SESSION OF 2025
SUPPLEMENTAL NOTE ON SENATE BILL NO. 121
As Amended by House Committee on Insurance
Brief*
SB 121, as amended, to make certain selections of
calculations, instructions promulgated by the National
Association of Insurance Commissioners (NAIC), or other
documents required by the NAIC; add certain self-funded
health plans to the list of plans to which the Insurance Code
of the State of Kansas (Insurance Code) does not apply;
clarify law regarding health organization risk-based capital
(RBC); amend the Insurance Holding Company Act (Act); and
make other clarifying and technical amendments.
The bill would be in effect upon publication in the
Kansas Register.
Insurance Calculations (New Section 1)
The bill would require the Commissioner of Insurance
(Commissioner) to select and announce the version of
insurance calculations, instructions promulgated by NAIC, or
other documents that may be required by NAIC for the next
calendar year by publishing the announcement in the Kansas
Register no later than December 1st.
Calculations and instructions would include, but not be
limited to, RBC instructions, RBC managed care instructions,
and group capital calculation instructions.
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
https://klrd.gov/ Self-funded Health Plans Excluded from Insurance Code
Applicability (Section 2)
The bill would add the following to the list of those
entities or plans to which the Insurance Code would not
apply:
●A self-funded health plan established or maintained
for its employees by the State or 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; and
●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.
Definitions Pertaining to RBC and Health Organization
RBC Requirements (Sections 3–5)
The bill would amend definitions pertaining to RBC
requirements and health organization RBC requirements.
RBC Requirements (Section 3)
●“RBC instructions” would mean the RBC
instructions promulgated by the NAIC that are in
effect as announced and noticed by the
Commissioner.
Health Organization RBC Requirements (Section 4)
●“Health organization” would mean 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
2- 121 licensed under articles of the Insurance Code
relating to non-profit dental services corporations,
non-profit medical and hospital service
corporations, or health maintenance organizations
and medicare provider organizations, or an
organization that is licensed as a life and health
insurer under the Insurance Code general
provisions relating to life insurance companies, and
has been determined by the Commissioner to
report predominantly health lines of business in
accordance with a health statement test; and
●“RBC instructions” would mean the RBC
instructions for managed care organizations
promulgated by the NAIC that are in effect as
announced and noticed by the Commissioner.
Insurance Holding Company Act (Section 5)
The bill would add the following definitions to the Act, in
addition to adding the NAIC acronym to the defined terms:
●“Financial analysis handbook” would mean the
version of the NAIC financial analysis handbook
adopted by the NAIC and in effect that has been
selected and noticed by the Commissioner;
●“Group capital calculation instructions” would mean
the group capital calculation instructions selected
and announced by the Commissioner;
●“NAIC Liquidity Stress Test Framework” would
mean 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
3- 121 accordance with the procedures adopted by the
NAIC and as selected and announced by the
Commissioner; and
●“Scope criteria” would mean, as detailed in the
NAIC Liquidity Stress Test Framework, 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.
Insurance Holding Company Act Amendments
(Sections 6–9)
The bill would amend the Act to adopt provisions for
group capital calculations and liquidity stress testing
requirements and would align the Act with NAIC accreditation
standards. The bill would require the Commissioner to
maintain confidentiality of the information reported.
Annual Group Capital Calculation (Section 6)
The bill would require the ultimate controlling person of
every insurer subject to registration to concurrently file with
the registration an annual group capital calculation as
directed by the lead state commissioner. The calculation
report would be completed in accordance with the NAIC
Group Capital Calculation Instructions, which may allow a
controlling person who is not the ultimate controlling person
to file such report, and according to the procedures within the
financial analysis handbook. The report would be filed with
the lead state commissioner of the insurance holding
company system as determined by the Commissioner in
accordance with the procedures within the financial analysis
handbook.
4- 121 The bill would provide exemptions for an insurer holding
company system from filling the group capital calculations if
certain requirements are met.
The bill would grant a lead state commissioner
discretion in determining whether to require, exempt, or
extend the filing of a group capital calculation report or to
accept a limited group capital calculation report under certain
conditions.
Liquidity Stress Test (Section 6)
The bill would require the ultimate controlling person of
every insurer subject to registration and also scoped into the
NAIC Liquidity Stress Test Framework to file the results of a
specific year’s liquidity stress test. The filing would be made
to the lead state insurance commissioner of the insurance
holding company system as determined by procedures within
the financial analysis handbook. The NAIC Liquidity Stress
Test Framework would include scope criteria applicable to a
specific data year. The bill would provide for the frequency of
the scope criteria review, the effective date of any changes to
the NAIC Liquidity Stress Test Framework, and the criteria for
scoping an insurer in or out of the NAIC Liquidity Stress Test
Framework.
The bill would require that the performance and filing of
the results of a specific year’s liquidity stress test comply with
the NAIC Liquidity Stress Test Framework instructions and
reporting template for that year and any lead state insurance
commissioner determinations, in consultation with the NAIC
Financial Stability Task Force.
Deposit or Bond Requirement for Insurer in Hazardous
Financial Condition (Section 7)
If an insurer subject to the Act that is deemed by the
Commissioner to be in a hazardous financial condition or a
condition that would be grounds for supervision,
5- 121 conservation, or a delinquency proceeding, the bill would
authorize the Commissioner to require the insurer secure and
maintain either a deposit, held by the Commissioner, or a
bond, as determined by the insurer at the insurer’s discretion.
Such bond or deposit would be 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 bond.
The bill would provide the concerns the Commissioner
should consider in determining whether a deposit or bond
would be required. The Commissioner would have discretion
in determining 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.
Records and Data Held by an Affiliate (Section 7)
The bill would maintain that all records and data of the
insurer held by an affiliate, in whatever form maintained, are
and would remain the property of the insurer, be subject to
control of the insurer, be identifiable, and be segregated or
readily capable of segregation at no additional cost to the
insurer. The bill would provide a non-exhaustive list of the
types of records and data within the possession, custody, or
control of the affiliate that would remain the property of the
insurer. The bill would also provide that premiums or other
funds belonging to the insurer that are collected or held by an
affiliate would be deemed the exclusive property of and
subject to the control of the insurer.
Examination of Financial Condition by the Commissioner
(Section 8)
The bill would authorize the Commissioner to examine
any registered insurer and the insurer’s affiliate to ascertain
the financial condition of such insurer, including the enterprise
6- 121 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.
Confidentiality of Data and Records (Section 9)
Continuing law provides that the provisions of this
section would not be subject to the legislative review of
exceptions to disclosure under the Kansas Open Records
Act.
The bill would require the Commissioner to maintain the
confidentiality of information reported or provided to the
Commissioner, including the:
●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 U.S. group-wide supervisor;
and
●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-
U.S. group-wide supervisors.
The bill would add that the written agreements the
Commissioner is required to enter into with the NAIC
governing the sharing and use of information pursuant to the
Act would be required to:
●Exclude documents, materials, or information
reported by insurance holding companies as part of
the registration process;
●Prohibit the NAIC and its affiliates and subsidiaries
from storing the information shared pursuant to the
7- 121 Act in a permanent database after the underlying
analysis is completed; and
●Provide for notification of the identity of the third-
party consultant to the applicable insurers for
documents, materials, or information reported by
insurance holding companies as part of the
registration process, in the case of an agreement
involving a third-party consultant.
The bill would deem the group capital calculation and
resulting group capital ratio and the liquidity stress test with
its results and supporting disclosures, as regulatory tools for
assessing group risks, capital adequacy, and group liquidity
risks. The bill would prohibit construing such documents as a
means to rank insurers or insurance holding company
systems.
Unless otherwise required under the Act, the bill would
provide that the following actions regarding a representation
or statement of the group capital calculation, group capital
ratio, the liquidity stress test results, or supporting disclosures
of an insurer or insurer group, or of any component derived in
the calculation by an insurer, broker, or other person engaged
in the insurance business could be misleading and thereby
prohibited:
●Making, publishing, disseminating, circulating,
placing before the public, or directly or indirectly
causing such actions through any of the following
means of communication:
○A newspaper, magazine, or other publication;
○A notice, circular, pamphlet, letter, or poster;
○Radio or television broadcast or by any
electronic means of communication available
to the public; or
○In any other way as an advertisement,
announcement, or statement.
8- 121 The bill would authorize an insurer to publish
announcements in a written publication for the sole purpose
of rebutting a materially false statement if the insurer is able
to demonstrate to the Commissioner with substantial proof of
the falsity or inappropriateness of a materially false statement
published in any written publication regarding the:
●Group capital calculation or resulting group capital
ratio;
●Liquidity stress test result or supporting disclosures
for such test; or
●Inappropriate comparison of any amount to an
insurer’s or insurance group’s group capital
calculation, resulting group capital ratio, or liquidity
stress test result or supporting disclosures.
Health Benefit Plan Definition in the Patient Protection
Act (Section 10)
The bill would exclude the following from the definition of
“health benefit plan” in the Patient Protection Act:
●A self-funded health plan established or maintained
for its employees by the State or 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; and
●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.
9- 121 Statutes Repealed
In addition to the statutes that would be repealed as a
result of amendments made by the bill, the bill would also
repeal the following statutes in the Insurance Code:
●KSA 40-249, pertaining to the expiration of the
corporate powers or an insurance company
organized under Kansas law for failure to issue
policies within two years from the granting of its
charter; and
●KSA 40-2c29, authorizing the Commissioner to
adopt by rules and regulations any later versions of
the RBC instructions promulgated by the NAIC.
Background
The bill was introduced by the Senate Committee on
Financial Institutions and Insurance at the request of a
representative of the Kansas Insurance Department
(Department).
[Note: A companion bill, HB 2128, has been introduced
in the House.]
10- 121 Senate Committee on Financial Institutions and
Insurance
In the Senate Committee hearing, proponent testimony
was provided by representatives of the Department and The
University of Kansas Health System. The Department
representative stated the changes would assist the
Department in remaining accredited by the NAIC, as well as
update two financial regulatory tools to better ascertain
insurance company solvency. The University of Kansas
Health System representative requested an amendment to
clarify that self-funded plans offered by churches, government
entities, and similar organizations continue to be exempt from
classification as health insurers under state law.
No other testimony was provided.
The Senate Committee amended the bill to exempt
certain self-funded health plans from Insurance Code
applicability, add the same plans to those plans excluded
from the definition of health benefit plan in the Patient
Protection Act, and make a technical amendment.
House Committee on Insurance
In the House Committee hearing, no testimony was
provided.
The House Committee amended the bill to change the
effective date to be upon publication in the Kansas Register.
Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, the Department
indicates the bill would have no fiscal effect.
11- 121 Insurance; Insurance Code of the State of Kansas; Commissioner of Insurance; risk-
based capital instructions; RBC; health financial reports; National Association of
Insurance Commissioners; NAIC; NAIC Holding Company System Regulatory Act;
group capital calculations; liquidity stress testing; Insurance Holding Company Act;
self-funded health plan exemptions; Patient Protection Act
12- 121