive insurance company under this act. This act shall apply to
protected cell captive insurance companies.
(b) A protected cell captive insurance company shall be
incorporated as a stock insurer with its capital divided into shares and
held by the stockholders as a mutual corporation, as a nonprofit
corporation with one or more members or as a limited liability
company.
New Sec. 3. As used in this act, unless the context requires
otherwise:
(a) "Act" means the Kansas protected cell captive insurance
company act;
(b) "general account" means all assets and liabilities of a protected
cell captive insurance company not attributable to a protected cell;
(c) "participant" means a person or an entity, authorized to be a
participant by section 5, and amendments thereto, or any affiliate of a
participant, that is insured by a protected cell captive insurance
company if the losses of the participant are limited through a
participant contract;
(d) "participant contract" means a contract by which a protected
cell captive insurance company insures the risks of a participant and
limits the losses of each such participant to its pro rata share of the
assets of one or more protected cells identified in such participant
contract;
(e) "protected cell" means a separate account that is established by
a protected cell captive insurance company formed or licensed pursuant
to this act and in which an identified pool of assets and liabilities are
segregated and insulated by means of this act from the remainder of the
protected cell captive insurance company's assets and liabilities in
accordance with the terms of one or more participant contracts to fund
the liability of the protected cell captive insurance company with
respect to the participants as set forth in the participant contracts;
(f) "protected cell assets" means all assets, contract rights and
general intangibles identified with and attributable to a specific
protected cell of a protected cell captive insurance company;
(g) "protected cell captive insurance company" means any captive
insurance company:
(1) In which the minimum capital and surplus required by the
chapter are provided by one or more sponsors;
(2) that is formed or licensed under this act; HOUSE BILL No. 2334—page 2
(3) that insures the risks of separate participants through
participant contracts; and
(4) that funds its liability to each participant through one or more
protected cells and segregates the assets of each protected cell from the
assets of other protected cells and from the assets of the protected cell
captive insurance company's general account;
(h) "protected cell liabilities" means all liabilities and other
obligations identified with and attributed to a specific protected cell of
a protected cell captive insurance company; and
(i) "protected cell liabilities" means all liabilities and other
obligations identified with and attributed to a specific protected cell of
a protected cell captive insurance company; and
(j) "sponsor" means any person or entity that is approved by the
commissioner to provide all or part of the capital and surplus required
by this act and organize and operate a protected cell captive insurance
company.
New Sec. 4. In addition to the information required by K.S.A. 40-
4302, and amendments thereto, each applicant-protected cell captive
insurance company shall file with the commissioner the following:
(a) Materials demonstrating how the applicant will account for the
loss and expense experience of each protected cell at a level of detail
found to be sufficient by the commissioner, and how it will report such
experience to the commissioner;
(b) a statement acknowledging that all financial records of the
applicant, including records pertaining to any protected cells, shall be
made available for inspection or examination by the commissioner or
the commissioner's designated agent;
(c) all contracts or sample contracts between the applicant and any
participants; and
(d) evidence that expenses shall be allocated to each protected cell
in a fair and equitable manner.
New Sec. 5. A protected cell captive insurance company formed
or licensed under this chapter may establish and maintain one or more
incorporated or unincorporated protected cells to insure risks of one or
more participants, subject to the following conditions:
(a) (1) A protected cell captive insurance company may establish
one or more protected cells if the commissioner has approved in writing
a plan of operation or amendments to a plan of operation submitted by
the protected cell captive insurance company with respect to each
protected cell. A plan of operation includes, but is not limited to, the
specific business objectives and investment guidelines of the protected
cell, except that the commissioner may require additional information
in the plan of operation. The commissioner may put into effect a plan of
operation or amendments to a plan of operation on or before the date
that the approval is signed if the effective date is not earlier than the
date that the plan of operation or amendments to the plan of operation
were filed with the department;
(2) upon the commissioner's written approval of the plan of
operation, the protected cell captive insurance company, in accordance
with the approved plan of operation, may attribute insurance
obligations with respect to its insurance business to the protected cell;
(3) a protected cell shall have its own distinct name or designation
that shall include the words "protected cell" or "incorporated cell." An
incorporated cell formed as a series of a limited liability company shall
bear a distinct name or designation as reflected in its formation
documents and include the words "series cell." Such names or
designations may also be reasonably abbreviated, including, without
limitation, pc or p.c. for "protected cell," ic, i.c., ipc, or i.p.c. for
"incorporated cell" and sc, s.c., spc or s.p.c. for "series cell";
(4) the protected cell captive insurance company shall transfer all
assets attributable to a protected cell to one or more separately
established and identified protected cell accounts bearing the name or
designation of such protected cell. Protected cell assets shall be held in
the protected cell accounts for the purpose of satisfying the obligations HOUSE BILL No. 2334—page 3
of such protected cell;
(5) an incorporated protected cell may be organized and operated
in any form of business organization authorized by the commissioner,
including, but not limited to, an individual series of a limited liability
company as provided for in the Kansas revised limited liability
company act. Each incorporated protected cell of a protected cell
captive insurer shall be treated as a captive insurer for purposes of this
act and shall have the power to enter into contracts, including an
individual series of a limited liability company. Unless otherwise
permitted by the organizational documents of a protected cell captive
insurer, each incorporated protected cell of the protected cell captive
insurer shall have the same directors, secretary and registered office as
the protected cell captive insurer; and
(6) all attributions of assets and liabilities between a protected cell
and the general account shall be in accordance with the plan of
operation and participant contracts approved by the commissioner. No
other attribution of assets or liabilities shall be made by a protected cell
captive insurance company between the protected cell captive
insurance company's general account and its protected cells. Any
attribution of assets and liabilities between the general account and a
protected cell shall be in cash or in readily marketable securities with
established market values.
(b) The creation of a protected cell does not create, with respect to
such protected cell, a legal person separate from the protected cell
captive insurance company unless the protected cell is an incorporated
cell. Amounts attributed to a protected cell under this section, including
assets transferred to a protected cell account, are deemed to be owned
by the protected cell. No protected cell captive insurance company shall
be, or represent itself as a trustee with respect to those protected cell
assets of such protected cell account. Notwithstanding the provisions of
this subsection, the protected cell captive insurance company may
allow for a security interest to attach to protected cell assets or a
protected cell account when in favor of a creditor of the protected cell
and otherwise allowed under applicable law.
(c) This act shall not be construed to prohibit the protected cell
captive insurance company from contracting with or arranging for an
investment advisor, commodity trading advisor or other third party to
manage the protected cell assets of a protected cell if all remuneration,
expenses and other compensation of the third-party advisor or manager
are payable from the protected cell assets of such protected cell and not
from the protected cell assets of other protected cells or the assets of the
protected cell captive insurance company's general account.
(d) (1) A protected cell captive insurance company shall establish
administrative and accounting procedures necessary to properly
identify the one or more protected cells of the protected cell captive
insurance company and the protected cell assets and protected cell
liabilities attributable to the protected cells. The directors of a protected
cell captive insurance company shall keep protected cell assets and
protected cell liabilities:
(A) Separate and separately identifiable from the assets and
liabilities of the protected cell captive insurance company's general
account; and
(B) attributable to one protected cell that is separate and separately
identifiable from protected cell assets and protected cell liabilities
attributable to other protected cells.
(2) If subsection (d)(1) is violated, then the remedy of tracing is
applicable to protected cell assets when commingled with protected cell
assets of other protected cells or the assets of the protected cell captive
insurance company's general account. The remedy of tracing shall not
be construed as an exclusive remedy.
(e) When establishing a protected cell, the protected cell captive
insurance company shall attribute to the protected cell assets a value
that is at least equal to the reserves and other insurance liabilities
attributed to such protected cell. HOUSE BILL No. 2334—page 4
(f) Each protected cell shall be accounted for separately on the
books and records of the protected cell captive insurance company to
reflect the financial condition and results of operations of such
protected cell, net income or loss, dividends or other distributions to
participants and such other factors as may be provided in the participant
contract or required by the commissioner.
(g) No asset of a protected cell shall be chargeable with liabilities
arising out of any other insurance business that the protected cell
captive insurance company may conduct.
(h) No sale, exchange or other transfer of assets shall be made by
such protected cell captive insurance company between or among any
of its protected cells without the consent of such protected cells.
(i) No sale, exchange, transfer of assets, dividend or distribution
shall be made from a protected cell to another protected cell captive
insurance company or participant without the commissioner's approval.
In no event shall the commissioner's approval be given if the sale,
exchange, transfer, dividend or distribution would result in the
insolvency or impairment of a protected cell.
(j) All attributions of assets and liabilities to the protected cells
and the general account shall be in accordance with the plan of
operation approved by the commissioner. No other attribution of assets
or liabilities shall be made by a protected cell captive insurance
company between its general account and any protected cell or between
any protected cells. The protected cell captive insurance company shall
attribute all insurance obligations, assets and liabilities relating to a
reinsurance contract entered into with respect to a protected cell to such
protected cell. The performance under such reinsurance contract and
any tax benefits, losses, refunds or credits allocated pursuant to a tax
allocation agreement to which the protected cell captive insurance
company is a party, including any payments made by or due to be made
to the protected cell captive insurance company pursuant to the terms of
such agreement, shall reflect the insurance obligations, assets and
liabilities relating to the reinsurance contract that are attributed to such
protected cell.
(k) In connection with the conservation, rehabilitation or
liquidation of a protected cell captive insurance company, the assets
and liabilities of a protected cell shall, to the extent that the
commissioner determines that such assets and liabilities are separable,
at all times be kept separate from and shall not be commingled with
those of other protected cells and the protected cell captive insurance
company.
(l) Each protected cell captive insurance company shall annually
file with the commissioner such financial reports as required by the
commissioner. Any such financial report shall include, without
limitation, accounting statements detailing the financial experience of
each protected cell.
(m) Each protected cell captive insurance company shall notify the
commissioner in writing within 10 business days of any protected cell
that is insolvent or otherwise unable to meet its claim or expense
obligations.
(n) No participant contract shall take effect without the
commissioner's prior written approval. The addition of each new
protected cell, the withdrawal of any participant or the termination of
any existing protected cell shall constitute a change in the plan of
operation requiring the commissioner's prior written approval.
(o) The business written by a protected cell captive insurance
company, with respect to each protected cell, shall be:
(1) Fronted by an insurance company licensed under the laws of
any state;
(2) reinsured by a reinsurer authorized or approved by this state;
or
(3) secured by a trust fund in the United States for the benefit of
policyholders and claimants or funded by an irrevocable letter of credit
or other arrangement that is acceptable to the commissioner. The HOUSE BILL No. 2334—page 5
amount of security provided shall be not less than the reserves
associated with those liabilities that are neither fronted nor reinsured,
including reserves for losses, allocated loss adjustment expenses,
incurred but not reported losses and unearned premiums for business
written through the participant's protected cell. The commissioner may
require the protected cell captive insurance company to increase the
funding of any security arrangement established under this subsection.
If the form of security is a letter of credit, the letter of credit shall be
issued or confirmed by a bank approved by the commissioner. A trust
maintained pursuant to this subsection shall be established in a form
and upon such terms approved by the commissioner.
(p) Notwithstanding this act or other laws of Kansas, and in
addition to article 36 of chapter 40 of the Kansas Statutes Annotated,
and amendments thereto, in the event of an insolvency of a protected
cell captive insurance company in which the commissioner determines
that one or more protected cells remain solvent, the commissioner may
separate such cells from the protected cell captive insurance company
and may allow, on application of the protected cell captive insurance
company, for the conversion of such protected cells into one or more
new or existing protected cell captive insurance companies or one or
more other captive insurance companies, pursuant to such plan of
operation as the commissioner deems acceptable.
(q) Biographical affidavits shall not be required for participants in
unincorporated cells. Biographical affidavits shall be required for
owners of incorporated cells, including series members of a series LLC.
(r) A protected cell captive insurance company formed or licensed
under this act may establish and operate unincorporated and
incorporated protected cells.
New Sec. 6. (a) Associations, corporations, limited liability
companies, partnerships, trusts and other business entities may be
participants in any protected cell captive insurance company formed or
licensed under this chapter.
(b) A sponsor may be a participant in a protected cell captive
insurance company.
(c) A participant shall not be required to be a shareholder of the
protected cell captive insurance company or any affiliate thereof.
(d) A participant shall insure only such participant's own risks
through a protected cell captive insurance company, unless otherwise
approved by the commissioner.
New Sec. 7. (a) Notwithstanding the provisions of section 4, and
amendments thereto, the assets of two or more protected cells may be
combined for purposes of investment, and such combination shall not
be construed as defeating the segregation of such assets for accounting
or other purposes.
(b) Notwithstanding any other provision of this act, the
commissioner may approve the use of alternative reliable methods of
valuation and rating.
New Sec. 8. (a) Except as otherwise provided in this section the
insurers supervision, rehabilitation and liquidation act shall apply to a
protected cell captive insurance company.
(b) Upon any order of supervision, rehabilitation, or liquidation of
a protected cell captive insurance company, the receiver shall manage
the assets and liabilities of the protected cell captive insurance
company pursuant to this section.
(c) Notwithstanding the provisions of the insurers supervision,
rehabilitation and liquidation act:
(1) No assets of a protected cell shall be used to pay any expenses
or claims other than those attributable to such protected cell; and
(2) a protected cell captive insurance company's capital and
surplus shall be available at all times to pay any expenses of or claims
against the protected cell captive insurance company.
New Sec. 9. (a) The pleadings in any legal action brought by or
against a protected cell captive insurance company shall specify which
protected cell or cells should be named as a party to the suit. If the HOUSE BILL No. 2334—page 6
general account is party to this suit, it shall be separately identified in
the pleadings as if it were a protected cell.
(b) A legal action brought against a protected cell captive
insurance company that does not specify one or more protected cells
shall be deemed to have been brought against the general account only.
(c) Any protected cell that is not named in the pleadings of the
legal action shall not be deemed to be a party to the legal action. Any
protected cell that is erroneously named as a party or named without
proper cause shall be entitled to prompt dismissal from the legal action.
(d) Unless specified by the plan of operation, participant contract
or other prior contractual agreement, the assets of one protected cell
may not be encumbered or seized to satisfy the obligations of or a
judgment against any other protected cell. No protected cell shall have
a duty to defend the rights and obligations of any other protected cell.
(e) In any legal action involving a protected cell captive insurance
company or a protected cell, any papers, documents or property of a
nonparty protected cell shall be afforded the same status during
discovery as the documents or property of any other unrelated third
party. A nonparty protected cell shall have standing to appear and
petition for any appropriate relief to protect the confidentiality of its
papers or documents.
New Sec. 10. (a) (1) Upon the application of a protected cell
captive insurance company, one of its protected cells may be converted
to any form of captive insurance company authorized pursuant to
chapter 40 of the Kansas Statutes Annotated, and amendments thereto,
with the consent of the commissioner. The commissioner may issue to
the converting protected cell a certificate of authority with an effective
date of its original date of formation as a protected cell.
(2) The following shall be the criteria for determining the filing or
submission requirements of:
(A) A series of a limited liability company, the cell shall file
organizational documents with the secretary of state that comply with
article 43 of chapter 40 and chapters 17 and 56A of the Kansas Statutes
Annotated, and amendments thereto, as applicable. The organizational
documents shall include the date of formation as a series. Upon
conversion, the formation date of the series shall be deemed as the
formation date of the new entity. The new entity shall possess all assets
and liabilities, including outstanding insurance liabilities, owned by the
predecessor series;
(B) any other type of incorporated protected cell entity, then the
converting protected cell shall submit amended organizational
documents to the secretary of state that comply with article 43 of
chapter 40 and chapters 17 and 56A of the Kansas Statutes Annotated,
and amendments thereto, as applicable; or
(C) neither a series of a limited liability company nor an
incorporated protected cell, the cell shall file organizational documents
with the secretary of state that comply with article 43 of chapter 40 and
chapters 17 and 56A of the Kansas Statutes Annotated, and
amendments thereto, as applicable, or any other applicable provision
governing formation of that type of entity. The organizational
documents shall include the date of formation as a cell. Upon
conversion, the formation date of the cell shall be deemed as the
formation date of the new entity. The new entity shall possess all assets
and liabilities, including outstanding insurance liabilities, owned by the
predecessor cell.
(b) A captive insurance company may apply to the commissioner
for conversion to become a protected cell captive insurance company
under any form permitted under this section. Upon compliance with
this section, approval by the commissioner and the filing of amended
organizational documents with the secretary of state, the captive
insurance company shall be issued a revised certificate of authority.
The effective date of the revised protected cell captive insurance
company's certificate of authority shall remain the same as the effective
date of the prior captive insurance company. HOUSE BILL No. 2334—page 7
New Sec. 11. (a) A foreign or alien insurer may become a
domestic captive insurance company by complying with all of the
requirements of chapter 40 of the Kansas Statutes Annotated, and
amendments thereto, relating to the organization and licensing of a
domestic captive insurance company of the same type, with the
approval of the commissioner. A company redomesticating to this state
pursuant to this section may be organized under any lawful corporate
form permitted by chapter 40 of the Kansas Statutes Annotated, and
amendments thereto.
(b) A redomestication pursuant to this section shall be authorized
for insurance companies domiciled in foreign or alien jurisdictions that
authorize the redomestication of insurance companies if, as a result of
the actions taken by the company pursuant to this section to
redomesticate to this state, such insurance company will no longer be a
domestic legal entity of foreign or alien jurisdiction. A company
wishing to redomesticate pursuant to this section shall provide evidence
that the applicable regulatory authority of its domicile consents to the
redomestication.
(c) An insurance company wishing to redomesticate under this
section shall file organizational documents with the secretary of state
that comply with article 43 of chapter 40 and chapters 17 and 56a of the
Kansas Statutes Annotated, and amendments thereto, as applicable, or
any other applicable provision governing formation of such type of
entity.
(d) The insurance company shall file a copy of the secretary of
state's acknowledgement letter with the commissioner, who shall then
issue a certificate of authority, pursuant to K.S.A. 40-4302, and
amendments thereto.
(e) Upon the completion of a redomestication under this section,
the captive insurance company shall be subject to the laws of this state
and considered domiciled in this state. Such captive insurance company
shall be deemed to have a formation date corresponding to its original
formation date in the foreign or alien domicile.
(f) For the purposes of the financial examination required pursuant
to K.S.A. 40-4308, and amendments thereto, any examination
conducted by the foreign or alien domicile that is substantially similar
to an examination that would have been done in this state had the
company been domiciled in this state shall be recognized for the
purposes of establishing the period of time when the next examination
is due.
New Sec. 12. (a) The commissioner is hereby authorized to select
and announce the version of insurance calculations, instructions
promulgated by the NAIC or other documents required by the NAIC
that shall be in effect for the next calendar year. Not later than
December 1 of each year, the commissioner shall cause such
announcement to be published in the Kansas register.
(b) Calculations and instructions include, but are not limited to,
risk-based capital instructions, as used in K.S.A. 40-2c01, and
amendments thereto, risk-based capital managed care instructions, as
used in K.S.A. 40-2d01, and amendments thereto, and group capital
calculation instructions, as used in K.S.A. 40-3302, and amendments
thereto.
Sec. 13. K.S.A. 40-112 is hereby amended to read as follows: 40-
112. (a) For the purpose of maintaining the insurance department and
the payment of expenses incident thereto, there is hereby established
the insurance department service regulation fund in the state treasury,
which shall be administered by the commissioner of insurance. All
expenditures from the insurance department service regulation fund
shall be made in accordance with appropriation acts upon warrants of
the director of accounts and reports issued pursuant to vouchers
approved by the commissioner of insurance or by a person or persons
designated by the commissioner.
(b) On and after the effective date of this act January 1, 2026, all
fees received by the commissioner of insurance pursuant to any statute HOUSE BILL No. 2334—page 8
and 1% of taxes received pursuant to K.S.A. 40-252, and amendments
thereto, shall be remitted to the state treasurer in accordance with the
provisions of K.S.A. 75-4215, and amendments thereto. Upon receipt
of each such remittance, the state treasurer shall deposit the entire
amount in the state treasury to the credit of the insurance department
service regulation fund.
(c) Except as otherwise provided by this section, the
commissioner of insurance shall make an annual assessment on each
group of affiliated insurers whose certificates of authority to do
business in this state are in good standing at the time of the assessment.
The total amount of all such assessments for a fiscal year shall be equal
to the amount sufficient whichthat, when combined with the total
amount to be credited to the insurance department service regulation
fund pursuant to subsection (b) is equal to the amount approved by the
legislature to fund the insurance company regulation program. With
respect to each group of affiliated insurers, such assessment shall be in
proportion to the amount of total assets of the group of affiliated
insurers as reported to the commissioner of insurance pursuant to
K.S.A. 40-225, and amendments thereto, for the immediately preceding
calendar year, shall not be less than $500 and shall not be more than the
amount equal to .0000015 of the amount of total assets of the group of
affiliated insurers or $25,000, whichever is less. The total assessment
for any fiscal year shall not increase by any amount greater than 15% of
the total budget approved by the legislature to fund the insurance
company regulation program for the fiscal year immediately preceding
the fiscal year for which the assessment is made. In the event the total
amount of the assessment would be less than the aggregate amount
resulting by assessing the $500 minimum on each insurer, the
commissioner may establish a lower minimum to be assessed equally
on each insurer.
(d) If, by the laws of any state other than Kansas or by the
retaliatory laws of any state other than Kansas, any insurer domiciled in
Kansas shall be required to pay any fee or tax in such other state of
licensure, and the fee or tax is due and payable either because the
insurance department service regulation fee imposed by this section on
insurers licensed in Kansas and organized or domiciled in such other
state is greater than the comparable fee or tax assessed in such other
state, or such other state has no comparable fee or tax but requires
payment on a retaliatory basis, then to the extent such fee or tax
amounts are legally due and are paid in such other state, any insurer
domiciled in Kansas may claim a dollar-for-dollar credit for such fees
paid against insurer's annual premium taxes due the state of Kansas
under K.S.A. 40-252, and amendments thereto, or privilege fee due the
state of Kansas under K.S.A. 40-3213, and amendments thereto, but
such credit shall only be calculated on the amount which that would not
have been required to be paid in such other state of licensure in the
absence of the existence of the insurance department service regulation
fee imposed by this section, and in no event shall the credit permitted
by this section exceed 90% of the insurer's annual premium tax or
privilege fee due the state of Kansas. The insurance commissioner shall
prescribe the forms for reporting such credits.
(e) Assessments payable under this section shall be past due if not
paid to the insurance department within 45 days of the billing date of
such assessment. A penalty equal to 10% of the amount assessed shall
be imposed upon any past due payment and the total amount of the
assessment and penalty shall bear interest at the rate of 1.5% per month
or any portion thereof.
(f) When there exists in the insurance department service
regulation fund a deficiency which that would render such fund
temporarily insufficient during any fiscal year to meet the insurance
department's funding requirements, the commissioner of insurance shall
certify the amount of the insufficiency. Upon receipt of any such
certification, the director of accounts and reports shall transfer an
amount of moneys equal to the amount so certified from the state HOUSE BILL No. 2334—page 9
general fund to the insurance department service regulation fund. On
June 30 of any fiscal year during which an amount or amounts are
certified and transferred under this subsection, the director of accounts
and reports shall provide for the repayment of the amounts so
transferred and shall transfer the amount equal to the total of all such
amounts transferred during the fiscal year from the insurance
department service regulation fund to the state general fund.
(g) Any unexpended balance in the insurance department service
regulation fund at the close of a fiscal year shall remain credited to the
insurance department service regulation fund for use in the succeeding
fiscal year and shall be used to reduce future assessments or to
accommodate cash flow demands on the fund.
(h) The commissioner of insurance shall exempt the assessment of
any insurer which that, as of December 31 of the calendar year
preceding the assessment, has a surplus of less than two times the
minimum amount of surplus required for a certificate of authority on
and after May 1, 1994, and which is subject to the premium tax or
privilege fee liability imposed on insurers organized under the laws of
this state. The commissioner of insurance may also exempt or defer, in
whole or in part, the assessment of any other insurer if, in the opinion
of the commissioner of insurance, immediate payment of the total
assessment would be detrimental to the solvency of the insurer.
(i) As used in this section:
(1) "Affiliates" or "affiliated" has the meaning ascribed by K.S.A.
40-3302, and amendments thereto;
(2) "group" or "group of affiliated insurers" means the affiliated
insurers of a group and also includes an individual, unaffiliated insurer;
and
(3) "insurer" means any insurance company, as defined by K.S.A.
40-201, and amendments thereto, any fraternal benefit society, as
defined by K.S.A. 40-738, and amendments thereto, any reciprocal or
interinsurance exchange under K.S.A. 40-1601 through 40-1614, and
amendments thereto, any mutual insurance company organized to
provide health care provider liability insurance under K.S.A. 40-12a01
through 40-12a09, and amendments thereto, any nonprofit dental
service corporation under K.S.A. 40-19a01 through 40-19a14, and
amendments thereto, any nonprofit medical and hospital service
corporation under K.S.A. 40-19c01 through 40-19c11, and amendments
thereto, any health maintenance organization, as defined by K.S.A. 40-
3202, and amendments thereto, or any captive insurance company, as
defined by K.S.A. 40-4301, and amendments thereto, which that is
authorized to do business in Kansas.
Sec. 14. K.S.A. 40-202 is hereby amended to read as follows: 40-
202. Nothing contained in this code shall apply to:
(a) Grand or subordinate lodges of any fraternal benefit society
which that admits to membership only persons engaged in one or more
hazardous occupations in the same or similar line of business or to
fraternal benefit societies as defined in and organized under article 7 of
chapter 40 of the Kansas Statutes Annotated, and amendments thereto,
unless they be expressly designated;
(b) the employees of a particular person, firm, or corporation;
(c) mercantile associations which that simply guarantee insurance
to each other in the same lines of trade and do not solicit insurance
from the general public;
(d) the Swedish mutual aid association of Rapp, Osage county,
Kansas;
(e) the Scandia mutual protective insurance company, of Chanute,
Kansas;
(f) the Seneca and St. Benedict mutual fire insurance company of
Nemaha county, Kansas;
(g) the mutual insurance system practiced in the Mennonite
church, in accordance with an old custom, either by the congregation
themselves or by special associations, of its members in Kansas;
(h) the Kansas state high-school activities association; HOUSE BILL No. 2334—page 10
(i) the mutual aid association of the church of the brethren; or
(j) a voluntary noncontractual mutual aid arrangement whereby
the needs of participants are announced and accommodated through
subscriptions to a monthly publication;
(k) a self-funded health plan established or maintained for its
employees by the state or a subdivision of the state, a school district,
any public authority or by a county or city government or any political
subdivision, agency or instrumentality thereof; or
(l) a self-funded health plan established or maintained for its
employees by a church or by a convention or association of churches
that is exempt from tax under section 501 of the internal revenue code.
Sec. 15. K.S.A. 40-252 is hereby amended to read as follows: 40-
252. Every insurance company or fraternal benefit society organized
under the laws of this state or doing business in this state shall pay to
the commissioner of insurance fees and taxes specified in the following
schedule:
A
Insurance companies organized under the laws of this state:
1.Capital stock insurance companies and mutual legal reserve life
insurance companies:
Filing application for sale of stock or certificates of indebtedness$25
Admission fees:
Examination of charter and other documents.................................500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
2.Mutual life, accident and health associations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
3.Mutual fire, hail, casualty and multiple line insurers and reciprocal
or interinsurance exchanges:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
In addition to the above fees and as a condition precedent to the
continuation of the certificate of authority provided in this code, all
such companies shall pay a fee of $2 for each agent certified by the
company and shall also pay a tax annually upon all premiums received
on risk located in this state at the rate of 1% for tax year 1997, and 2%
for tax year 2025 and 1.98% for tax year 2026, and all tax years
thereafter, per annum less (1) for tax years prior to 1984, any taxes paid
on business in this state pursuant to the provisions of K.S.A. 40-1701 to
40-1707, inclusive, and 75-1508, and amendments thereto, and (2) for
tax years 1984 and thereafter, any taxes paid on business in this state
pursuant to the provisions of K.S.A. 75-1508, and amendments thereto,
and the amount of the firefighters relief tax credit determined by the
commissioner of insurance. The amount of the firefighters relief tax
credit for a company for the current tax year shall be determined by the
commissioner of insurance by dividing (A) the total amount of credits
against the tax imposed by this section for taxes paid by all such
companies on business in this state under K.S.A. 40-1701 to 40-1707,
inclusive, and amendments thereto, for tax year 1983, by (B) the total
amount of taxes paid by all such companies on business in this state HOUSE BILL No. 2334—page 11
under K.S.A. 40-1703, and amendments thereto, for the tax year
immediately preceding the current tax year, and by multiplying the
result so obtained by (C) the amount of taxes paid by the company on
business in this state under K.S.A. 40-1703, and amendments thereto,
for the current tax year.
In the computation of the gross premiums all such companies shall
be entitled to deduct any premiums returned on account of
cancellations, including funds accepted before January 1, 1997, and
declared and taxed as annuity premiums which that, on or after January
1, 1997, are withdrawn before application to the purchase of annuities,
all premiums received for reinsurance from any other company
authorized to do business in this state, dividends returned to
policyholders and premiums received in connection with the funding of
a pension, deferred compensation, annuity or profit-sharing plan
qualified or exempt under sections 401, 403, 404, 408, 457 or 501 of
the United States internal revenue code of 1986. Funds received by life
insurers for the purchase of annuity contracts and funds applied by life
insurers to the purchase of annuities shall not be deemed taxable
premiums or be subject to tax under this section for tax years
commencing on or after January 1, 1997.
B
Fraternal benefit societies organized under the laws of this state:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
C
Mutual nonprofit hospital service corporations, nonprofit medical
service corporations, nonprofit dental service corporations, nonprofit
optometric service corporations and nonprofit pharmacy service
corporations organized under the laws of this state:
1.Mutual nonprofit hospital service corporations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
2.Nonprofit medical service corporations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
3.Nonprofit dental service corporations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
4.Nonprofit optometric service corporations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees: HOUSE BILL No. 2334—page 12
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
5.Nonprofit pharmacy service corporations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
In addition to the above fees and as a condition precedent to the
continuation of the certificate of authority, provided in this code, every
corporation or association shall pay annually to the commissioner of
insurance a tax in an amount equal to 1% for tax year 1997, and 2% for
tax year 2025 and 1.98% for tax year 2026, and all tax years thereafter,
per annum of the total of all premiums, subscription charges, or any
other term which that may be used to describe the charges made by
such corporation or association to subscribers for hospital, medical or
other health services or indemnity received during the preceding year.
In such computations all such corporations or associations shall be
entitled to deduct any premiums or subscription charges returned on
account of cancellations and dividends returned to members or
subscribers.
D
Insurance companies organized under the laws of any other state,
territory or country:
1.Capital stock insurance companies and mutual legal reserve life
insurance companies:
Filing application for sale of stock or certificates of indebtedness$25
Admission fees:
Examination of charter and other documents.................................500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
In addition to the above fees all such companies shall pay $5 for
each agent certified by the company, except as otherwise provided by
law.
As a condition precedent to the continuation of the certificate of
authority, provided in this code, every company organized under the
laws of any other state of the United States or of any foreign country
shall pay a tax upon all premiums received during the preceding year at
the rate of 2% for tax year 2025 and 1.98% for tax year 2026, and all
tax years thereafter, per annum.
In the computation of the gross premiums all such companies shall
be entitled to deduct any premiums returned on account of
cancellations, including funds accepted before January 1, 1997, and
declared and taxed as annuity premiums which that, on or after January
1, 1997, are withdrawn before application to the purchase of annuities,
dividends returned to policyholders and all premiums received for
reinsurance from any other company authorized to do business in this
state and premiums received in connection with the funding of a
pension, deferred compensation, annuity or profit-sharing plan
qualified or exempt under sections 401, 403, 404, 408, 457 or 501 of
the United States internal revenue code of 1986. Funds received by life
insurers for the purchase of annuity contracts and funds applied by life
insurers to the purchase of annuities shall not be deemed taxable
premiums or be subject to tax under this section for tax years
commencing on or after January 1, 1997.
2. Mutual life, accident and health associations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100 HOUSE BILL No. 2334—page 13
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
In addition to the above fees, every such company organized under
the laws of any other state of the United States shall pay $5 for each
agent certified by the company, and shall pay a tax annually upon all
premiums received at the rate of 2% for tax year 2025 and 1.98% for
tax year 2026, and all tax years thereafter, per annum.
In the computation of the gross premiums all such companies shall
be entitled to deduct any premiums returned on account of
cancellations, including funds accepted before January 1, 1997, and
declared and taxed as annuity premiums which that, on or after January
1, 1997, are withdrawn before application to the purchase of annuities,
dividends returned to policyholders and all premiums received for
reinsurance from any other company authorized to do business in this
state and premiums received in connection with the funding of a
pension, deferred compensation, annuity or profit-sharing plan
qualified or exempt under sections 401, 403, 404, 408, 457 or 501 of
the United States internal revenue code of 1986. Funds received by life
insurers for the purchase of annuity contracts and funds applied by life
insurers to the purchase of annuities shall not be deemed taxable
premiums or be subject to tax under this section for tax years
commencing on or after January 1, 1997.
3.Mutual fire, casualty and multiple line insurers and reciprocal or
interinsurance exchanges:
Admission fees:
Examination of charter and other documents and issuance of
certificate of authority..................................................................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
In addition to the above fees, every such company or association
organized under the laws of any other state of the United States shall
pay a fee of $5 for each agent certified by the company and shall also
pay a tax annually upon all premiums received at the rate of 2% for tax
year 2025 and 1.98% for tax year 2026, and all tax years thereafter, per
annum.
For tax years 1998 and thereafter, the annual tax shall be reduced by
the "applicable percentage" of: (1) Any taxes paid on business in this
state pursuant to the provisions of K.S.A. 75-1508, and amendments
thereto,; and (2) the amount of the firefighters relief tax credit
determined by the commissioner of insurance. The amount of the
firefighters relief tax credit for a company taxable under this subsection
for the current tax year shall be determined by the commissioner of
insurance by dividing (A) the total amount of taxes paid by all such
companies on business in this state under K.S.A. 40-1701 to 40-1707,
and amendments thereto, for tax year 1983 as then in effect, by (B) the
total amount of taxes paid by all such companies on business in this
state under K.S.A. 40-1703, and amendments thereto, for the tax year
immediately preceding the current tax year, and by multiplying the
result so obtained by (C) the amount of taxes paid by the company on
business in this state under K.S.A. 40-1703, and amendments thereto,
for the current tax year. The "applicable percentage" shall be as
follows: 100%.
Tax Year Applicable Percentage
1998 10%
1999 20%
2000 40%
2002 50%
2003 60% HOUSE BILL No. 2334—page 14
2004 70%
2005 80%
2006 90%
2007 and thereafter100%
In the computation of the gross premiums all such companies shall
be entitled to deduct any premiums returned on account of
cancellations, all premiums received for reinsurance from any other
company authorized to do business in this state, and dividends returned
to policyholders.
E
Fraternal benefit societies organized under the laws of any other state,
territory or country:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
F
Mutual nonprofit hospital service corporations, nonprofit medical
service corporations, nonprofit dental service corporations, nonprofit
optometric service corporations and nonprofit pharmacy service
corporations organized under the laws of any other state, territory or
country:
1.Mutual nonprofit hospital service corporations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
2.Nonprofit medical service corporations, nonprofit dental service
corporations, nonprofit optometric service corporations and
nonprofit pharmacy service corporations:
Admission fees:
Examination of charter and other documents...............................$500
Filing annual statement..................................................................100
Certificate of authority.....................................................................10
Annual fees:
Filing annual statement..................................................................100
Continuation of certificate of authority............................................10
In addition to the above fees and as a condition precedent to the
continuation of the certificate of authority, provided in this code, every
corporation or association shall pay annually to the commissioner of
insurance a tax in an amount equal to 2% for tax year 2025 and 1.98%
for tax year 2026, and all tax years thereafter, per annum of the total of
all premiums, subscription charges, or any other term which that may
be used to describe the charges made by such corporation or association
to subscribers in this state for hospital, medical or other health services
or indemnity received during the preceding year. In such computations
all such corporations or associations shall be entitled to deduct any
premiums or subscription charges returned on account of cancellations
and dividends returned to members or subscribers.
G
Payment of Taxes.
For the purpose of insuring the collection of the tax upon premiums,
assessments and charges as set out in subsection A, C, D or F, every
insurance company, corporation or association shall at the time it files
its annual statement, as required by the provisions of K.S.A. 40-225,
and amendments thereto, make a return, generated by or at the direction
of its president and secretary or other chief officers, under penalty of HOUSE BILL No. 2334—page 15
K.S.A. 21-5824, and amendments thereto, to the commissioner of
insurance, stating the amount of all premiums, assessments and charges
received by the companies or corporations in this state, whether in cash
or notes, during the year ending on the December 31 next preceding.
Commencing in 1985 and annually thereafter the estimated taxes
shall be paid as follows: On or before June 15 and December 15 of
such year an amount equal to 50% of the full amount of the prior year's
taxes as reported by the company shall be remitted to the commissioner
of insurance. As used in this paragraph, "prior year's taxes" includes:
(1) Taxes assessed pursuant to this section for the prior calendar year,;
(2) fees and taxes assessed pursuant to K.S.A. 40-253, and amendments
thereto, for the prior calendar year,; and (3) taxes paid for maintenance
of the department of the state fire marshal pursuant to K.S.A. 75-1508,
and amendments thereto, for the prior calendar year.
Upon the receipt of such returns the commissioner of insurance shall
verify the same and assess the taxes upon such companies, corporations
or associations on the basis and at the rate provided herein and the
balance of such taxes shall thereupon become due and payable giving
credit for amounts paid pursuant to the preceding paragraph, or the
commissioner shall make a refund if the taxes paid in the prior June and
December are in excess of the taxes assessed.
All reports and returns required by this act and rules and
regulations adopted pursuant thereto shall be preserved for three years
and thereafter until the commissioner orders them to be destroyed.
H
The fee prescribed for the examination of charters and other
documents shall apply to each company's initial application for
admission and shall not be refundable for any reason.
Sec. 16. K.S.A. 2024 Supp. 40-2,239 is hereby amended to read as
follows: 40-2,239. (a) Notwithstanding any other provision of chapter
40 of the Kansas Statutes Annotated, and amendments thereto, travel
insurance shall be classified and filed for purposes of rates and forms
under an inland marine line of insurance. Travel insurance that
provides coverage for sickness, accident, disability or death occurring
during travel either exclusively, or in conjunction with related
coverages of emergency evacuation or repatriation of remains, may be
classified and filed under either an accident and health or an inland
marine line of insurance.
(b) Travel insurance may be in the form of an individual, group or
blanket policy.
(c) Eligibility and underwriting standards for travel insurance may
be developed and provided based on travel protection plans designed
for individual or identified marketing or distribution channels, provided
if those standards also meet underwriting standards of the state for
inland marine insurance.
Sec. 17. K.S.A. 2024 Supp. 40-2c01 is hereby amended to read as
follows: 40-2c01. As used in this act:
(a) "Adjusted RBC report" means an RBC report that has been
adjusted by the commissioner in accordance with K.S.A. 40-2c04, and
amendments thereto.
(b) "Corrective order" means an order issued by the commissioner
specifying corrective actions that the commissioner has determined are
required to address an RBC level event.
(c) "Domestic insurer" means any insurance company or risk
retention group that is licensed and organized in this state.
(d) "Foreign insurer" means any insurance company or risk
retention group not domiciled in this state that is licensed or registered
to do business in this state pursuant to article 41 of chapter 40 of the
Kansas Statutes Annotated, and amendments thereto, or K.S.A. 40-209,
and amendments thereto.
(e) "NAIC" means the national association of insurance
commissioners.
(f) "Life and health insurer" means any insurance company
licensed under article 4 or 5 of chapter 40 of the Kansas Statutes HOUSE BILL No. 2334—page 16
Annotated, and amendments thereto, or a licensed property and
casualty insurer writing only accident and health insurance.
(g) "Property and casualty insurer" means any insurance company
licensed under articles 9, 10, 11, 12, 12a, 15 or 16 of chapter 40 of the
Kansas Statutes Annotated, and amendments thereto, but does not
include monoline mortgage guaranty insurers, financial guaranty
insurers and title insurers.
(h) "Negative trend" means, with respect to a life and health
insurer, a negative trend over a period of time, as determined in
accordance with the "trend test calculation" included in the RBC
instructions defined in subsection (j).
(i) "RBC" means risk-based capital.
(j) "RBC instructions" means the risk-based capital instructions
promulgated by the NAIC that are in effect on December 31, 2023, or
any later version promulgated by the NAIC as may be adopted by the
as announced and noticed by the commissioner under K.S.A. 40-2c29
pursuant to section 12, and amendments thereto.
(k) "RBC level" means an insurer's company action level RBC,
regulatory action level RBC, authorized control level RBC or
mandatory control level RBC where:
(1) "Company action level RBC" means, with respect to any
insurer, the product of 2.0 and its authorized control level RBC;
(2) "regulatory action level RBC" means the product of 1.5 and its
authorized control level RBC;
(3) "authorized control level RBC" means the number determined
under the risk-based capital formula in accordance with the RBC
instructions; and
(4) "mandatory control level RBC" means the product of 0.70 and
the authorized control level RBC.
(l) "RBC plan" means a comprehensive financial plan containing
the elements specified in K.S.A. 40-2c06, and amendments thereto. If
the commissioner rejects the RBC plan, and it is revised by the insurer,
with or without the commissioner's recommendation, the plan shall be
called the "revised RBC plan."
(m) "RBC report" means the report required by K.S.A. 40-2c02,
and amendments thereto.
(n) "Total adjusted capital" means the sum of:
(1) An insurer's capital and surplus or surplus only if a mutual
insurer; and
(2) such other items, if any, as the RBC instructions may provide.
(o) "Commissioner" means the commissioner of insurance.
Sec. 18. K.S.A. 40-2d01 is hereby amended to read as follows: 40-
2d01. As used in K.S.A. 40-2d01 through 40-2d30, and amendments
thereto:
(a) "Adjusted RBC report" means an RBC report which that has
been adjusted by the commissioner in accordance with K.S.A. 40-2d04,
and amendments thereto.
(b) "Corrective order" means an order issued by the commissioner
specifying corrective actions which that the commissioner has
determined are required.
(c) "Domestic health organization" means any health organization
which that is licensed and organized in this state.
(d) "Foreign health organization" means any health organization
not domiciled in this state which that is licensed to do business in this
state pursuant to articles 19a, 19c or 32 of chapter 40 of the Kansas
Statutes Annotated, and amendments thereto.
(e) "NAIC" means the national association of insurance
commissioners.
(f) "Health organization" means a health maintenance
organization, limited health service organization, dental or vision plan,
hospital, medical and dental indemnity or service corporation or other
managed care organization licensed under articles 19a, 19c or 32 of
chapter 40 of the Kansas Statutes Annotated, and amendments thereto.
This definition shall, or an organization that is licensed as a life and HOUSE BILL No. 2334—page 17
health insurer under article 4 of chapter 40 of the Kansas Statutes
Annotated, and amendments thereto, and has been determined by the
commissioner to report predominantly health lines of business in
accordance with a health statement test. "Health organization" does
not include an organization that is licensed as either a life and health
insurer or a property and casualty insurer under articles 4, 5, 9, 10, 11,
12, 12a, 15 or 16 of chapter 40 of the Kansas Statutes Annotated, and
amendments thereto, and that is otherwise subject to either the life or
property and casualty RBC requirements in K.S.A. 40-2c01 et seq., and
amendments thereto.
(g) "RBC" means risk-based capital.
(h) "RBC instructions" means the risk-based capital instructions
for managed care organizations promulgated by the NAIC which that
are in effect on December 31, 1999, or any later version as adopted by
as announced and noticed by the commissioner in rules and regulations
pursuant to section 12, and amendments thereto.
(i) "RBC level" means a health organization's company action
level RBC, regulatory action level RBC, authorized control level RBC,
or mandatory control level RBC where:
(1) "Company action level RBC" means, with respect to any
health organization, the product of 2.0 and its authorized control level
RBC;
(2) "regulatory action level RBC" means the product of 1.5 and its
authorized control level RBC;
(3) "authorized control level RBC" means the number determined
under the risk-based capital formula in accordance with the RBC
instructions; and
(4) "mandatory control level RBC" means the product of .70 and
the authorized control level RBC.
(j) "RBC plan" means a comprehensive financial plan containing
the elements specified in K.S.A. 40-2d05, and amendments thereto. If
the commissioner rejects the RBC plan, and it is revised by the health
organization, with or without the commissioner's recommendation, the
plan shall be called the "revised RBC plan."
(k) "RBC report" means the report required by K.S.A. 40-2d02,
40-2d03 and 40-2d04, and amendments thereto.
(l) "Total adjusted capital" means the sum of:
(1) A health organization's capital and surplus as determined in
accordance with the annual financial statements required to be filed
under articles 19a, 19c or 32 of chapter 40 of the Kansas Statutes
Annotated, and amendments thereto; and
(2) such other items, if any, as the RBC instructions may provide.
(m) "Commissioner" means the commissioner of insurance.
Sec. 19. K.S.A. 40-3302 is hereby amended to read as follows: 40-
3302. As used in the insurance holding company act, unless the context
otherwise requires:
(a) "Affiliate" of, or person "affiliated" with, a specific person,
means a person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, the person specified.
(b) "Commissioner of insurance" or "commissioner" means the
commissioner of insurance, the commissioner's deputies, or the
insurance department, as appropriate.
(c) "Control" including the terms "controlling," "controlled by"
and "under common control with," means the possession, direct or
indirect, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of
voting securities, by contract other than a commercial contract for
goods or nonmanagement services, or otherwise, unless the power is
the result of an official position with or corporate office held by the
person. Control shall be presumed to exist if any person, directly or
indirectly, owns, controls, holds with the power to vote, or holds
proxies representing 10% or more of the voting securities of any other
person. This presumption may be rebutted by a showing made in the HOUSE BILL No. 2334—page 18
manner provided by K.S.A. 40-3305(k), and amendments thereto, that
control does not exist in fact. The commissioner of insurance may
determine, after a hearing in accordance with the provisions of the
Kansas administrative procedure act, that control exists in fact,
notwithstanding the absence of a presumption to that effect.
(d) "Enterprise risk" means any activity, circumstance, event or
series of events involving one or more affiliates of an insurer that, if not
remedied promptly, is likely to have a material adverse effect upon the
financial condition or liquidity of the insurer or its insurance holding
company system as a whole, including, but not limited to, anything that
would cause the insurer's risk-based capital to fall into company action
level RBC, as such term is defined in either K.S.A. 40-2c01 et seq., and
amendments thereto, or K.S.A. 40-2d01 et seq., and amendments
thereto, as appropriate, or would cause the insurer to be in hazardous
financial condition as set forth in K.S.A. 40-222b, 40-222c and 40-
222d, and amendments thereto.
(e) "Financial analysis handbook" means the version of the NAIC
financial analysis handbook adopted by the NAIC and in effect that has
been selected and noticed by the commissioner pursuant to section 12,
and amendments thereto.
(f) "Group capital calculation instructions" means the group
capital calculation instructions selected and announced by the
commissioner pursuant to section 12, and amendments thereto.
(g) "Group-wide supervisor" means the regulatory official
authorized to engage in conducting and coordinating group-wide
supervision activities who is determined or acknowledged by the
commissioner under K.S.A. 40-3318, and amendments thereto, to have
sufficient significant contacts with the internationally active insurance
group.
(f)(h) "Insurance holding company system" means two or more
affiliated persons, one or more of which is an insurer.
(g)(i) "Insurer" means any corporation, company, association,
society, fraternal benefit society, health maintenance organization,
nonprofit medical and hospital service corporation, nonprofit dental
service corporation, reciprocal exchange, person or partnership writing
contracts of insurance, indemnity or suretyship in this state upon any
type of risk or loss except lodges, societies, persons or associations
transacting business pursuant to the provisions of K.S.A. 40-202, and
amendments thereto.
(h)(j) "Internationally active insurance group" means an insurance
holding company system that:
(1) Includes an insurer registered under K.S.A. 40-3305, and
amendments thereto; and
(2) meets the following criteria:
(A) Has premiums written in at least three countries;
(B) the percentage of gross premiums written outside the United
States is at least 10% of the insurance holding company system's total
gross written premiums; and
(C) based on a three-year rolling average, the total assets of the
insurance holding company system are at least $50,000,000,000 or the
total gross written premiums of the insurance holding company system
are at least $10,000,000,000.
(i)(k) "NAIC" means the national association of insurance
commissioners.
(l) "NAIC liquidity stress test framework" means the separate
NAIC publication that includes the history of the NAIC's development
of regulatory liquidity stress testing, the scope criteria applicable for a
specific data year and the liquidity stress test instructions and
reporting templates for a specific data year and such scope criteria,
instructions and reporting templates as adopted by the NAIC and as
amended by the NAIC from time to time in accordance with the
procedures adopted by the NAIC and as selected and announced by the
commissioner pursuant to section 12, and amendments thereto.
(m) "Person" means an individual, corporation, a partnership, an HOUSE BILL No. 2334—page 19
association, a joint stock company, a trust, an unincorporated
organization, any similar entity or any combination of the foregoing
acting in concert.
(n) "Scope criteria," as detailed in the NAIC liquidity stress test
framework, are the designated exposure bases along with minimum
magnitudes thereof for the specified data year, used to establish a
preliminary list of insurers considered scoped into the NAIC liquidity
stress test framework for such specified data year.
(j)(o) "Securityholder" of a specified person means one who owns
any security of such person, including common stock, preferred stock,
debt obligations, and any other security convertible into or evidencing
the right to acquire any of the foregoing.
(k)(p) "Subsidiary" of a specified person means an affiliate
controlled by such person, directly, or indirectly, through one or more
intermediaries.
(l)(q) "Voting security" means any security convertible into or
evidencing a right to acquire a voting security.
Sec. 20. K.S.A. 40-3305 is hereby amended to read as follows: 40-
3305. (a) Every insurer that is authorized to do business in this state
and that is a member of an insurance holding company system shall
register with the commissioner of insurance, except a foreign insurer
subject to registration requirements and standards adopted by statute or
regulation in the jurisdiction of its domicile that are substantially
similar to those contained in this section. Any insurer that is subject to
registration under this section shall register within 15 days after it
becomes subject to registration, and annually thereafter by May 1 of
each year unless for the previous calendar year the commissioner of
insurance for good cause shown extends the time for registration, and
then within such extended time. The commissioner of insurance may
require any authorized insurer that is a member of an insurance holding
company system and that is not subject to registration under this
section to furnish a copy of the registration statement, the summary
specified in subsection (c) or other information filed by such insurance
company with the insurance regulatory authority of domiciliary
jurisdiction.
(b) Pursuant to subsection (a), every insurer subject to registration
shall file a registration statement on a form provided by the
commissioner of insurance, that shall contain current information about
regarding:
(1) The capital structure, general financial condition, ownership
and management of the insurer and any person controlling the insurer;
(2) the identity and relationship of every member of the insurance
holding company system;
(3) the following agreements in force and transactions currently
outstanding or that occurred during the last calendar year between such
insurer and its affiliates:
(A) Loans, other investments, or purchases, sales or exchanges of
securities of the affiliates by the insurer or of the insurer by its
affiliates;
(B) purchases, sales or exchanges of assets;
(C) transactions not in the ordinary course of business;
(D) guarantees or undertakings for the benefit of an affiliate that
result in an actual contingent exposure of the insurer's assets to liability,
other than insurance contracts entered into in the ordinary course of the
insurer's business;
(E) all management agreements, service contracts and cost sharing
arrangements;
(F) reinsurance agreements;
(G) dividends and other distributions to shareholders; and
(H) consolidated tax allocation agreements;
(4) other matters concerning transactions between registered
insurers and any affiliates as may be included from time to time in any
registration forms adopted or approved by the commissioner of
insurance; HOUSE BILL No. 2334—page 20
(5) any pledge of the insurer's stock, including stock of any
subsidiary or controlling affiliate, for a loan made to any member of the
insurance holding company system;
(6) financial statements of or within an insurance holding
company system, including all affiliates, if requested by the
commissioner of insurance. Financial statements may include, but are
not be limited to, annual audited financial statements filed with the U.S.
securities and exchange commission (, SEC), pursuant to the securities
act of 1933, as amended, or the securities exchange act of 1934, as
amended. An insurer required to file financial statements pursuant to
this paragraph may satisfy the request by providing the commissioner
of insurance with the most recently filed parent corporation financial
statements that have been filed with the SEC;
(7) statements that the insurer's board of directors and principal
officers oversee corporate governance and internal controls and that the
insurer's principal officers have approved, implemented and continue to
maintain and monitor corporate governance and internal control
procedures; and
(8) any other information required by the commissioner of
insurance by rules and regulations.
(c) All registration statements shall be accompanied by a summary
outlining all items in the current registration statement representing
changes from the prior registration statement.
(d) No information need be disclosed on the registration statement
filed pursuant to subsection (b) if such information is not material for
the purpose of this section. Unless the commissioner of insurance by
rules and regulations or order provides otherwise, sales, purchases,
exchanges, loans or extensions of credit, investments or guarantees,
involving 0.5% or less of an insurer's admitted assets as of the
December 31 immediately next preceding shall be deemed immaterial
for purposes of this section.
(e) Each registered insurer shall keep current the information
required to be disclosed in such insurer's registration statement by
reporting all material changes or additions on amendment forms
provided by the commissioner of insurance within 15 days after the end
of the month in which it learns of each such change or addition, except
that each registered insurer shall report all dividends and other
distributions to shareholders within five business days following its
declaration. Any such dividend or distribution shall not be paid for at
least 10 business days from the commissioner's receipt of the notice of
its declaration.
(f) Any person within an insurance holding company system
subject to registration shall provide complete and accurate information
to an insurer, where if such information is reasonably necessary to
enable the insurer to comply with the provisions of this act.
(g) The commissioner of insurance shall terminate the registration
of any insurer that demonstrates that such insurer is no longer is a
member of an insurance holding company system.
(h) The commissioner of insurance may require or allow two or
more affiliated insurers subject to registration hereunder to file a
consolidated registration statement.
(i) The commissioner of insurance may allow an insurer that is
authorized to do business in this state and that is part of an insurance
holding company system to register on behalf of any affiliated insurer
that is required to register under subsection (a) and to file all
information and material required to be filed under this section.
(j) The provisions of this section shall not apply to any
information or transaction if and to the extent the commissioner of
insurance by rule and regulation or order exempts the same from the
provisions of this section.
(k) Any person may file with the commissioner of insurance a
disclaimer of affiliation with any authorized insurer or such a
disclaimer may be filed by such insurer or any member of an insurance
holding company system. The disclaimer shall fully disclose all HOUSE BILL No. 2334—page 21
material relationships and bases for affiliation between such person and
such insurer as well as the basis for disclaiming such affiliation. After a
disclaimer has been filed, the insurer shall be relieved of any duty to
register or report under this section which that may arise out of the
insurer's relationship with such person unless and until the
commissioner of insurance disallows such a disclaimer. The
commissioner of insurance shall disallow such a disclaimer only after
furnishing all parties in interest with notice and opportunity to be heard
in accordance with the provisions of the Kansas administrative
procedure act.
(l) (1) Except as provided in paragraph (2), the ultimate
controlling person of every insurer subject to registration also shall file
an annual enterprise risk report. The report, to the best of the ultimate
controlling person's knowledge and belief, shall identify the material
risks within the insurance holding company system that could pose
enterprise risk to the insurer. The report shall be appropriate to the
nature, scale and complexity of the insurer. The report shall be filed
with the lead state commissioner of insurance of the insurance holding
company system as determined by the procedures within the financial
analysis handbook adopted by the national association of insurance
commissioners NAIC. The first enterprise risk report shall be filed no
not later than May 1, 2015, and annually thereafter by May 1 of each
year unless the commissioner of insurance extends the time for filing
for good cause shown.
(2) The ultimate controlling person of a domestic insurer that is
authorized, admitted or eligible to engage in the business of insurance
only in this state with total direct and assumed annual premiums of less
than $300 million is not required to submit an enterprise risk report
under paragraph (1) unless the ultimate controlling person of the
domestic insurer also controls other insurers that do not meet the
requirements of this subsection. For the purposes of this subsection, an
insurer is not considered to be authorized, admitted or eligible to
engage in the business of insurance only in this state if the insurer
directly or indirectly writes or assumes insurance in any other manner
in another state (A) Except as provided hereunder, the ultimate
controlling person of every insurer subject to registration shall
concurrently file with the registration an annual group capital
calculation as directed by the lead state commissioner. The report shall
be completed in accordance with the NAIC group capital calculation
instructions, which may permit the lead state commissioner to allow a
controlling person that is not the ultimate controlling person to file the
group capital calculation. The report shall be filed with the lead state
commissioner of the insurance holding company system as determined
by the commissioner of insurance in accordance with the procedures
within the financial analysis handbook. An insurance holding company
system shall be exempt from filing the group capital calculation if:
(i) It has only one insurer within its holding company structure,
only writes business is only licensed in its domestic state and assumes
no business from any other insurer;
(ii) it is required to perform a group capital calculation specified
by the board of governors of the federal reserve system. The lead state
commissioner shall request the calculation from the federal reserve
board under the terms of information sharing agreements in effect. If
the federal reserve board cannot share the calculation with the lead
state commissioner, the insurance holding company shall not be exempt
from the group capital calculation filing;
(iii) its non-United States group-wide supervisor is located within
a reciprocal jurisdiction, as defined in K.S.A. 40-221a, and
amendments thereto, that recognizes the United States regulatory
approach to group supervision and group capital; and
(iv) it is an insurance holding company system:
(a) That provides information to the lead state that meets the
requirements for accreditation under the NAIC financial standards and
accreditation program, either directly or indirectly through the group- HOUSE BILL No. 2334—page 22
wide supervisor, who has determined that such information is
satisfactory to allow the lead state to comply with the NAIC group
supervision approach, as detailed in the NAIC financial analysis
handbook; and
(b) whose non-United States group-wide supervisor who is not in
a reciprocal jurisdiction recognizes and accepts, as specified by the
commissioner in rules and regulations, the group capital calculation as
the worldwide group capital assessment for United States insurance
groups that operate in that jurisdiction.
(B) Notwithstanding the provisions of K.S.A. 40-3305, and
amendments thereto, a lead state commissioner shall require the group
capital calculation for the United States operations of any non-United
States based insurance holding company system if, after any necessary
consultation with other supervisors or officials, it is deemed
appropriate by the lead state commissioner for prudential oversight
and solvency monitoring purposes or for ensuring the competitiveness
of the insurance marketplace.
(C) Notwithstanding the exemptions from filing the group capital
calculation stated in K.S.A. 40-3305, and amendments thereto, the lead
state commissioner has the discretion to exempt the ultimate
controlling person from filing the annual group capital calculation or
to accept a limited group capital filing or report in accordance with
criteria specified by the commissioner in regulation.
(D) If the lead state commissioner determines that an insurance
holding company system no longer meets one or more of the
requirements for an exemption from filing the group capital calculation
under this section, the insurance holding company system shall file the
group capital calculation at the next annual filing date unless given an
extension by the lead state commissioner based on reasonable grounds
shown.
(E) The ultimate controlling person of every insurer subject to
registration and also scoped into the NAIC liquidity stress test
framework shall file the results of a specific year's liquidity stress test.
The filing shall be made to the lead state insurance commissioner of
the insurance holding company system as determined by the
procedures within the financial analysis handbook and that:
(i) The NAIC liquidity stress test framework includes scope
criteria applicable to a specific data year. These scope criteria are
reviewed at least annually by the financial stability task force or its
successor. Any change to the NAIC liquidity stress test framework or to
the data year for which the scope criteria are to be measured shall be
effective on January 1 of the year following the calendar year in which
such changes are adopted. Insurers meeting at least one threshold of
the scope criteria are considered scoped into the NAIC liquidity stress
test framework for the specified data year, unless the lead state
insurance commissioner, in consultation with the NAIC financial
stability task force or its successor, determines that such insurer should
not be scoped into the framework for that data year. Similarly, insurers
that do not trigger at least one threshold of the scope criteria are
considered scoped out of the NAIC liquidity stress test framework for
the specified data year, unless the lead state insurance commissioner,
in consultation with the NAIC financial stability task force or its
successor, determines that the insurer should be scoped into the
framework for that data year.
(ii) The lead state insurance commissioner, in consultation with
the financial stability task force or its successor, shall assess the
concerns of regulators that wish to avoid having insurers scoped in and
out of the NAIC liquidity stress test framework on a frequent basis as
part of the determination for an insurer.
(F) The performance and filing of the results of a specific year's
liquidity stress test shall comply with the NAIC liquidity stress test
framework instructions and reporting templates for that year and any
lead state insurance commissioner determinations, in consultation with
the financial stability task force or its successor, provided within the HOUSE BILL No. 2334—page 23
framework.
(m) The failure of an insurer or an ultimate controlling person of
the insurer to file a registration statement, any summary of the
registration statement or enterprise risk filing within the specified time
for filing shall be a violation by the insurer or by the ultimate
controlling person of the insurer, as applicable.
Sec. 21. K.S.A. 40-3306 is hereby amended to read as follows: 40-
3306. (a) Material Transactions by registered insurers with their
affiliates shall be subject to the following standards:
(1) The terms shall be fair and reasonable;
(2) agreements for cost-sharing services and management shall
include such provisions as required by rules and regulations adopted by
the commissioner of insurance;
(3) the charges or fees for services performed shall be reasonable;
(4) expenses incurred and payment received with respect to such
transactions shall be allocated to the insurer in conformity with the
requirements of K.S.A. 40-225, and amendments thereto;
(5) the books, accounts and records of each party to all such
transactions shall be so maintained as to clearly and accurately disclose
the nature and details of the transactions including such accounting
information necessary to support the reasonableness of the charges or
fees to the respective parties; and
(6) the insurer's surplus as regards policyholders following any
transactions, dividends or distributions to shareholder affiliates shall be
reasonable in relation to the insurer's outstanding liabilities and
adequate to its financial needs.
(b) (1) If an insurer subject to this act is deemed by the
commissioner of insurance to be in a hazardous financial condition as
defined by K.S.A. 40-222d, and amendments thereto, or a condition
that would be grounds for supervision, conservation or a delinquency
proceeding, then the commissioner may require the insurer to secure
and maintain either a deposit, held by the commissioner, or a bond, as
determined by the insurer at the insurer's discretion, for the protection
of the insurer for the duration of the contract or agreement or the
existence of the condition for which the commissioner required the
deposit or the bond.
(2) In determining whether a deposit or a bond is required, the
commissioner shall consider whether concerns exist with respect to the
affiliated person's ability to fulfill the contract or agreement if the
insurer were to be put into liquidation. Once the insurer is deemed to
be in a hazardous financial condition or a condition that would be
grounds for supervision, conservation or a delinquency proceeding and
a deposit or bond is necessary, the commissioner shall have the
discretion to determine the amount of the deposit or bond, not to
exceed the value of the contract or agreement in any one year, and
whether such deposit or bond should be required for a single contract,
multiple contracts or a contract only with a specific person;
(c) All records and data of the insurer held by an affiliate are and
shall remain the property of the insurer, are subject to control of the
insurer, are identifiable and are segregated or readily capable of
segregation, at no additional cost to the insurer from all other persons'
records and data. All records and data that are otherwise the property
of the insurer, in whatever form maintained, including, but not limited
to, claims and claim files, policyholder lists, application files, litigation
files, premium records, rate books, underwriting manuals, personnel
records, financial records or similar records within the possession,
custody or control of the affiliate shall remain the property of the
insurer. At the request of the insurer, the affiliate shall provide that the
receiver may obtain a complete set of all records of any type that
pertain to the insurer's business, obtain access to the operating systems
upon which the data is maintained, obtain the software that runs those
systems either through assumption of licensing agreements or
otherwise and restrict the use of the data by the affiliate if it is not
operating the insurer's business. The affiliate shall provide a waiver of HOUSE BILL No. 2334—page 24
any landlord lien or other encumbrance to provide the insurer with
access to all records and data in the event of the affiliate's default
under a lease or other agreement; and
(d) Premiums or other funds belonging to the insurer that are
collected or held by an affiliate shall be deemed the exclusive property
of and subject to the control of such insurer. Any right of offset in the
event that an insurer is placed into receivership shall be subject to
K.S.A. 40-3605 et seq., and amendments thereto.
(b)(e) The following transactions involving a domestic insurer and
any person in such insurer's insurance holding company system,
including amendments or modifications of affiliate agreements
previously filed pursuant to this section, may not be entered into unless
the insurer has notified the commissioner of insurance in writing of
such insurer's intention to enter into such transaction at least 30 days
prior thereto, or such shorter period as the commissioner of insurance
may permit, and the commissioner of insurance has not disapproved
such transaction within such period.
(1) Sales, purchases, exchanges, loans or extensions of credit,
guarantees or investments provided such transactions are equal to or
exceed:
(A) With respect to nonlife insurers, the lesser of 3% of the
insurer's admitted assets or 25% of surplus as regards policyholders; or
(B) with respect to life insurers, 3% of the insurer's admitted
assets, each as of December 31 immediately preceding.
(2) Loans or extensions of credit to any person who is not an
affiliate, where if the insurer makes such loans or extensions of credit
with the agreement or understanding that the proceeds of such
transactions, in whole or in substantial part, are to be used to make
loans or extensions of credit to, purchase assets of, or make
investments in, any affiliate of the insurer making such loans or
extensions of credit provided if such transactions are equal to or
exceed:
(A) With respect to nonlife insurers, the lesser of 3% of the
insurer's admitted assets or 25% of surplus as regards policyholders;
(B) with respect to life insurers, 3% of the insurer's admitted
assets, each as of December 31 immediately preceding.
(3) Reinsurance agreements or modifications thereto, including:
(A) All reinsurance pooling agreements; and
(B) agreements in which the reinsurance premium or a change in
the insurer's liabilities, or the projected reinsurance premium or a
projected change in the insurer's liabilities in any of the next three
consecutive years equals or exceeds 5% of the insurer's surplus as
regards policyholders, as of December 31 immediately preceding,
including those agreements which that may require as consideration the
transfer of assets from an insurer to a nonaffiliate, if an agreement or
understanding exists between the insurer and nonaffiliate that any
portion of such assets will be transferred to one or more affiliates of the
insurer;
(4) all management agreements, service contracts, tax allocation
agreements and all cost-sharing arrangements; and
(5) any material transactions, specified by rules and regulations,
which that the commissioner of insurance determines may adversely
affect the interests of an insurer's policyholders.
Nothing herein contained in this subsection shall be deemed to
authorize or permit any transactions which, that in the case of an
insurer not a member of the same insurance holding company system,
would be otherwise contrary to law.
(c)(f) A domestic insurer may shall not enter into transactions
which that are part of a plan or series of like transactions with persons
within the insurance holding company system if the purpose of those
separate transactions is to avoid the threshold amount required under
this section and thus avoid the review that would occur otherwise. If the
commissioner of insurance determines that such separate transactions
were entered into over any 12-month period for such purpose, the HOUSE BILL No. 2334—page 25
commissioner of insurance may exercise authority under K.S.A. 40-
3311, and amendments thereto.
(d)(g) The commissioner of insurance, in reviewing transactions
pursuant to subsection (b)(e), shall consider whether the transactions
comply with the standards set forth in subsection (a), and whether such
transactions may adversely affect the interests of policyholders.
(e)(h) The commissioner of insurance shall be notified within 30
days of any investment of the domestic insurer in any one corporation
if the total investment in such corporation by the insurance holding
company system exceeds 10% of such corporation's voting securities.
(f)(i) A transaction subject to approval by the commissioner of
insurance pursuant to K.S.A. 40-3304, and amendments thereto, shall
not be subject to the requirements of this section.
(g)(j) (1) No insurer subject to registration under K.S.A. 40-3305,
and amendments thereto, shall pay any extraordinary dividend or make
any other extraordinary distribution to such insurer's shareholders until:
(A) 30 days after the commissioner of insurance has received
notice of the declaration thereof and has not within such period
disapproved such payment; or
(B) the commissioner of insurance has approved such payment
within such 30-day period.
(2) (A) For purposes of this section, an extraordinary dividend or
distribution includes any dividend or distribution of cash or other
property, the fair market value of which, together with that of other
dividends or distributions made within the preceding 12 months,
exceeds the greater of:
(i) 10% of such insurer's surplus as regards policyholders as of
December 31 immediately preceding; or
(ii) the net gain from operations of such insurer, if such insurer is a
life insurer, or the net income, if such insurer is not a life insurer, not
including realized capital gains for the 12-month period ending
December 31 immediately next preceding, but shall not include pro rata
distributions of any class of the insurer's own securities.
(B) In determining whether a dividend or distribution is
extraordinary, an insurer, other than a life insurer, may carry forward
net income from the previous two calendar years that has not already
been paid out as dividends. This carry-forward carryforward shall be
computed by taking the net income from the second and third preceding
calendar years, not including realized capital gains, less dividends paid
in the second and immediately preceding calendar years.
(C) An extraordinary dividend or distribution shall also include
any dividend or distribution made or paid out of any funds other than
earned surplus arising from the insurer's business, as defined in K.S.A.
40-233, and amendments thereto. The provisions of K.S.A. 40-233, and
amendments thereto, shall not be construed so as to prohibit an insurer,
subject to registration under K.S.A. 40-3305, and amendments thereto,
from making or paying an extraordinary dividend or distribution in
accordance with this section.
(3) Notwithstanding any other provisions of law, an insurer may
declare an extraordinary dividend or distribution which that is
conditional upon the approval of the commissioner of insurance. No
declaration shall confer any rights upon shareholders until:
(A) The commissioner of insurance has approved the payment of
such dividend or distribution; or
(B) the commissioner of insurance has not disapproved such
payment within the 30-day period referred to above.
(h)(k) (1) Notwithstanding the control of a domestic insurer by
any person, the officers and directors of the insurer shall not thereby be
relieved of any obligation or liability to which they would otherwise be
subject by law, and the insurer shall be managed so as to assure its
separate operating identity consistent with this act.
(2) Nothing herein shall preclude a domestic insurer from having
or sharing a common management or cooperative or joint use of
personnel, property or services with one or more other persons under HOUSE BILL No. 2334—page 26
arrangements meeting the standards of K.S.A. 40-3306, and
amendments thereto.
(i) For purposes of this act, in determining whether an insurer's
surplus as regards policyholders is reasonable in relation to the insurer's
outstanding liabilities and adequate to such insurer's financial needs,
the following factors, among others, shall be considered:
(1) The size of the insurer as measured by such insurer's assets,
capital and surplus, reserves, premium writings, insurance in force and
other appropriate criteria;
(2) the extent to which the insurer's business is diversified among
the several lines of insurance;
(3) the number and size of risks insured in each line of business;
(4) the extent of the geographical dispersion of the insurer's
insured risks;
(5) the nature and extent of the insurer's reinsurance program;
(6) the quality, diversification and liquidity of the insurer's
investment portfolio;
(7) the recent past and projected future trend in the size and
performance of the insurer's surplus as regards policyholders;
(8) the surplus as regards policyholders maintained by other
comparable insurers;
(9) the adequacy of the insurer's reserves;
(10) the quality and liquidity of investments in affiliates. The
commissioner of insurance may treat any such investment as a
disallowed asset for purposes of determining the adequacy of surplus as
regards policyholders whenever in the judgment of the commissioner
of insurance such investment so warrants; and
(11) the quality of the insurer's earnings and the extent to which
the reported earnings include extraordinary items.
Sec. 22. K.S.A. 40-3307 is hereby amended to read as follows: 40-
3307. (a) Subject to the limitation contained in this section and in
addition to the powers which that the commissioner of insurance has
under K.S.A. 40-222 and K.S.A. 40-222a, and amendments thereto,
relating to the examination of insurers, the commissioner of insurance
shall have the power to examine any insurer registered under K.S.A.
40-3305, and amendments thereto, and such insurer's affiliates to
ascertain the financial condition, including enterprise risk, of such
insurer including the enterprise risk to the insurer by the ultimate
controlling party or by any entity or combination of entities within the
insurance holding company system or by the insurance holding
company system on a consolidated basis.
(b) (1) The commissioner of insurance may order any insurer
registered under K.S.A. 40-3305, and amendments thereto, to produce
such records, books or other information in the possession of the
insurer or its affiliates as are reasonably necessary to determine
compliance with this act.
(2) To determine compliance with this act, the commissioner of
insurance may order any insurer registered under K.S.A. 40-3305, and
amendments thereto, to produce information not in the possession of
the insurer, if the insurer can obtain access to such information pursuant
to contractual relationships, statutory obligations or another method. In
the event that the insurer cannot obtain the information requested by
the commissioner of insurance, the insurer shall provide the
commissioner of insurance a detailed explanation of the reason that the
insurer cannot obtain the information and the identity of the holder of
information. Whenever it appears to the commissioner of insurance that
the detailed explanation is without merit, the commissioner of
insurance may require, after notice and hearing, the insurer to pay a
penalty of not more than $1,000 for each day's delay, or may suspend
or revoke the license of the insurer.
(c) The commissioner of insurance may retain at the registered
insurer's expense such attorneys, actuaries, accountants and other
experts not otherwise a part of the staff of the commissioner of
insurance as the commissioner of insurance shall determine to be HOUSE BILL No. 2334—page 27
reasonably necessary to assist in the conduct of the examination under
subsection (a). Any persons so retained shall be under the direction and
control of the commissioner of insurance and shall act in a purely
advisory capacity.
(d) Each registered insurer producing examination records, books
and papers pursuant to subsection (a) shall be liable for and shall pay
the expense of such examination in accordance with K.S.A. 40-223 and
K.S.A. 40-253, and amendments thereto.
(e) The commissioner of insurance shall have the power to issue
subpoenas, administer oaths and examine under oath any person for
purposes of determining compliance with this section. Upon the failure
or refusal of any person to obey a subpoena, the commissioner of
insurance may petition a court of competent jurisdiction, and upon
proper showing, the court may enter an order compelling the witness to
appear and testify or produce documentary evidence. Failure to obey
the court order shall be punishable as contempt of court. Every person
subpoenaed shall be obliged to attend as a witness at the place specified
in the subpoena, when subpoenaed, anywhere within the state. Such
subpoenaed person shall be entitled to the same fees and mileage, if
claimed, as a witness in K.S.A. 28-125, and amendments thereto. Fees,
mileage and actual expense, if any, necessarily incurred in securing the
attendance and testimony of witnesses shall be itemized, charged
against and paid by the company being examined.
Sec. 23. K.S.A. 40-3308 is hereby amended to read as follows: 40-
3308. (a) Documents, materials or other information obtained by or
disclosed to the commissioner of insurance or any other person in the
course of an examination or investigation made pursuant to K.S.A. 40-
3307, and amendments thereto, and all information reported pursuant to
K.S.A. 40-3304, 40-3305 and 40-3306, and amendments thereto, shall:
(1) Be confidential and privileged;
(2) not be subject to disclosure under the Kansas open records act,
K.S.A. 45-215 et seq., and amendments thereto;
(3) not be subject to subpoena; and
(4) not be subject to discovery or admissible in evidence in any
private civil action.
(b) (1) The commissioner of insurance shall not otherwise make
the documents, materials or other information public without the prior
written consent of the insurer to which it pertains unless the
commissioner of insurance, after giving the insurer and its affiliates
who would be affected thereby notice and opportunity to be heard in
accordance with the provisions of the Kansas administrative procedure
act, determines that the interests of policyholders, shareholders or the
public would be served by the publication thereof, in which event, the
commissioner of insurance may publish all or any part thereof in such a
manner as the commissioner of insurance may deem appropriate. In
making such determination, the commissioner of insurance also shall
take into consideration any potential adverse consequences of the
disclosure thereof.
(2) For purposes of the information reported and provided to the
commissioner pursuant to K.S.A. 40-3304 through 40-3307, and
amendments thereto, the commissioner shall maintain the
confidentiality of the:
(A) Group capital calculation and group capital ratio produced
within the calculation and any group capital information received from
an insurance holding company supervised by the federal reserve board
or any United States group-wide supervisor; and
(B) liquidity stress test results and supporting disclosures and any
liquidity stress test information received from an insurance holding
company supervised by the federal reserve board and non-United
States group-wide supervisors.
(c) Neither the commissioner of insurance nor any person who
received documents, materials or other information while acting under
the authority of the commissioner of insurance or with whom such
documents, materials or other information are shared pursuant to this HOUSE BILL No. 2334—page 28
section shall be permitted or required to testify in any private civil
action concerning any confidential documents, materials or information
subject to subsection (a).
(d) In order to assist in the performance of the commissioner of
insurance's duties, the commissioner of insurance:
(1) May share documents, materials or other information,
including the confidential and privileged documents, materials or
information subject to subsection (a), with other state, federal and
international regulatory agencies, with the national association of
insurance commissioners and its affiliates and subsidiaries, and with
state, federal and international law enforcement authorities, including
members of any supervisory college described in K.S.A. 40-3316, and
amendments thereto, provided that the recipient agrees in writing to
maintain the confidentiality and privileged status of the document,
material or other information, and has verified in writing the legal
authority to maintain confidentiality;
(2) notwithstanding the provisions of paragraph (1) above, the
commissioner of insurance may only share confidential and privileged
documents, material or information reported pursuant to subsection (1)
of K.S.A. 40-3305, and amendments thereto, with the commissioner of
insurance or corresponding official of any state having statutes or
regulations substantially similar to subsections (a) and, (b) and (c), and
who has agreed in writing not to not disclose such information;
(3) may receive documents, materials or information, including
otherwise confidential and privileged documents, materials or
information from the national association of insurance commissioners,
and its affiliates and subsidiaries, and from regulatory and law
enforcement officials of other foreign or domestic jurisdictions, and
shall maintain as confidential or privileged any document, material or
information received with notice or the understanding that it is
confidential or privileged under the laws of the jurisdiction that is the
source of the document, material or information. Documents received
pursuant to this section shall not be subject to disclosure pursuant to the
open records act, K.S.A. 45-215 et seq., and amendments thereto; and
(4) shall enter into written agreements with the national
association of insurance commissioners governing sharing and use of
information provided pursuant to this act consistent with this
subsection that shall:
(i) Specify procedures and protocols regarding the confidentiality
and security of information shared with the national association of
insurance commissioners and its affiliates and subsidiaries pursuant to
this act, including procedures and protocols for sharing by the national
association of insurance commissioners with other state, federal or
international regulators;
(ii) specify that ownership of information shared with the national
association of insurance commissioners and its affiliates and
subsidiaries pursuant to this act remains with the commissioner of
insurance, and that the national association of insurance
commissioners' NAIC's use of the information is subject to the direction
of the commissioner of insurance;
(iii) exclude documents, material or information reported
pursuant to K.S.A. 40-3305, and amendments thereto, and prohibit the
NAIC and its affiliates and subsidiaries from storing the information
shared pursuant to the insurance holding company act in a permanent
database after the underlying analysis is completed;
(iv) require prompt notice to be given to an insurer and its
affiliates whose confidential information in the possession of the
national association of insurance commissioners NAIC, pursuant to this
act, is subject to a request or subpoena to the national association of
insurance commissioners NAIC for disclosure or production; and
(iv)(v) require the national association of insurance commissioners
NAIC and its affiliates and subsidiaries to consent to intervention by an
insurer in any judicial or administrative action in which the national
association of insurance commissioners NAIC and its affiliates and HOUSE BILL No. 2334—page 29
subsidiaries may be required to disclose confidential information about
the insurer and its affiliates that are shared with the national association
of insurance commissioners NAIC and its affiliates and subsidiaries
pursuant to this the insurance holding company act; and
(vi) for documents, material or information reporting pursuant to
K.S.A. 40-3305, and amendments thereto, in the case of an agreement
involving a third-party consultant, provide for notification of the
identity of the consultant to the applicable insurers.
(e) The sharing of information by the commissioner of insurance,
pursuant to this act, shall not constitute a delegation of regulatory
authority or rule-making rulemaking authority, and the commissioner of
insurance is solely responsible for the administration, execution and
enforcement of the provisions of this act.
(f) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials or information shall occur
as a result of disclosure to the commissioner of insurance under this act
or as a result of sharing as authorized in subsection (d).
(g) Documents, materials or other information in the possession or
control of the national association of insurance commissioners shall be
confidential by law and privileged, shall not be subject to the open
records act, K.S.A. 45-215 et seq., and amendments thereto, shall not
be subject to subpoena, and shall not be subject to discovery or
admissible in evidence in any private civil action.
(h) (1) The group capital calculation and resulting group capital
ratio required under K.S.A. 40-3305, and amendments thereto, and the
liquidity stress test along with its results and supporting disclosures
required under K.S.A. 40-3305, and amendments thereto, shall be
deemed regulatory tools for assessing group risks and capital
adequacy and group liquidity risks, respectively, and shall not be
construed as a means to rank insurers or insurance holding company
systems.
(2) Except as otherwise may be required under the provisions of
the insurance holding company act, the making, publishing,
disseminating, circulating, placing before the public or causing directly
or indirectly to be made, published, disseminated, circulated or placed
before the public in a newspaper, magazine or other publication, in the
form of a notice, circular, pamphlet, letter or poster, broadcast by any
radio or television station or by any electronic means of
communication available to the public, or in any other way as an
advertisement, announcement or statement containing a representation
or statement with regard to the group capital calculation, group capital
ratio, the liquidity stress test results, or supporting disclosures for the
liquidity stress test of any insurer or any insurer group, or of any
component derived in the calculation by any insurer, broker, or other
person engaged in any manner in the insurance business could be
misleading and is therefore prohibited.
(3) If any materially false statement with respect to the group
capital calculation, resulting group capital ratio, an inappropriate
comparison of any amount to an insurer's or insurance group's group
capital calculation or resulting group capital ratio, liquidity stress test
result, supporting disclosures for the liquidity stress test or an
inappropriate comparison of any amount to an insurer's or insurance
group's liquidity stress test result or supporting disclosures is published
in any written publication and the insurer is able to demonstrate to the
commissioner with substantial proof the falsity or inappropriateness of
such statement, then the insurer may publish announcements in a
written publication if the sole purpose of the announcement is to rebut
the materially false statement.
(i) The provisions of this section shall not be subject to the
provisions of K.S.A. 45-229, and amendments thereto.
Sec. 24. K.S.A. 2024 Supp. 40-4302 is hereby amended to read as
follows: 40-4302. (a) Any captive insurance company, when permitted
by its organizational documents, may apply to the commissioner for a
certificate of authority to do any and all insurance comprised in K.S.A. HOUSE BILL No. 2334—page 30
40-901 et seq., 40-1102(1)(a), (1)(c) through (1)(n), and amendments
thereto, and to issue life, accident and health insurance policies
provided, except that:
(1) NoA pure captive insurance company shall not insure any risks
other than those of its parent and affiliated companies and, upon prior
approval of the commissioner, any controlled unaffiliated business up
to 5% of total direct written premium or combination thereof;
(2) no association captive insurance company shall insure any
risks other than those of its association and those of the member
organizations of its association. No association captive insurance
company shall expose itself to loss on any one risk or hazard in an
amount exceeding 10% of its paid-up capital and surplus;
(3) no captive insurance company shall provide personal lines of
insurance, workers' compensation, employers' liability insurance
coverage, long-term care coverage, critical care coverage, surety, title
insurance, credit insurance or any component thereof, except that a
technology-enabled fiduciary financial institution insurance company
shall be permitted to provide contracts of suretyship and credit
insurance in accordance with K.S.A. 2024 Supp. 40-4354, and
amendments thereto;
(4) noa captive insurance company shall accept or cede may
provide workers compensation insurance, insurance in the nature of
workers compensation insurance and the reinsurance except as
provided in K.S.A. 40-4311, and amendments thereto of such policies
unless prohibited by federal law, the provisions of chapter 40 of the
Kansas Statutes Annotated, and amendments thereto, or any other state
having jurisdiction over the transaction;
(5) a captive insurance company may provide excess or stop-loss
accident and health insurance unless prohibited by federal law or the
laws of the state having jurisdiction over the transaction;
(6) any captive insurance company may provide workers
compensation insurance, insurance in the nature of workers'
compensation insurance and reinsurance of such policies unless
prohibited by federal law, the laws of the state of Kansas or any other
state having jurisdiction over the transaction;
(7) no captive insurance company shall provide accident and
health, life insurance or annuities on a direct basis;
(6)(8) no captive insurance company authorized as a life insurance
company shall transact business other than life insurance; and
(7)(9) no captive insurance company authorized to transact
business under article 9 or 11 of chapter 40 of the Kansas Statutes
Annotated, and amendments thereto, shall engage in the business of life
insurance.
(b) No captive insurance company organized under the laws of
this state shall do any insurance business in this state unless such
captive insurance company:
(1) It First obtains from the commissioner a certificate of authority
authorizing it to do insurance business in this state;
(2) has its board of directors, members, partners, managers,
committee of managers or other governing body holds hold at least one
meeting each year in this state;
(3) it maintains its principal place of business in this state; and
(4) it authorizes the commissioner to accept service of process on
its behalf in accordance with K.S.A. 40-218, and amendments thereto.
(c) Before receiving a certificate of authority, an applicant captive
insurance company shall file with the commissioner:
(1) A copy of the applicant captive insurance company's
organizational documents; and
(2) a plan of operation or a feasibility study describing the
anticipated activities and results of the applicant captive insurance
company that shall include:
(A) The company's loss prevention program of its parent and
insureds, as applicable;
(B) historical and expected loss experience of the risks to be HOUSE BILL No. 2334—page 31
insured or reinsured by the applicant captive insurance company;
(C) pro forma financial statements and projections of the proposed
business operations of the applicant captive insurance company;
(D) an analysis of the adequacy of the applicant captive insurance
company's proposed premiums, assets and capital and surplus levels
relative to the risks to be insured or reinsured by the captive insurance
company;
(E) a statement of the applicant captive insurance company's net
retained limited liability on any contract of insurance or reinsurance it
that such insurance company intends to issue and the nature of any
reinsurance it intends to cede;
(F) a statement certifying that the applicant captive insurance
company's investment policy is in compliance with this act and
specifying the type of investments to be made;
(G) a statement identifying the geographic areas in which the
applicant captive insurance company intends to operate;
(H) a statement identifying the persons or organizations that will
perform the applicant captive insurance company's major operational
functions, including management, underwriting, accounting, asset
investment, claims adjusting and loss control and the adequacy of the
expertise, experience and character of such persons or organizations;
and
(I) whenever required by the commissioner, an appropriate
opinion by a qualified independent actuary regarding the adequacy of
the applicant captive insurance company's proposed capital, surplus and
premium levels;
(3) a description of the coverages, deductibles, coverage limits,
rates and forms, together with any additional information that the
commissioner may require;
(4) such other items deemed to be relevant by the commissioner in
ascertaining whether the proposed captive insurance company will be
able to meet its obligations; and
(5) any modification or change in the items required under this
subsection that shall require the prior approval of the commissioner.
(d) Notwithstanding any other provision of this act, the
commissioner may issue a provisional certificate of authority to any
applicant captive insurance company if the commissioner deems that
the public interest will be served by the issuance of such a provisional
certificate.
(1) As a condition precedent to the issuance of a provisional
certificate of authority under this subsection, the applicant shall have
filed a complete application containing all information required in
subsection (c) and paid all necessary fees. The commissioner shall
have made a preliminary finding that the expertise, experience and
character of the person who shall control and manage the applicant
captive are acceptable.
(2) The commissioner may by order limit the authority of any
provisional certificate holder in any way deemed to be necessary in
order to protect insureds and the public. The commissioner may revoke
a provisional certificate holder if the interests of the insureds or the
public are endangered. If the applicant fails to complete the regular
application for a certificate of authority, the provisional certificate of
authority shall terminate by operation of law.
(3) The commissioner may enact all rules and regulations
necessary to implement a program for the issuance of provisional
certificates of authority.
(d)(e) Each captive insurance company not in existence on
January 1, 2018, shall pay to the commissioner a nonrefundable fee of
$10,000 up to $2,500 for examining, investigating and processing its
application for a certificate of authority. The commissioner is
authorized to retain legal, financial, actuarial, analysis and examination
services from outside the department, the reasonable costs of which
shall be charged against the applicant. In addition, it shall pay a
renewal fee of $2,500 for each year thereafter of $10,000. HOUSE BILL No. 2334—page 32
(e)(f) Each captive insurance company already in existence on
January 1, 2018, shall pay an annual renewal fee of $110 until January
1, 2028, after which date, the provisions of subsection (d) (e) shall
apply.
(f)(g) If the commissioner is satisfied that the documents and
statements that such captive insurance company has filed comply with
the provisions of this act, the commissioner may grant a certificate of
authority authorizing a:
(1) Captive insurance company other than a technology-enabled
fiduciary financial institution to do insurance business in this state until
March 1 thereafter, which certificate of authority may be renewed; and
(2) technology-enabled fiduciary financial institution insurance
company to do insurance business in this state until the later of March 1
thereafter or the maturity date of the last payment-in-kind asset held by
such technology-enabled fiduciary financial institution insurance
company pursuant to this act.
(g)(h) Information submitted under this section shall be and
remain confidential, and shall not be made public by the commissioner
or any employee or agent of the commissioner without the written
consent of the company, except that:
(1) Such information may be discoverable by a party in a civil
action or contested case to which the captive insurance company that
submitted such information is a party, upon a showing by the party
seeking to discover such information that:
(A) The information sought is relevant to and necessary for the
furtherance of such action or case;
(B) the information sought is unavailable from other non-
confidential nonconfidential sources;
(C) a subpoena issued by a judicial or administrative officer or
competent jurisdiction has been submitted to the commissioner; and
(D) the privacy of a qualified policyholder shall be protected in
any court proceeding concerning such qualified policyholder if the
technology-enabled fiduciary financial institution insurance company
so petitions the court. Upon the filing of such petition, any information,
including, but not limited to, an instrument, inventory, statement or
verified report produced by the technology-enabled fiduciary financial
institution insurance company regarding a policy issued to a qualified
policyholder or payment-in-kind assets held by the technology-enabled
fiduciary financial institution insurance company to satisfy claims of
such qualified policyholder, all payment-in-kind policies, all petitions
relevant to such information and all court orders thereon, shall be
sealed upon filing and shall not be made a part of the public record of
the proceeding, except that such petition shall be available to the court,
the commissioner, the technology-enabled fiduciary financial
institution insurance company, their attorneys and to such other
interested persons as the court may order upon a showing of good
cause;
(2) the commissioner may disclose such information to a public
officer having jurisdiction over the regulation of insurance in another
state, provided that:
(A) Such public official shall agree in writing to maintain the
confidentiality of such information; and
(B) the laws of the state in which such public official serves
requires such information to be and to remain confidential;
(3) access may also be granted to the national association of
insurance commissioners and its affiliates, and the international
association of supervisors and its affiliates. Such parties must agree in
writing prior to receiving the information to provide to it the same
confidential treatment as required by this section, unless the company
gives prior written consent; and
(4) the privacy of those who have established an affiliated fidfin
trust or alternative asset custody account shall be protected in any court
proceeding concerning such trust or custody account if the acting
trustee, custodian, trustor or any beneficiary so petition the court. Upon HOUSE BILL No. 2334—page 33
the filing of such a petition, the instrument, inventory, statement filed
by any trustee or custodian, annual verified report of the trustee or
custodian and all petitions relevant to trust administration and all court
orders thereon shall be sealed upon filing and shall not be made a part
of the public record of the proceeding, except that such petition shall be
available to the court, the trustor, the trustee, the custodian, any
beneficiary, their attorneys and to such other interested persons as the
court may order upon a showing of good cause.
Sec. 25. K.S.A. 40-4304 is hereby amended to read as follows: 40-
4304. (a) No captive insurance company shall be issued a certificate of
authority unless it such company shall possess and thereafter maintain
unimpaired paid-in capital and surplus of not less than:
(1) In the case of a pure captive insurance company, not less than
$250,000, in the case of a pure captive insurance company; and
(2) in the case of an association captive insurance company
incorporated as a stock insurer, not less than $500,000, in the case of
an association captive insurance company incorporated as a stock
insurer; and
(3) $100,000, in the case of a protected cell captive insurance
company.
(b) Such capital may be in the form of cash or, upon approval of
the commissioner, an irrevocable letter of credit issued by a bank
chartered by the state of Kansas or the United States comptroller of
currency, domiciled in Kansas, and approved by the commissioner.
(c) In connection with the issuance of a certificate of authority, the
commissioner may prescribe additional minimum capital and surplus
based upon the type, volume and nature of the insurance business
transacted.
(d) Loans of minimum capital and surplus funds shall be
prohibited. Notwithstanding the foregoing, the minimum capital and
surplus funds may be received by the issuance of a surplus note as
approved by the commissioner.
(e) No pure captive insurance company shall make a loan or an
investment in its parent company or affiliates without prior written
approval of the commissioner, and any such loan or investment shall be
evidenced by documentation approved by the commissioner.
Sec. 26. K.S.A. 2024 Supp. 40-4308 is hereby amended to read as
follows: 40-4308. (a) Whenever the commissioner deems necessary,
but at least once every three five years, the commissioner may make, or
direct to be made, a financial examination of any captive insurance
company in the process of organization or applying for admission or
doing business in Kansas. The commissioner may engage in continuous
analysis for the preparation of the examination. In addition, at the
commissioner's discretion, the commissioner may make, or direct to be
made, a market regulation examination of any insurance company
doing business in Kansas.
(b) In scheduling and determining the nature, scope and frequency
of examinations of financial condition, the commissioner shall consider
such matters as the results of financial statement analyses and ratios,
changes in management or ownership, actuarial opinions, reports of
independent certified public accountants and other criteria as set forth
in the examiner's handbook adopted by the national association of
insurance commissioners in effect when the commissioner exercises
discretion under this subsection.
(c) The commissioner shall have free access to the books and
papers of any such company that relate to its business and to the books
and papers kept by any of its agents and may examine under oath,
which the commissioner shall be empowered to administer, the
directors, officers, agents or employees of any such company in
relation to its affairs, transactions and condition.
(d) For the purpose of such analysis, the commissioner may
require reports and other documents be filed with the commissioner.
(e) The commissioner may also examine or investigate any
person, or the business of any person, insofar as such examination or HOUSE BILL No. 2334—page 34
investigation is, in the sole discretion of the commissioner, necessary or
material to the examination of the company, but such examination or
investigation shall not infringe upon or extend to any communications
or information accorded privileged or confidential status under any
other laws of this state.
(f) Upon determining that an examination should be conducted,
the commissioner or the commissioner's designee shall appoint one or
more examiners to perform the examination and instruct such
examiners as to the scope of the examination. The commissioner may
also employ such other guidelines or procedures as the commissioner
may deem appropriate.
(g) When making an examination under this act, the commissioner
may retain attorneys, appraisers, independent actuaries, independent
certified public accountants or other professionals and specialists as
examiners, the reasonable cost of which shall be paid by the company
that is the subject of the examination.
(h) (1) Not later than 30 days following completion of the
examination or at such earlier time as the commissioner shall prescribe,
the examiner in charge shall file with the deparment a verified written
report of examination under oath. Not later than 30 days following
receipt of the verified report, the department shall transmit the report to
the company examined, together with a notice that shall afford such
company examined a reasonable opportunity of not more than 30 days
to make a written submission or rebuttal with respect to any matters
contained in the examination report.
(2) Within 30 days of the end of the period allowed for the receipt
of written submissions or rebuttals, the commissioner shall fully
consider and review the report, together with any written submissions
or rebuttals and any relevant portions of the examiners' workpapers,
and enter an order:
(A) Adopting the examination report as filed or with modification
or corrections. If the examination report reveals that the company is
operating in violation of any law, rule and regulation or prior order of
the commissioner, the commissioner may order the company to take
any action the commissioner considers necessary and appropriate to
cure such violations;
(B) rejecting the examination report with directions to the
examiners to reopen the examination for purposes of obtaining
additional data, documentation or information; or
(C) call for and conduct a fact-finding hearing in accordance with
K.S.A. 40-281, and amendments thereto, for purposes of obtaining
additional documentation, data, information and testimony.
(3) All orders entered as a result of revelations contained in the
final examination report shall be accompanied by findings and
conclusions resulting from the commissioner's consideration and
review of the examination report, relevant examiner work papers and
any written submissions or rebuttals. Within 30 days of the issuance of
the adopted report, the company shall file affidavits executed by each
of its directors stating under oath that they have received a copy of the
adopted report and related orders.
(4) Upon the adoption of the examination report of an association
captive insurance company, the commissioner shall hold the content of
the examination report as private and confidential as to the pure captive
insurance company. Nothing contained in this act shall be construed to
limit the commissioner's authority to use and, if appropriate, to make
public any final or preliminary examination report in the furtherance of
any legal or regulatory action that the commissioner may, in the
commissioner's discretion, deem appropriate.
(i) Nothing contained in this act shall be construed to limit the
commissioner's authority to terminate or suspend any examination in
order to pursue other legal or regulatory action pursuant to the
insurance laws of this state.
(j) All examination reports, preliminary examination reports or
results, working papers, recorded information, documents and copies HOUSE BILL No. 2334—page 35
thereof produced by, obtained by or disclosed to the commissioner or
any other person in the course of an examination made under this
section are confidential and are not subject to subpoena and may not be
made public by the commissioner or an employee or agent of the
commissioner without the written consent of the company, except to the
extent provided in this subsection. Nothing in this subsection shall
prevent the commissioner from using such information in furtherance
of the commissioner's regulatory authority under this act. The
commissioner may grant access to such information to public officers
having jurisdiction over the regulation of insurance in any other state or
country or to law enforcement officers of Kansas or any other state or
agency of the federal government at any time. Access may also be
granted to the national association of insurance commissioners and its
affiliates and the international association of insurance supervisors and
its affiliates. Persons receiving such information must agree in writing
prior to receiving the information to provide to it the same confidential
treatment as required by this section, unless the prior written consent of
the company to which it pertains has been obtained.
(k) The commissioner may receive documents, materials or
information, including otherwise confidential and privileged
documents, materials or information, from the national association of
insurance commissioners, and its affiliates and subsidiaries, and from
regulatory and law enforcement officials of other foreign or domestic
jurisdictions and shall maintain as confidential or privileged any
document, material or information received with notice or the
understanding that it is confidential or privileged under the laws of the
jurisdiction that is the source of the document, material or information.
Documents received pursuant to this section shall not be subject to
disclosure pursuant to the open records act, K.S.A. 45-215 et seq., and
amendments thereto.
Sec. 27. K.S.A. 40-4312 is hereby amended to read as follows: 40-
4312. No captive insurance company shall be required to join a rating
organization or a policy form organization.
Sec. 28. K.S.A. 40-4314 is hereby amended to read as follows: 40-
4314. (a) Each captive insurance company shall, at the time it files the
report required by K.S.A. 40-4307, and amendments thereto, pay a tax
on all premiums received on risks located in this state.
(b) Each captive insurance company shall pay the commissioner a
tax at the rate of
2
/10 of 1% on each dollar of direct premiums collected
or contracted for, during the year ending December 31 next preceding,
on policies or contracts of insurance written by the captive insurance
company, after deducting from the direct premiums subject to the tax
amounts paid to policyholders as return premiums with respect to such
preceding year only, which amounts shall include only dividends or
distributions of unabsorbed premiums or premium deposits returned or
credited to policyholders, up to a maximum tax for such year of
$500,000, except that no tax shall be due or payable as a consideration
received for annuity contracts.
(c) Each captive insurance company shall pay to the commissioner
no later than March 1 of each year a tax at the rate of
1
/10 of 1% on each
dollar assumed reinsurance premiums collected or contracted for,
during the year end December 31 next preceding, on policies or
contracts of insurance written by the captive insurance company, up to
a maximum tax for such year of $300,000. However, no such tax
applies to premiums for risks or portion of risks that are subject to
taxation on a direct basis pursuant to subsection (b), and no such tax
shall be payable in connection with the receipt of assets in exchange for
the assumption of loss reserves and other liabilities of another insurer
under common ownership and control if such transaction is part of a
plan to discontinue the operations of such other insurer and if the intent
of the company by the state or any county, city or municipality within
Kansas, except ad valorem taxes on real and personal property used in
the production of income.
(d) (1) A company redomesticating under section 11, and HOUSE BILL No. 2334—page 36
amendments thereto, shall only be liable for taxes due pursuant to
subsections (b) and (c) on premiums paid to the company after
redomestication.
(2) A company redomesticating under this section after July 1 of
any year shall only be subject to
1
/2 of the minimum premium tax
specified in subsections (b) and (c).
(3) A foreign or alien company redomesticating pursuant to
section 11, and amendments thereto, shall report all premium taxes due
pursuant to subsections (b) and (c) but may, in either its first or its
second year of operations, but not both, after redomesticating into this
state, elect to forego the payment of premium taxes. A company making
such an election that surrenders its certificate of authority or
redomesticates to another jurisdiction within five years of
redomestication into this state shall immediately pay a tax in an
amount equal to the foregone premium tax plus 10% per annum from
the date of the foregone premium.
(e) The tax provided in this section shall be calculated on an
annual basis, notwithstanding that policies or contracts of insurance or
contracts of reinsurance are issued on a multi-year basis. In the case of
multi-year policies or contracts, the premium shall be prorated for
purposes of determining the tax under this section.
(f) The tax provided for in this section shall constitute all taxes
collectible under the laws of the state of Kansas from any captive
insurance company, and no other occupation tax or any other tax shall
be levied or collected from any captive insurance company by the state
or any political subdivision thereof.
Sec. 29. K.S.A. 40-4602 is hereby amended to read as follows: 40-
4602. As used in this act:
(a) "Emergency medical condition" means the sudden and, at the
time, unexpected onset of a health condition that requires immediate
medical attention, where failure to provide medical attention would
result in serious impairment to bodily functions or serious dysfunction
of a bodily organ or part, or would place the person's health in serious
jeopardy.
(b) "Emergency services" means ambulance services and health
care healthcare items and services furnished or required to evaluate and
treat an emergency medical condition, as directed or ordered by a
physician.
(c) "Health benefit plan" means any hospital or medical expense
policy, health, hospital or medical service corporation contract, a plan
provided by a municipal group-funded pool, a policy or agreement
entered into by a health insurer or a health maintenance organization
contract offered by an employer or any certificate issued under any
such policies, contracts or plans. "Health benefit plan" does not include
policies or certificates covering only accident, credit, dental, disability
income, long-term care, hospital indemnity, medicare supplement,
specified disease, vision care, coverage issued as a supplement to
liability insurance, insurance arising out of a workers compensation or
similar law, automobile medical-payment insurance, a self-funded
health plan established or maintained for its employees by the state or
a subdivision of the state, a school district, any public authority or by a
county or city government or any political subdivision, agency or
instrumentality thereof, a self-funded health plan established or
maintained for its employees by a church or by a convention or
association of churches that is exempt from tax under section 501 of the
internal revenue code or insurance under which benefits are payable
with or without regard to fault and which that is statutorily required to
be contained in any liability insurance policy or equivalent self-
insurance.
(d) "Health insurer" means any insurance company, nonprofit
medical and hospital service corporation, municipal group-funded pool,
fraternal benefit society, health maintenance organization, or any other
entity which that offers a health benefit plan subject to the Kansas
Statutes Annotated. HOUSE BILL No. 2334—page 37
(e) "Insured" means a person who is covered by a health benefit
plan.
(f) "Participating provider" means a provider who, under a
contract with the health insurer or with its contractor or subcontractor,
has agreed to provide one or more health care healthcare services to
insureds with an expectation of receiving payment, other than
coinsurance, copayments or deductibles, directly or indirectly from the
health insurer.
(g) "Provider" means a physician, hospital or other person which
that is licensed, accredited or certified to perform specified health care
healthcare services.
(h) "Provider network" means those participating providers who
have entered into a contract or agreement with a health insurer to
provide items or health care healthcare services to individuals covered
by a health benefit plan offered by such health insurer.
(i) "Physician" means a person licensed by the state board of
healing arts to practice medicine and surgery.
Sec. 30. K.S.A. 2024 Supp. 40-4909 is hereby amended to read as
follows: 40-4909. (a) The commissioner may deny, suspend, revoke or
refuse renewal of any license issued under this act if the commissioner
finds that the applicant or license holder has:
(1) Provided incorrect, misleading, incomplete or untrue
information in the license application.
(2) Violated:
(A) Any provision of chapter 40 of the Kansas Statutes Annotated,
and amendments thereto, or any rules and regulations promulgated
thereunder;
(B) any subpoena or order of the commissioner;
(C) any insurance law or regulation of another state; or
(D) any subpoena or order issued by the regulatory official for
insurance in another state.
(3) Obtained or attempted to obtain a license under this act
through misrepresentation or fraud.
(4) Improperly withheld, misappropriated or converted any
moneys or properties received in the course of doing insurance
business.
(5) Intentionally misrepresented the provisions, terms and
conditions of an actual or proposed insurance contract or application
for insurance.
(6) Been convicted of a misdemeanor or felony.
(7) Admitted to or been found to have committed any insurance
unfair trade practice or fraud in violation of K.S.A. 40-2404, and
amendments thereto.
(8) Used any fraudulent, coercive, or dishonest practice, or
demonstrated any incompetence, untrustworthiness or financial
irresponsibility in the conduct of business in this state or elsewhere.
(9) Had an insurance agent license, public adjuster license,
securities registration, or its their equivalent, denied, suspended or
revoked in any state, district or territory.
(10) Forged another person's name to an application for insurance
or to any document related to an insurance transaction.
(11) Improperly used notes or any other reference material to
complete an examination for an insurance license issued under this act.
(12) Knowingly accepted insurance business from an individual
who is not licensed.
(13) Failed to comply with any administrative or court order
imposing a child support obligation upon the applicant or license
holder.
(14) Failed to pay any state income tax or comply with any
administrative or court order directing payment of state income tax.
(15) Except as otherwise permitted by law, rebated the whole or
any part of any insurance premium or offered in connection with the
presentation of any contract of insurance any other inducement not
contained in the contract of insurance. HOUSE BILL No. 2334—page 38
(16) Made any misleading representation or incomplete
comparison of policies to any person for the purposes of inducing or
tending to induce such person to lapse, forfeit or surrender such
person's insurance then in force.
(17) Failed to respond to an inquiry from the commissioner within
15 business days.
(b) In addition, the commissioner may deny, suspend, revoke or
refuse renewal of any license issued under this act if the commissioner
finds that the interests of the insurer or the insurable interests of the
public are not properly served under such license.
(c) (1) When considering whether to deny, suspend, revoke or
refuse to renew the application of an individual who has been convicted
of a misdemeanor or felony, the commissioner shall consider the:
(A) Applicant's age at the time of the conduct;
(B) recency of the conduct;
(C) reliability of the information concerning the conduct;
(D) seriousness of the conduct;
(E) factors underlying the conduct;
(F) cumulative effect of the conduct or information;
(G) evidence of rehabilitation;
(H) applicant's social contributions since the conduct;
(I) applicant's candor in the application process; and
(J) materiality of any omissions or misrepresentations.
(2) In determining whether to reinstate or grant to an applicant a
license that has been revoked, the commissioner shall consider the:
(A) Present moral fitness of the applicant;
(B) demonstrated consciousness by the applicant of the wrongful
conduct and disrepute that the conduct has brought to the insurance
profession;
(C) extent of the applicant's rehabilitation;
(D) seriousness of the original conduct;
(E) applicant's conduct subsequent to discipline;
(F) amount of time that has elapsed since the original discipline;
(G) applicant's character, maturity and experience at the time of
revocation; and
(H) applicant's present competence and skills in the insurance
industry.
(d) Any action taken under this section that affects any license or
imposes any administrative penalty shall be taken only after notice and
an opportunity for a hearing conducted in accordance with the
provisions of the Kansas administrative procedure act.
(e) The license of any business entity may be suspended, revoked
or refused renewal if the insurance commissioner finds that any
violation committed by an individual licensee employed by or acting on
behalf of such business entity was known by or should have been
known by one or more of the partners, officers or managers acting on
behalf of the business entity and:
(1) Such violation was not reported to the insurance commissioner
by such business entity; or
(2) such business entity failed to take any corrective action.
(f) None of the following actions shall deprive the commissioner
of any jurisdiction or right to institute or proceed with any disciplinary
proceeding against such license, to render a decision suspending,
revoking or refusing to renew such license, or to establish and make a
record of the facts of any violation of law for any lawful purpose:
(1) The imposition of an administrative penalty under this section;
(2) the lapse or suspension of any license issued under this act by
operation of law;
(3) the licensee's failure to renew any license issued under this act;
or
(4) the licensee's voluntary surrender of any license issued under
this act. No such disciplinary proceeding shall be instituted against any
licensee after the expiration of two years from the termination of the
license. HOUSE BILL No. 2334—page 39
(g) Whenever the commissioner imposes any administrative
penalty or denies, suspends, revokes or refuses renewal of any license
pursuant to subsection (a), any costs incurred as a result of conducting
an administrative hearing authorized under the provisions of this
section shall be assessed against the person who is the subject of the
hearing or any business entity represented by such person who is the
party to the matters giving rise to the hearing. As used in this
subsection, "costs" shall include includes witness fees, mileage
allowances, any costs associated with the reproduction of documents
that become a part of the hearing record and the expense of making a
record of the hearing.
(h) No person whose license as an agent or broker had been
suspended or revoked shall be employed by any insurance company
doing business in this state either directly, indirectly, as an independent
contractor or otherwise to negotiate or effect contracts of insurance,
suretyship or indemnity or perform any act toward the solicitation of or
transaction of any business of insurance during the period of such
suspension or revocation.
(i) In lieu of taking any action under subsection (a), the
commissioner may:
(1) Censure the person; or
(2) issue an order imposing an administrative penalty up to a
maximum of $500 for each violation but not to exceed $2,500 for the
same violation occurring within any six consecutive calendar months
from the date of the original violation unless such person knew or
should have known that the violative act could give rise to disciplinary
action under subsection (a). If such person knew or reasonably should
have known the violative act could give rise to any disciplinary
proceeding authorized by subsection (a), the commissioner may impose
a penalty up to a maximum of $1,000 for each violation but not to
exceed $5,000 for the same violation occurring within any six
consecutive calendar months from the date of the imposition of the
original administrative penalty.
(j) (1) An applicant to whom a license has been denied after a
hearing shall not apply again for a license again until after the
expiration of a period of one year from the date of the commissioner's
order.
(2) A licensee whose license was revoked shall not apply again for
a license again until after the expiration of a period of two years from
the date of the commissioner's order.
Sec. 31. K.S.A. 40-5510 is hereby amended to read as follows: 40-
5510. (a) The commissioner may suspend, revoke or refuse to issue or
renew a public adjuster's license for any of the following causes:
(1) Providing incorrect, misleading, incomplete or materially
untrue information in the license application;
(2) violating:
(A) Any provision of chapter 40 of the Kansas Statutes Annotated,
and amendments thereto, or any rule and regulation promulgated
thereunder;
(B) any subpoena or order of the commissioner;
(C) any insurance law or regulation of another state; or
(D) any subpoena or order issued by the regulatory official for
insurance in another state;
(3) obtaining or attempting to obtain a license through
misrepresentation or fraud;
(4) misappropriating, converting or improperly withholding any
monies or properties received in the course of doing insurance
business;
(5) intentionally misrepresenting the terms of an actual or
proposed insurance contract or application for insurance;
(6) having been convicted of a misdemeanor or felony;
(7) having admitted or committed any insurance unfair trade
practice or insurance fraud;
(8) using fraudulent, coercive or dishonest practices or HOUSE BILL No. 2334—page 40
demonstrating incompetence, untrustworthiness or financial
irresponsibility in the conduct of business in this state or elsewhere;
(9) having an insurance license, public adjuster license, securities
registration or its their equivalent, denied, suspended or revoked in any
other state, province, district or territory;
(10) forging another's name to an application for insurance or to
any document related to an insurance transaction;
(11) cheating, including improperly using notes or any other
reference material, to complete an examination for an insurance
license;
(12) knowingly accepting insurance business from an individual
who is not licensed but who is required to be licensed by the
commissioner;
(13) failing to comply with an administrative or court order
imposing a child support obligation upon the applicant or license
holder; or
(14) failing to pay state income tax or comply with any
administrative or court order directing payment of state income tax; or
(15) failing to respond to an inquiry from the commissioner within
15 business days.
(b) In addition, the commissioner may deny, suspend, revoke or
refuse renewal of a public adjuster's license if the commissioner finds
that the interests of the public are not properly served under such
license. Any action taken under this section which affects any license or
imposes any administrative penalty shall be taken only after notice and
an opportunity for a hearing conducted in accordance with the Kansas
administrative procedure act.
(c) In lieu of any action under subsection (a), the commissioner
may:
(1) Censure the individual; or
(2) issue an order imposing an administrative penalty up to a
maximum of $500 for each violation, but not to exceed $2,500 for the
same violation occurring within any six consecutive calendar months
from the date of the original violation, unless such person knew or
should have known that the violative act could give rise to disciplinary
action under subsection (a). If such person knew or reasonably should
have known the violative act could give rise to any disciplinary
proceeding authorized by subsection (a), the commissioner may impose
a penalty up to a maximum of $1,000 for each violation, but not to
exceed $5,000 for the same violation occurring within any six
consecutive calendar months from the date of the original violation.
(d) (1) When considering whether to deny, suspend, revoke or
refuse to renew the application of an individual who has been
convicted of a misdemeanor or felony, the commissioner shall consider
the:
(A) Applicant's age at the time of the conduct;
(B) recency of the conduct;
(C) reliability of the information concerning the conduct;
(D) seriousness of the conduct;
(E) factors underlying the conduct;
(F) cumulative effect of the conduct or the information;
(G) evidence of rehabilitation;
(H) applicant's social contributions since the conduct;
(I) applicant's candor in the application process; and
(J) materiality of any omissions or misrepresentations.
(2) In determining whether to reinstate or grant to an applicant a
license that has been revoked, the commissioner shall consider the:
(A) Present moral fitness of the applicant;
(B) demonstrated consciousness by the applicant of the wrongful
conduct and disrepute that the conduct has brought to the insurance
profession;
(C) extent of the applicant's rehabilitation;
(D) seriousness of the original conduct;
(E) applicant's conduct subsequent to discipline; HOUSE BILL No. 2334—page 41
(F) amount of time that has elapsed since the original discipline;
(G) applicant's character, maturity and experience at the time of
revocation; and
(H) applicant's present competence and skills in the insurance
industry.
(e) Any action taken under this section that affects any license or
imposes any administrative penalty shall be taken only after notice and
an opportunity for a hearing conducted in accordance with the
provisions of the Kansas administrative procedure act.
(d)(f) The commissioner shall remit all such fines collected under
subsection (c) to the state treasurer in accordance with the provisions of
K.S.A. 75-4215, and amendments thereto. Upon receipt of each such
remittance, the state treasurer shall deposit the entire amount in the
state treasury to the credit of the state general fund.
(g) Whenever the commissioner imposes any administrative
penalty or denies, suspends, revokes or refuses renewal of any license
pursuant to subsection (a), any costs incurred as a result of conducting
an administrative hearing authorized under the provisions of this
section shall be assessed against the person who is the subject of the
hearing or any business entity represented by such person who is the
party to the matters giving rise to the hearing. As used in this
subsection, "costs" includes witness fees, mileage allowances, any
costs associated with the reproduction of documents that become a part
of the hearing record and the expense of making a record of the
hearing.
(h) No person whose license as a public adjuster had been
suspended or revoked shall be employed by any insurance company
doing business in this state either directly, indirectly, as an independent
contractor or otherwise to negotiate or effect contracts of insurance,
suretyship or indemnity or perform any act toward the solicitation or
transaction of any business of insurance during the period of such
suspension or revocation.
(e)(i) The commissioner shall retain the authority to enforce the
provisions of and impose any penalty or remedy authorized by this act
against any individual who is under investigation for or charged with a
violation of this act, even if the individual's license or registration has
been surrendered or has lapsed by operation of law.
(j) (1) An applicant to whom a license has been denied after a
hearing shall not apply again for a license until after the expiration of
a period of one year from the date of the commissioner's order.
(2) A licensee whose license was revoked shall not apply again for
a license until after the expiration of a period of two years from the
date of the commissioner's order. HOUSE BILL No. 2334—page 42
Sec. 32. K.S.A. 40-112, 40-202, 40-252, 40-2d01, 40-3302, 40-
3305, 40-3306, 40-3307, 40-3308, 40-4304, 40-4312, 40-4314, 40-
4602 and 40-5510 and K.S.A. 2024 Supp. 40-2,239, 40-2c01, 40-4302,
40-4308 and 40-4909 are hereby repealed.
Sec. 33. This act shall take effect and be in force from and after its
publication in the statute book.
I hereby certify that the above BILL originated in the
HOUSE, and was adopted by that body
HOUSE adopted
Conference Committee Report
Speaker of the House.
Chief Clerk of the House.
Passed the SENATE
as amended
SENATE adopted
Conference Committee Report
President of the Senate.
Secretary of the Senate.
APPROVED
Governor.