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AN ACT relating to insurance regulatory requirements. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 304.2-205 is amended to read as follows: 3
(1) The provisions of this section apply to all domestic, foreign, and alien insurers, 4
fraternal benefit societies, health maintenance organizations, and nonprofit hospital, 5
medical-surgical, dental, and health service corporations authorized to transact 6
business pursuant to this chapter. 7
(2) (a) 1. Each domestic, foreign, and alien insurer,[ and] fraternal benefit society, 8
health maintenance organization, and nonprofit hospital, medical-9
surgical, dental, and health service corporation authorized to transact 10
business pursuant to this chapter shall annually on or before March 1 of 11
each year file with the National Association of Insurance Commissioners 12
a copy of its annual statement convention blank, along with additional 13
filings as prescribed by the commissioner, for the preceding year. 14
2. The information filed with the National Association of Insurance 15
Commissioners shall: 16
a. Be submitted electronically; 17
b. Be in the same format and scope as that required by the 18
commissioner; and[ shall ] 19
c. Include the: 20
i. Signed jurat page; and[ the ] 21
ii. Life and health actuarial certification. 22
3. Any amendments or additions to the annual statement filing 23
subsequently filed with the commissioner shall also be filed 24
electronically with the National Association of Insurance 25
Commissioners. 26
(b) Foreign insurers, health maintenance organizations, and fraternal benefit 27 UNOFFICIAL COPY 22 RS BR 1465
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societies that are domiciled in states which have laws substantially similar to 1
paragraph (a) of this subsection shall be deemed in compliance with this 2
section. 3
(c) Nothing contained in this section shall be deemed to require anyone filing 4
documents with the National Association of Insurance Commissioners to pay 5
any filing fee for a filing. 6
(3) Members of the National Association of Insurance Commissioners, their duly 7
authorized committees, subcommittees, and task forces, their delegates, National 8
Association of Insurance Commissioners employees, and all others charged with the 9
responsibility of collecting, reviewing, analyzing, or disseminating the information 10
developed from the filing of the annual statement convention blanks shall not be 11
subject to civil liability for defamation or any other cause of action by virtue of their 12
collection, review, analysis, or dissemination of the data and information collected 13
from the filings required by this section while acting in good faith. 14
Section 2. KRS 304.2-230 is amended to read as follows: 15
(1) Whenever the commissioner determines to examine the affairs of any person, he or 16
she shall designate one (1) or more examiners, which may include analysts, and 17
instruct them as to the scope of the examination. The examiner or analyst shall, 18
upon demand, exhibit his or her official credentials to the person under 19
examination. In conducting the examination, the examiner or analyst shall observe 20
those guidelines and procedures set forth in the Examiners' Handbook adopted by 21
the National Association of Insurance Commissioners. The commissioner may also 22
employ other guidelines or procedures as the commissioner deems appropriate. 23
(2) (a) 1. An examiner or analyst may not be appointed by the commissioner if 24
the examiner or analyst, either directly or indirectly, has a conflict of 25
interest or is affiliated with the management of, or owns a pecuniary 26
interest in, any person subject to examination. 27 UNOFFICIAL COPY 22 RS BR 1465
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2. This subsection shall not be construed to automatically preclude an 1
examiner or analyst from being: 2
a.[1.] A policyholder or claimant under an insurance policy; 3
b.[2.] A grantor of a mortgage or similar instrument on the examiner's or 4
analyst's residence to a regulated entity if done under customary 5
terms and in the ordinary course of business; 6
c.[3.] An investment owner in shares of regulated diversified investment 7
companies; or 8
d.[4.] A settler or beneficiary of a "blind trust" into which any otherwise 9
impermissible holdings have been placed. 10
(b) Notwithstanding the requirements of paragraph (a) of this subsection, the 11
commissioner may retain from time to time, on an individual basis, qualified 12
actuaries, certified public accountants, or other similar individuals who are 13
independently practicing their professions even though these persons may 14
from time to time be similarly employed or retained by persons subject to 15
examination. 16
(3) (a) Except as provided in paragraph (b) of this subsection, any examiner or 17
analyst[person] performing an examination of an insurer on behalf of, and as 18
called by, the commissioner, including any analyst engaged in review, 19
verification, and analysis of an insurer, shall have official immunity and 20
shall be immune from suit and liability, both personally and in their official 21
capacities, for any claim for damage to, or loss of property, or personal injury, 22
or other civil liability caused by or resulting from any alleged act, error, or 23
omission of the examiner or analyst, or any assistant or contractor, arising out 24
of, or by reason of, their duties or employment. 25
(b) Nothing in this subsection shall be construed to hold the examiner or analyst, 26
or any assistant or contractor, immune from suit and liability for any damage, 27 UNOFFICIAL COPY 22 RS BR 1465
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loss, injury, or liability caused by the intentional or willful and wanton 1
misconduct of the examiner or analyst[,] or any assistant[,] or contractor. 2
(4) The commissioner shall conduct the[such] examination in an expeditious, fair, and 3
impartial manner. 4
(5) Upon[ any such] examination, the commissioner, or the examiner or analyst if 5
specifically so authorized in writing by the commissioner, shall have power to issue 6
subpoenas, administer oaths, and to examine under oath any individual as to any 7
matter relevant to the affairs under examination or relevant to the examination. 8
(6) Every person being examined, and its officers, attorneys, employees, agents, and 9
representatives, shall: 10
(a) Make freely available to the commissioner, or his or her examiners or 11
analysts, the accounts, records, documents, files, information, assets, and 12
matters of the[such] person in its[his] possession or control relating to the 13
subject of the examination; and[ shall ] 14
(b) Facilitate the examination. 15
(7) (a) Neither the commissioner nor any examiner or analyst shall remove any 16
record, account, document, file, or other property of the person being 17
examined from the offices or place of that[such] person except with the 18
person's written consent[ of such person] in advance of the[such] removal or 19
pursuant to an order of court duly obtained. 20
(b) This subsection[provision] shall not be deemed to affect the making and 21
removal of copies or abstracts of any[ such] record, account, document, or 22
file. 23
(8) Any individual who refuses without just cause to be examined under oath or who 24
willfully obstructs or interferes with the examiners or analysts in the exercise of 25
their authority pursuant to this section is guilty of a violation of this code. 26
(9) (a) The commissioner may terminate or suspend an examination in order to 27 UNOFFICIAL COPY 22 RS BR 1465
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pursue other legal or regulatory action pursuant to the insurance laws of this 1
state. 2
(b) Findings of fact and conclusions made pursuant to an examination shall be 3
prima facie evidence in any legal or regulatory action. 4
(c) The commissioner may use, and[,] if appropriate, may make public, any final 5
or preliminary examination report, any examiner's or analyst's workpapers or 6
other documents, or any other information discovered or developed during the 7
course of the examination in the furtherance of any legal or regulatory action 8
that the commissioner may, in his or her sole discretion, deem appropriate. 9
(d) Nothing in this subsection shall be binding upon the court in making 10
determinations about relevancy and admissibility in any civil action pertaining 11
to any examination[such] documents. 12
Section 3. KRS 304.3-240 is amended to read as follows: 13
(1) (a) Each authorized insurer shall annually file with the commissioner a true 14
statement of its financial condition, transactions, and affairs as of December 15
31 preceding. 16
(b) The statement shall be: 17
1. Filed electronically on forms prescribed by the National Association of 18
Insurance Commissioners;[ and shall be ] 19
2. Completed according to the instructions of the National Association of 20
Insurance Commissioners;[,] and[ shall be ] 21
3. Verified by the oaths of at least two (2) of the insurer's principal officers. 22
The annual statement of a reciprocal insurer shall be made and verified 23
by its attorney-in-fact. 24
(c) The annual statement shall be filed by March 1 of each year[, or, if filed by 25
mail, postmarked no later than March 1]. 26
(d) The annual statement of a foreign or alien insurer may be executed or verified 27 UNOFFICIAL COPY 22 RS BR 1465
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by facsimile or reproduced signature; however, the annual statement of a 1
domestic insurer shall contain original signatures. 2
(2) The statement forms shall be in general form and context as approved by the 3
National Association of Insurance Commissioners for the kinds of insurance to be 4
reported upon, and as supplemented for additional information required by the 5
commissioner. 6
(3) The annual statement of an alien insurer shall: 7
(a) Relate only to its assets, transactions, and affairs in the United States unless 8
the commissioner requires otherwise; and[. The statement shall ] 9
(b) Be verified by the insurer's United States manager or by its officers duly 10
authorized. 11
(4) The commissioner may suspend or revoke the authority of any insurer failing to file 12
its annual and quarterly statement when due or failing so to file during any 13
extension of time therefor, which the commissioner, for good cause, may grant. 14
(5) Notwithstanding the provisions of this section or any other law of this 15
Commonwealth:[, ] 16
(a) An authorized insurer may, subject to the requirements of administrative 17
regulations adopted by the commissioner, publish financial statements or 18
information based on financial statements prepared on a basis which: 19
1. Is in accordance with requirements of a competent authority; and 20
[which] 21
2. Differs from the basis of the statements which have been filed with the 22
commissioner in compliance with this section; and[.] 23
(b) The[Such] differing financial statements, or information based on the 24
financial statements, shall not be made the basis for the application of any 25
provision of this chapter not relating solely to the publication of financial 26
information unless the provision specifically so requires. 27 UNOFFICIAL COPY 22 RS BR 1465
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Section 4. KRS 304.5-140 is amended to read as follows: 1
(1) (a) For the purposes of subsection (4)(c) of this section, a "qualified United States 2
financial institution" means an institution that: 3
1. Is organized or, in the case of a United States office of a foreign banking 4
organization, licensed under the laws of the United States or any state 5
thereof; 6
2. Is regulated, supervised, and examined by the United States federal or 7
state authorities having regulatory authority over banks and trust 8
companies; and 9
3. Has been determined by the commissioner, or the Securities Valuation 10
Office of the NAIC, to meet the standards of financial condition and 11
standing considered necessary and appropriate to regulate the quality of 12
financial institutions whose letters of credit will be acceptable to the 13
commissioner. 14
(b) A "qualified United States financial institution" means, for purposes of those 15
provisions of this section specifying those institutions that are eligible to act as 16
a fiduciary of a trust, an institution that: 17
1. Is organized or, in the case of a United States branch or agency office of 18
a foreign banking organization, licensed under the laws of the United 19
States or any state thereof and has been granted authority to operate with 20
fiduciary powers; and 21
2. Is regulated, supervised, and examined by federal or state authorities 22
having regulatory authority over banks and trust companies. 23
(c) For purposes of subsection (3)(f)1. of this section, "reciprocal jurisdiction" 24
means a jurisdiction that meets one (1) of the following: 25
1. A non-United States jurisdiction that is subject to an in-force covered 26
agreement with the United States, each within its legal authority, or, in 27 UNOFFICIAL COPY 22 RS BR 1465
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the case of a covered agreement between the United States and the 1
European Union, is a member state of the European Union; 2
2. A United States jurisdiction that meets the requirements for 3
accreditation under the NAIC's financial standards and accreditation 4
program; 5
3. A qualified jurisdiction, as determined by the commissioner pursuant to 6
subsection (3)(e)4. of this section, which is not otherwise described in 7
this paragraph, and which meets certain additional requirements, 8
consistent with the terms and conditions of in-force covered agreements, 9
as specified by the commissioner in administrative regulation; or 10
4. Any other jurisdiction contained on the list of reciprocal jurisdictions 11
published by the commissioner in accordance with subsection (3)(g) of 12
this section. 13
(d) As used in this section: 14
1. "Covered agreement" means an agreement entered into pursuant to the 15
Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 16
U.S.C. secs. 313 and 314, and that is currently in effect or in a period of 17
provisional application and addresses the elimination, under specified 18
conditions, of collateral requirements as a condition for entering into any 19
reinsurance agreement with the ceding insurer domiciled in this state or 20
for allowing the ceding insurer to recognize credit for reinsurance; and 21
2. "NAIC" means National Association of Insurance Commissioners. 22
(2) (a) Credit for reinsurance shall be allowed a ceding insurer as either an asset or a 23
deduction from liability on account of reinsurance ceded only when the 24
reinsurer meets the requirements of: 25
1. Subsection (3)(a), (b), (c), (d), (e), (f), or (h) of this section; and 26
2. Paragraphs (b), (c), (d), and (e) of this subsection. 27 UNOFFICIAL COPY 22 RS BR 1465
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(b) The commissioner may promulgate administrative regulations pursuant to 1
subsection (8)(a)2. of this section that establish specific additional 2
requirements relating to or setting forth: 3
1. The valuation of assets or reserve credits; 4
2. The amount and forms of security supporting reinsurance arrangements 5
described in that subsection; and 6
3. The circumstances pursuant to which credit will be reduced or 7
eliminated. 8
(c) For reinsurers meeting the requirements of subsection (3)(c) of this section, 9
the requirements of paragraph (i) of that subsection shall also be met. 10
(d) For reinsurers meeting the requirements of subsection (3)(d) of this section, 11
the requirements of paragraphs (i) and (j) of that subsection shall also be met. 12
(e) For reinsurers meeting the requirements of subsection (3)(e) of this section, 13
the requirements of paragraph (j) of that subsection shall also be met. 14
(3) (a) Credit shall be allowed when the reinsurance is ceded to an assuming insurer 15
that is authorized to transact insurance or reinsurance in Kentucky. 16
(b) 1. Credit shall be allowed when the reinsurance is ceded to an assuming 17
insurer that is accredited as a reinsurer in Kentucky. An accredited 18
reinsurer is one which: 19
a. Files with the commissioner evidence of its submission to 20
Kentucky's jurisdiction; 21
b. Submits to Kentucky's authority to examine its books and records; 22
c. Is licensed to transact insurance or reinsurance in at least one (1) 23
state, or in the case of a United States branch of an alien assuming 24
insurer, is entered through and licensed to transact insurance or 25
reinsurance in at least one (1) state; 26
d. Files annually with the commissioner a copy of its annual 27 UNOFFICIAL COPY 22 RS BR 1465
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statement filed with the insurance regulatory official of its state of 1
domicile and a copy of its most recent audited financial statement; 2
and 3
e. Demonstrates to the satisfaction of the commissioner that it has 4
adequate financial capacity to meet its reinsurance obligations and 5
is otherwise qualified to assume reinsurance from domestic 6
insurers. An assuming insurer meets the requirements of this 7
subdivision at the time of its application if: 8
i. It maintains a surplus as regards policyholders in an amount 9
that is not less than twenty million dollars ($20,000,000); 10
and 11
ii. Its accreditation has not been denied by the commissioner 12
within ninety (90) days after submission of its accreditation 13
application. 14
2. Credit shall not be allowed a ceding insurer under this paragraph if the 15
assuming insurer's accreditation has been revoked by the commissioner 16
after notice and hearing. 17
(c) Credit shall be allowed when the reinsurance is ceded to an assuming insurer 18
that is domiciled and licensed in or, in the case of a United States branch of an 19
alien assuming insurer, is entered through a state which employs standards 20
regarding credit for reinsurance substantially similar to those applicable under 21
this section and the assuming insurer or United States branch of an alien 22
insurer: 23
1. Maintains a surplus as regards policyholders in an amount not less than 24
twenty million dollars ($20,000,000); and 25
2. Submits to the authority of the commissioner to examine its books and 26
records. 27 UNOFFICIAL COPY 22 RS BR 1465
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However, subparagraph 1. of this paragraph shall not apply to reinsurance 1
ceded and assumed pursuant to pooling arrangements among insurers in the 2
same holding company system. 3
(d) 1. Credit shall be allowed when the reinsurance is ceded to an assuming 4
insurer that maintains a trust in a qualified United States financial 5
institution for the payment of valid claims of its United States 6
policyholders and ceding insurers, their assigns, and successors in 7
interest. The assuming insurer shall report annually to the commissioner 8
information substantially the same as that required to be reported on the 9
NAIC annual statement form by authorized insurers to enable the 10
commissioner to determine the sufficiency of the trust. 11
2. a. In the case of a single assuming insurer, the trust shall consist of a 12
trusteed account representing the assuming insurer's liabilities 13
attributable to business written in the United States and, in 14
addition, except as provided in subdivision b. of this subparagraph, 15
the assuming insurer shall maintain a trusteed surplus of not less 16
than twenty million dollars ($20,000,000). 17
b. At any time after the assuming insurer has permanently 18
discontinued underwriting new business secured by the trust for at 19
least three (3) years, the commissioner may authorize a reduction 20
in the trusteed surplus required by subdivision a. of this 21
subparagraph, but only after a finding, based on an assessment of 22
the risk, that the new required surplus level is adequate for the 23
protection of United States ceding insurers, policyholders, and 24
claimants in light of a reasonably foreseeable adverse loss 25
development. The risk assessment may involve an actuarial 26
review, including an independent analysis of reserves and cash 27 UNOFFICIAL COPY 22 RS BR 1465
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flows, and shall consider all material risk factors, including, when 1
applicable, the lines of business involved, the stability of the 2
incurred loss estimates, and the effect of the surplus requirements 3
on the assuming insurer's liquidity or solvency. The minimum 4
required trusteed surplus may not be reduced to an amount less 5
than thirty percent (30%) of the assuming insurer's liabilities 6
attributable to reinsurance ceded by United States ceding insurers 7
covered by the trust. 8
3. In the case of a group including incorporated and individual 9
unincorporated underwriters: 10
a. The trust shall consist of a trusteed account representing the 11
respective underwriter's liabilities attributable to business written 12
in the United States; 13
b. The group shall maintain a trusteed surplus of which one hundred 14
million dollars ($100,000,000) shall be held jointly for the benefit 15
of United States ceding insurers of any member of the group; 16
c. The incorporated members of which group shall not be engaged in 17
any business other than underwriting as a member of the group and 18
shall be subject to the same level of solvency regulation and 19
control by the group's domiciliary regulator as are the 20
unincorporated members; and 21
d. The group shall make available to the commissioner an annual 22
certification of the solvency of each underwriter by the group's 23
domiciliary insurance regulatory official and its independent public 24
accountants. 25
4. In the case of a group of incorporated underwriters under common 26
administration, the group shall: 27 UNOFFICIAL COPY 22 RS BR 1465
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a. Comply with the reporting requirements contained in subparagraph 1
1. of this paragraph; 2
b. Have continuously transacted insurance business outside the 3
United States for at least three (3) years immediately prior to 4
making an application for accreditation; 5
c. Maintain a trust in an amount not less than the group's several 6
liabilities attributable to business ceded by United States ceding 7
insurers to any member of the group pursuant to reinsurance 8
contracts issued in the name of the group; 9
d. Maintain an aggregate policyholders' surplus of at least ten billion 10
dollars ($10,000,000,000); 11
e. Maintain a joint trusteed surplus of which one hundred million 12
dollars ($100,000,000) shall be held jointly for the benefit of 13
United States ceding insurers of any member of the group; and 14
f. Each member of the group shall make available to the 15
commissioner an annual certification of the member's solvency by 16
the member's domiciliary insurance regulatory official and its 17
independent public accountant. 18
5. The trust shall be established in a form approved by the commissioner. 19
The trust instrument shall provide that contested claims shall be valid 20
and enforceable upon the final order of any court of competent 21
jurisdiction in the United States. The trust shall vest legal title to its 22
assets in the trustees of the trust for its United States policyholders and 23
ceding insurers, their assigns, and successors in interest. The trust and 24
the assuming insurer shall be subject to examination as determined by 25
the commissioner. The trust shall remain in effect for as long as the 26
assuming insurer shall have outstanding obligations due under the 27 UNOFFICIAL COPY 22 RS BR 1465
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reinsurance agreements subject to the trust. 1
6. No later than February 28 of each year, the trustees of the trust shall 2
report to the commissioner in writing setting forth the balance of the 3
trust and listing the trust's investments at the preceding year end and 4
shall certify the date of termination of the trust, if so planned, or certify 5
that the trust shall not expire prior to the next following December 31. 6
(e) 1. Credit shall be allowed when the reinsurance is ceded to an assuming 7
insurer that: 8
a. Has been certified by the commissioner as a reinsurer in this state; 9
and 10
b. Secures its obligations in accordance with the requirements of this 11
paragraph. 12
2. In order to be eligible for certification, the assuming insurer shall: 13
a. Be domiciled and licensed to transact insurance or reinsurance in a 14
qualified jurisdiction, as determined by subparagraph 4. of this 15
paragraph; 16
b. Maintain minimum capital and surplus, or its equivalent, in an 17
amount to be determined by the commissioner by administrative 18
regulation; 19
c. Maintain financial strength ratings from two (2) or more rating 20
agencies deemed acceptable by the commissioner by 21
administrative regulation; 22
d. Agree to submit to the jurisdiction of this state, appoint the 23
commissioner as its agent for service of process in this state, and 24
agree to provide security for one hundred percent (100%) of the 25
assuming insurer's liabilities attributable to reinsurance ceded by 26
United States ceding insurers if the assuming insurer resists 27 UNOFFICIAL COPY 22 RS BR 1465
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enforcement of a final United States judgment; 1
e. Agree to meet applicable information filing requirements as 2
determined by the commissioner, both with respect to an initial 3
application for certification and on an ongoing basis; and 4
f. Satisfy any other relevant requirements for certification as 5
determined by the commissioner. 6
3. An association, including incorporated and individual unincorporated 7
underwriters, may be certified as a reinsurer in this state if the 8
association satisfies the requirements of subparagraph 2. of this 9
paragraph and: 10
a. The association satisfies its minimum capital and surplus 11
requirements through the capital and surplus equivalents (net of 12
liabilities) of the association and its members, which shall include 13
a joint central fund that may be applied to any unsatisfied 14
obligation of the association or any of its members, in an amount 15
determined by the commissioner to provide adequate protection; 16
b. The incorporated members of the association are not engaged in 17
any business other than underwriting as a member of the 18
association and are subject to the same level of regulation and 19
solvency control by the association's domiciliary regulator as are 20
the unincorporated members; and 21
c. The association provides the commissioner an annual certification 22
by the association's domiciliary regulator of the solvency of each 23
underwriter member within ninety (90) days after its financial 24
statements are due to be filed with the association's domiciliary 25
regulator, or if a certification is unavailable, financial statements, 26
prepared by independent public accountants, of each underwriter 27 UNOFFICIAL COPY 22 RS BR 1465
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member of the association. 1
4. a. The commissioner shall create and publish a list of qualified 2
jurisdictions under which an assuming insurer licensed and 3
domiciled in the qualified jurisdiction is eligible to be considered 4
for certification by the commissioner as a certified reinsurer. 5
b. In order to determine whether the domiciliary jurisdiction of an 6
assuming insurer from a jurisdiction outside of the United States is 7
eligible to be recognized as a qualified jurisdiction, the 8
commissioner shall evaluate the appropriateness and effectiveness 9
of the reinsurance supervisory system of the jurisdiction outside of 10
the United States, both initially and on an ongoing basis, and 11
consider the rights, benefits, and the extent of reciprocal 12
recognition afforded by the jurisdiction outside of the United 13
States to reinsurers licensed and domiciled in the United States. A 14
qualified jurisdiction shall agree to share information and 15
cooperate with the commissioner with respect to all certified 16
reinsurers domiciled within that jurisdiction. A jurisdiction may 17
not be recognized as a qualified jurisdiction if the commissioner 18
has determined that the jurisdiction does not adequately and 19
promptly enforce final United States judgments and arbitration 20
awards. Additional factors may be considered in the discretion of 21
the commissioner. 22
c. The commissioner shall consider the list of qualified jurisdictions 23
published through the NAIC's committee process when 24
determining qualified jurisdictions. If the commissioner approves a 25
jurisdiction as qualified that does not appear on the list, the 26
commissioner shall provide justification in accordance with 27 UNOFFICIAL COPY 22 RS BR 1465
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criteria to be developed by the commissioner by administrative 1
regulation. 2
d. Jurisdictions within the United States that meet the requirements 3
for accreditation under the NAIC's financial standards and 4
accreditation program shall be recognized as qualified. 5
e. If a certified reinsurer's domiciliary jurisdiction ceases to be a 6
qualified jurisdiction, the commissioner may revoke or suspend the 7
reinsurer's certification indefinitely, in lieu of revocation. 8
5. The commissioner shall assign a rating to each certified reinsurer, giving 9
due consideration to the financial strength ratings that have been 10
assigned by rating agencies deemed acceptable to the commissioner by 11
administrative regulation. The commissioner shall publish a list of all 12
certified reinsurers and their ratings. 13
6. a. A certified reinsurer shall secure obligations assumed from United 14
States ceding insurers pursuant to this paragraph at a level 15
consistent with its rating as specified by administrative regulation 16
promulgated by the commissioner. 17
b. In order for a domestic ceding insurer to qualify for full financial 18
statement credit for reinsurance ceded to a certified reinsurer, the 19
certified reinsurer shall maintain security in a form acceptable to 20
the commissioner and consistent with subsection (4) of this 21
section, or in a multi-beneficiary[multibeneficiary] trust in 22
accordance with paragraph (d) of this subsection, except as 23
otherwise provided in this paragraph. 24
c. If a certified reinsurer maintains a trust to fully secure its 25
obligations subject to paragraph (d) of this subsection, and chooses 26
to secure its obligations incurred as a certified reinsurer in the form 27 UNOFFICIAL COPY 22 RS BR 1465
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of a multi-beneficiary[multibeneficiary] trust, the certified 1
reinsurer shall maintain separate trust accounts for: 2
i. Its obligations incurred under reinsurance agreements issued 3
or renewed as a certified reinsurer with reduced security as 4
permitted by this paragraph or comparable laws of other 5
United States jurisdictions; and 6
ii. Its obligation subject to paragraph (d) of this subsection. 7
d. The commissioner shall not grant a certification pursuant to this 8
paragraph unless the certified reinsurer agrees to bind itself, by 9
language of the trust and agreement with the commissioner with 10
principal regulatory oversight of each trust account, to fund, upon 11
termination of any applicable trust account, out of the remaining 12
surplus of the trust any deficiency of any other trust account. 13
e. The minimum trusteed surplus requirements provided in paragraph 14
(d) of this subsection are not applicable to a multi-15
beneficiary[multibeneficiary] trust maintained by a certified 16
reinsurer for the purpose of securing obligations incurred pursuant 17
to this paragraph, except that the multi-18
beneficiary[multibeneficiary] trust shall maintain a minimum 19
trusteed surplus of ten million dollars ($10,000,000). 20
f. With respect to obligations incurred by a certified reinsurer 21
pursuant to this paragraph, if the security is insufficient, the 22
commissioner shall reduce the allowable credit by an amount 23
proportionate to the deficiency, and the commissioner may impose 24
further reductions in allowable credit upon finding that there is a 25
material risk that the certified reinsurer's obligations will not be 26
paid in full when due. 27 UNOFFICIAL COPY 22 RS BR 1465
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g. i. For purposes of this paragraph, a certified reinsurer whose 1
certification has been terminated for any reason shall be 2
treated as a certified reinsurer required to secure one hundred 3
percent (100%) of its obligations. 4
ii. As used in this subdivision, "terminated" includes 5
revocation, suspension, voluntary surrender, and inactive 6
status, except if the commissioner continues to assign a 7
higher rating as permitted by this subsection, a certified 8
reinsurer in inactive status or reinsurer whose certification 9
has been suspended shall not be considered "terminated." 10
7. If an applicant for certification has been certified as a reinsurer in an 11
NAIC-accredited jurisdiction, the commissioner may defer to that 12
jurisdiction's certification and the rating assigned by that jurisdiction, 13
and the reinsurer shall be considered a certified reinsurer in this state. 14
8. A certified reinsurer that ceases to assume new business in this state may 15
request to maintain its certification in inactive status in order to continue 16
to qualify for a reduction in security for its in-force business. An inactive 17
certified reinsurer shall continue to comply with all applicable 18
requirements of this subsection, and the commissioner shall assign a 19
rating that takes into account, if relevant, the reasons why the reinsurer 20
is not assuming new business. 21
(f) Credit shall be allowed when the reinsurance is ceded to an assuming insurer 22
if: 23
1. The assuming insurer has its head office in, or is domiciled in, as 24
applicable, and is licensed in, a reciprocal jurisdiction; 25
2. The assuming insurer has and maintains, on an ongoing basis: 26
a. For assuming insurers that are not associations: 27 UNOFFICIAL COPY 22 RS BR 1465
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i. Minimum capital and surplus, or its equivalent, calculated 1
according to the methodology of its domiciliary jurisdiction, 2
in an amount to be set forth in administrative regulation; and 3
ii. A minimum solvency or capital ratio, as applicable, as set 4
forth in administrative regulation; or 5
b. For assuming insurers that are associations, including incorporated 6
and individual unincorporated underwriters: 7
i. Minimum capital and surplus equivalents, net of liabilities, 8
calculated according to the methodology applicable in its 9
domiciliary jurisdiction, and a central fund containing a 10
balance in amounts to be set forth by the commissioner in 11
administrative regulation; and 12
ii. A minimum solvency or capital ratio in the reciprocal 13
jurisdiction where the assuming insurer has its head office or 14
is domiciled, as applicable, and is also licensed; 15
3. The assuming insurer agrees, and provides adequate assurance, in a form 16
prescribed by the commissioner, to the following: 17
a. To provide prompt written notice and explanation to the 18
commissioner if the assuming insurer falls below the minimum 19
requirements set forth in subparagraph 2. of this paragraph, or if 20
any regulatory action is taken against the assuming insurer for 21
serious noncompliance with applicable law; 22
b. To submit the assuming insurer's consent, in writing, to the 23
jurisdiction of the courts of this state and to the appointment of the 24
commissioner as an agent for service of process. The 25
commissioner may require that consent for service of process be 26
provided to the commissioner and included in each reinsurance 27 UNOFFICIAL COPY 22 RS BR 1465
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agreement. Nothing in this subdivision shall be construed to limit, 1
or in any way alter, the capacity for the parties to a reinsurance 2
agreement to agree to alternative dispute resolution mechanisms, 3
except to the extent such agreements are unenforceable under 4
applicable insolvency or delinquency laws; 5
c. To submit the assuming insurer's consent, in writing, to pay all 6
final judgments, wherever enforcement is sought, obtained by a 7
ceding insurer or its legal successor, that have been declared 8
enforceable in the jurisdiction where the judgment was obtained; 9
d. To include in each reinsurance agreement, a provision requiring 10
the assuming insurer to provide security in an amount equal to one 11
hundred percent (100%) of the assuming insurer's liabilities 12
attributable to reinsurance ceded pursuant to that agreement if the 13
assuming insurer resists enforcement of a final judgment that is 14
enforceable under the law of the jurisdiction in which it was 15
obtained or a properly enforceable arbitration award, whether 16
obtained by the ceding insurer or by its legal successor on behalf of 17
its resolution estate; and 18
e. i. To confirm that the assuming insurer is not presently 19
participating in any solvent scheme of arrangement which 20
involves this state's ceding insurers; and 21
ii. To notify the ceding insurer and the commissioner, and to 22
provide security in the amount of one hundred percent 23
(100%) of the assuming insurer's liabilities to the ceding 24
insurer, should the assuming insurer enter into a solvent 25
scheme of arrangement referenced in subpart i. of this 26
subdivision. The security required under this subdivision 27 UNOFFICIAL COPY 22 RS BR 1465
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shall be in a form consistent with the provisions of paragraph 1
(e) of this subsection and subsection (4) of this section, as 2
specified by the commissioner in administrative regulation; 3
4. The assuming insurer or its legal successor provides, upon request of the 4
commissioner, on behalf of itself and any legal predecessors, any 5
documentation prescribed by the commissioner in administrative 6
regulation; 7
5. The assuming insurer maintains a practice of prompt payment of claims 8
under reinsurance agreements, pursuant to criteria set forth by the 9
commissioner in administrative regulation; and 10
6. The assuming insurer's supervisory authority confirms to the 11
commissioner on an annual basis, as of the preceding December 31 or at 12
the annual date otherwise statutorily reported to the reciprocal 13
jurisdiction, that the assuming insurer complies with the requirements of 14
subparagraph 2. of this paragraph. 15
Nothing in this paragraph precludes an assuming insurer from providing 16
the commissioner with information on a voluntary basis. 17
(g) For purposes of paragraph (f) of this subsection: 18
1. a. The commissioner shall timely create and publish a list of 19
reciprocal jurisdictions which shall include reciprocal jurisdictions 20
as defined in subsection (1) of this section. 21
b. The commissioner shall consider, and may approve, any other 22
reciprocal jurisdiction: 23
i. On the list of reciprocal jurisdictions published by the NAIC, 24
through the NAIC committee process; and 25
ii. That meets the criteria established by the commissioner by 26
administrative regulation. 27 UNOFFICIAL COPY 22 RS BR 1465
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c. The commissioner may remove a jurisdiction from the list of 1
reciprocal jurisdictions upon a determination that the jurisdiction 2
no longer meets the requirements of a reciprocal jurisdiction, in 3
accordance with a process established by the commissioner by 4
administrative regulation, except the commissioner shall not 5
remove a reciprocal jurisdiction, as defined in subsection (1) of 6
this section. Upon removal of a reciprocal jurisdiction from the 7
commissioner's list, credit for reinsurance ceded to an assuming 8
insurer that has its home office or is domiciled in that jurisdiction 9
shall be allowed if otherwise allowed under this section; 10
2. a. The commissioner shall timely create and publish a list of 11
assuming insurers that have satisfied the conditions set forth in 12
paragraph (f) of this subsection[,] and to which cessions shall be 13
granted credit in accordance with[, as set forth in] paragraph (f) of 14
this subsection. 15
b. The commissioner may add an assuming insurer to the[ 16
commissioner's] list described in subdivision a. of[ assuming 17
insurers under] this subparagraph if an NAIC-accredited[NAIC 18
accredited] jurisdiction has added the[such] assuming insurer to 19
a[its] list of such assuming insurers, or if upon initial eligibility, 20
the assuming insurer submits information to the commissioner as 21
required under paragraph (f)4. of this subsection and complies with 22
any additional requirements that the commissioner may impose by 23
administrative regulation, except to the extent that they[there is a] 24
conflict with an applicable covered agreement. 25
c. For purposes of carrying out the provisions of this 26
subparagraph: 27 UNOFFICIAL COPY 22 RS BR 1465
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i. If an NAIC-accredited jurisdiction has determined that the 1
conditions set forth in paragraph (f) of this subsection have 2
been met, the commissioner may defer to that jurisdiction's 3
determination; 4
ii The commissioner may accept financial documentation 5
filed with another NAIC-accredited jurisdiction or with the 6
NAIC; 7
iii. If an assuming insurer requests the commissioner to defer 8
to another NAIC-accredited jurisdiction's determination, 9
the insurer shall submit the request on forms prescribed by 10
the commissioner, and any additional information as the 11
commissioner may require, by administrative regulation; 12
and 13
iv. Upon receiving a request described in subpart iii. of this 14
subdivision, the commissioner shall notify other states 15
through the NAIC committee process and provide relevant 16
information with respect to the determination of eligibility; 17
3. a. If the commissioner determines that an assuming insurer no longer 18
meets one (1) or more of the requirements of paragraph (f) of this 19
subsection, the commissioner may revoke or suspend the eligibility 20
of the assuming insurer for recognition under paragraph (f) of this 21
subsection, in accordance with procedures set forth in 22
administrative regulation. 23
b. While an assuming insurer's eligibility is suspended, no 24
reinsurance agreement issued, amended, or renewed after the 25
effective date of the suspension qualifies for credit, except to the 26
extent that the assuming insurer's obligations under the contract are 27 UNOFFICIAL COPY 22 RS BR 1465
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secured in accordance with subsection (4) of this section. 1
c. If an assuming insurer's eligibility is revoked, no credit for 2
reinsurance may be granted after the effective date of the 3
revocation with respect to any reinsurance agreements entered into 4
by the assuming insurer, including reinsurance agreements entered 5
into prior to the date of revocation, except to the extent that the 6
assuming insurer's obligations under the contract are secured in a 7
form acceptable to the commissioner and consistent with the 8
provisions of subsection (4) of this section; 9
4. If subject to legal process of rehabilitation, liquidation, or conservation, 10
as applicable, the ceding insurer, or its representative, may seek and, if 11
determined appropriate by the court in which the proceedings are 12
pending, may obtain an order requiring that the assuming insurer post 13
security for all outstanding ceded liabilities; 14
5. a. Credit may be taken under paragraph (f) of this subsection for 15
reinsurance agreements entered into, amended, or renewed, on or 16
after July 15, 2020, and only with respect to losses incurred and 17
reserves reported after the later of: 18
i. The date on which the assuming insurer has met all eligibility 19
requirements pursuant to paragraph (f) of this subsection; or 20
ii. The effective date of the new reinsurance agreement, 21
amendment, or renewal. 22
b. Nothing in this paragraph shall be construed to alter or impair a 23
ceding insurer's right to take credit for reinsurance, to the extent 24
that credit is not available under paragraph (f) of this subsection, as 25
long as the reinsurance qualifies for credit under any other 26
provision of this section; and 27 UNOFFICIAL COPY 22 RS BR 1465
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6. Nothing in this paragraph or paragraph (f) of this subsection shall be 1
construed to: 2
a. Limit or in any way alter the capacity of the parties to a 3
reinsurance agreement to: 4
i. Agree on requirements for security or other terms in the 5
reinsurance agreement, except as expressly prohibited by this 6
section or other applicable law; or 7
ii. Renegotiate the agreement; or 8
b. Authorize an assuming insurer to withdraw or reduce the security 9
provided under any reinsurance agreement, except as permitted by 10
the terms of the agreement. 11
(h) Credit shall be allowed when the reinsurance is ceded to an assuming insurer 12
not meeting the requirements of paragraph (a), (b), (c), (d), (e), or (f) of this 13
subsection, but only with respect to the insurance of risks located in 14
jurisdictions where such reinsurance is required by applicable law or 15
regulation of that jurisdiction or reinsurance ceded to a residual market 16
mechanism reinsurance association, or the members thereof, created pursuant 17
to law or which has been voluntarily created as such by its members with the 18
approval of the commissioner. 19
(i) If the assuming insurer is not authorized, certified, or accredited to transact 20
insurance or reinsurance in Kentucky, the credit permitted by paragraphs (c) 21
and (d) of this subsection shall not be allowed unless the assuming insurer 22
agrees in the reinsurance agreements: 23
1. That in the event of the failure of the assuming insurer to perform its 24
obligations under the terms of the reinsurance agreement, the assuming 25
insurer, at the request of the ceding insurer, shall submit to the 26
jurisdiction of any court of competent jurisdiction in any state of the 27 UNOFFICIAL COPY 22 RS BR 1465
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United States, shall comply with all requirements necessary to give the 1
court jurisdiction, and shall abide by the final decision of the court or of 2
any appellate court in the event of an appeal; and 3
2. To designate the Secretary of State or a designated attorney as its true 4
and lawful attorney upon whom may be served any lawful process in any 5
action, suit, or proceeding instituted by or on behalf of the ceding 6
insurer. 7
This paragraph is not intended to conflict with or override the obligation of 8
the parties to a reinsurance agreement to arbitrate their disputes, if this 9
obligation is created in the agreement. 10
(j) If the assuming insurer does not satisfy the requirements of paragraph (a), (b), 11
(c), or (f) of this subsection, the credit permitted by paragraph (d) or (e) of this 12
subsection shall not be allowed unless the assuming insurer agrees in the trust 13
agreements to the following conditions: 14
1. Notwithstanding any other provisions in the trust instrument, if the trust 15
is inadequate because it contains an amount less than the amount 16
required by paragraph (d)2. of this subsection, or if the grantor of the 17
trust has been declared insolvent or placed into receivership, 18
rehabilitation, liquidation, or similar proceedings under the laws of its 19
state or country of domicile, the trustee shall comply with an order of the 20
commissioner with regulatory oversight over the trust or with an order of 21
a court of competent jurisdiction directing the trustee to transfer to the 22
commissioner with regulatory oversight all of the assets of the trust; 23
2. The assets shall be distributed by and claims shall be filed with and 24
valued by the commissioner with regulatory oversight in accordance 25
with the laws of the state in which the trust is domiciled that are 26
applicable to the liquidation of domestic insurance companies; 27 UNOFFICIAL COPY 22 RS BR 1465
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3. If the commissioner with regulatory oversight determines that the assets 1
of the trust fund or any part thereof are not necessary to satisfy the 2
claims of the United States ceding insurers of the grantor of the trust, the 3
assets or part thereof shall be returned by the commissioner with 4
regulatory oversight to the trustee for distribution in accordance with the 5
trust agreement; and 6
4. The grantor shall waive any right otherwise available to it under United 7
States law that is inconsistent with this paragraph. 8
(k) 1. If an accredited or certified reinsurer ceases to meet the requirements for 9
accreditation or certification, the commissioner may suspend or revoke 10
the reinsurer's accreditation or certification. 11
2. The commissioner shall provide the reinsurer notice and an opportunity 12
for hearing prior to the entry of a suspension or revocation order. 13
3. A suspension or revocation order shall not take effect until after a 14
hearing is conducted, unless: 15
a. The reinsurer waives its right to hearing; 16
b. The commissioner's order is based on regulatory action by the 17
reinsurer's domiciliary jurisdiction or the voluntary surrender or 18
termination of the reinsurer's eligibility to transact insurance or 19
reinsurance business in its domiciliary jurisdiction or in the 20
primary certifying state of the reinsurer under paragraph (e)7. of 21
this subsection; or 22
c. The commissioner finds that an emergency requires immediate 23
action and a court of competent jurisdiction has not stayed the 24
commissioner's action. 25
4. While a reinsurer's accreditation or certification is suspended, no 26
reinsurance contract issued or renewed after the effective date of the 27 UNOFFICIAL COPY 22 RS BR 1465
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suspension qualifies for credit except to the extent that the reinsurer's 1
obligations under the contract are secured in accordance with subsection 2
(4) of this section. If a reinsurer's accreditation or certification is 3
revoked, no credit for reinsurance may be granted after the effective date 4
of the revocation except to the extent that the reinsurer's obligations 5
under the contract are secured in accordance with paragraph (e)6. of this 6
subsection or subsection (4) of this section. 7
(l) 1. A ceding insurer shall manage its reinsurance recoverables proportionate 8
to its own book of business and diversify its reinsurance program. 9
2. a. A domestic ceding insurer shall notify the commissioner within 10
thirty (30) days after: 11
i. Reinsurance recoverables from any single assuming insurer, 12
or group of affiliated assuming insurers, exceeds fifty percent 13
(50%) of the domestic ceding insurer's last reported surplus 14
to policyholders; or 15
ii. It is determined that reinsurance recoverables from any single 16
assuming insurer, or group of affiliated assuming insurers, is 17
likely to exceed the limit set forth in subpart i. of this 18
subdivision. 19
b. A domestic ceding insurer shall notify the commissioner within 20
thirty (30) days after: 21
i. Ceding to any single assuming insurer, or group of affiliated 22
assuming insurers, more than twenty percent (20%) of the 23
ceding insurer's gross written premium in the prior calendar 24
year; or 25
ii. It has determined that the reinsurance ceded to any single 26
assuming insurer, or group of affiliated assuming insurers, is 27 UNOFFICIAL COPY 22 RS BR 1465
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likely to exceed the limit set forth in subpart i. of this 1
subdivision. 2
c. The notification required by this subparagraph shall demonstrate 3
that the exposure is safely managed by the domestic ceding 4
insurer. 5
(m) 1. In order to facilitate the prompt payment of claims, the commissioner 6
may permit a certified reinsurer to defer posting the security for 7
catastrophic recoverables for a period of up to one (1) year from the date 8
of the first instance of a liability reserve entry by the ceding insurer as a 9
result of a loss from a catastrophic occurrence. 10
2. Upon notice by the ceding insurer to the commissioner that the certified 11
reinsurer has failed to pay claims owed under a reinsurance agreement in 12
a timely manner, the commissioner shall notify the certified reinsurer 13
that it is no longer permitted to defer the posting of security for 14
catastrophic recoverables. 15
3. Reinsurance recoverables for only the following lines of business, as 16
reported on the NAIC's annual financial statement related specifically to 17
the catastrophic occurrence, shall be included in the deferral: 18
a. Fire; 19
b. Allied lines; 20
c. Farmowner's multiple peril; 21
d. Homeowner's multiple peril; 22
e. Commercial multiple peril; 23
f. Inland marine; 24
g. Earthquake; and 25
h. Auto physical damage. 26
4. The commissioner may promulgate administrative regulations to 27 UNOFFICIAL COPY 22 RS BR 1465
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establish the process for a certified reinsurer to seek a deferral of posting 1
of security for catastrophic recoverables. 2
(4) An asset or a reduction from liability for the reinsurance ceded by an insurer to an 3
assuming insurer not meeting the requirements of subsections (2) and (3) of this 4
section shall be allowed in an amount not exceeding the liabilities carried by the 5
ceding insurer and the reduction shall be in the amount of funds held by or on 6
behalf of the ceding insurer, including funds held in trust for the ceding insurer, 7
under a reinsurance contract with the assuming insurer as security for the payment 8
of obligations thereunder, if the security is held in the United States subject to 9
withdrawal solely by, and under the exclusive control of, the ceding insurer, or, in 10
the case of a trust, held in a qualified United States financial institution. This 11
security may be in the form of: 12
(a) Cash; 13
(b) Securities listed by the Securities Valuation Office of the NAIC and 14
qualifying as admitted assets, including those deemed exempt from filing, as 15
defined by the Purposes and Procedures Manual of the Securities Valuation 16
Office, and qualifying as admitted assets; 17
(c) Clean, irrevocable, unconditional letters of credit issued or confirmed by a 18
qualified United States financial institution no later than December 31 in 19
respect of the year for which filing is being made, and in the possession of the 20
ceding insurer on or before the filing date of its annual statement. Letters of 21
credit meeting applicable standards of issuer acceptability as of the dates of 22
their issuance, or confirmation, shall, notwithstanding the issuing, or 23
confirming, institution's subsequent failure to meet applicable standards of 24
issuer acceptability, continue to be acceptable as security until their 25
expiration, extension, renewal, modification, or amendment, whichever first 26
occurs; or 27 UNOFFICIAL COPY 22 RS BR 1465
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(d) Any other form of security acceptable to the commissioner. 1
(5) Cession of bulk reinsurance by a domestic insurer is subject to KRS 304.24-420. 2
(6) (a) Credit shall be allowed as an asset or as a deduction from liability, to any 3
ceding insurer for reinsurance ceded to an assuming insurer qualified therefor 4
under subsection (2), (3), (4), or (5) of this section, except that no such credit 5
shall be allowed unless the reinsurance contract provides, in substance, that in 6
the event of the insolvency of the ceding insurer, the reinsurance shall be 7
payable under a contract reinsured by the assuming insurer on the basis of 8
reported claims allowed by the liquidation court, without diminution because 9
of the insolvency of the ceding insurer. Such payments shall be made directly 10
to the ceding insurer or to its domiciliary liquidator except: 11
1. Where the contract or other written agreement specifically provides 12
another payee of such reinsurance in the event of the insolvency of the 13
ceding insurer; or 14
2. Where the assuming insurer, with the consent of the direct insured, has 15
assumed such policy obligations of the ceding insurer as direct 16
obligations of the assuming insurer to the payees under such policies and 17
in substitution for the obligations of the ceding insurer to such payees. 18
(b) The reinsurance agreement may provide that the domiciliary liquidator of an 19
insolvent ceding insurer shall give written notice to the assuming insurer of 20
the pendency of a claim against such ceding insurer on the contract reinsured 21
within a reasonable time after such claim is filed in the liquidation proceeding. 22
During the pendency of such claim, any assuming insurer may investigate 23
such claim and interpose, at its own expense, in the proceeding where such 24
claim is to be adjudicated, any defenses which it deems available to the ceding 25
insurer or its liquidator. Such expense may be filed as a claim against the 26
insolvent ceding insurer to the extent of a proportionate share of the benefit 27 UNOFFICIAL COPY 22 RS BR 1465
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which may accrue to the ceding insurer solely as a result of the defense 1
undertaken by the assuming insurer. Where two (2) or more assuming insurers 2
are involved in the same claim and a majority in interest elect to interpose a 3
defense to such claim, the expense shall be apportioned in accordance with the 4
terms of the reinsurance agreement as though such expense had been incurred 5
by the ceding insurer. 6
(7) Upon request of the commissioner an insurer shall promptly inform the 7
commissioner in writing of the cancellation or any other material change of any of 8
its reinsurance treaties or arrangements. 9
(8) (a) The commissioner may promulgate administrative regulations to: 10
1. Implement the provisions of this section; and 11
2. Regulate any of the following reinsurance arrangements: 12
a. Life insurance policies with guaranteed nonlevel gross premium or 13
guaranteed nonlevel benefits; 14
b. Universal life insurance policies with provisions resulting in the 15
ability of a policyholder to keep a policy in force over a secondary 16
guarantee period; 17
c. Variable annuities with guaranteed death or living benefits; 18
d. Long-term care insurance policies; or 19
e. Such other life and health insurance and annuity products as to 20
which the NAIC adopts model regulatory requirements with 21
respect to credit for reinsurance. 22
(b) An administrative regulation adopted pursuant to paragraph (a)2.a. or b. of 23
this subsection may apply to any treaty containing policies issued: 24
1. On or after January 1, 2015; or 25
2. Prior to January 1, 2015, if risk pertaining to these policies is ceded in 26
connection with the treaty in whole or in part, on or after January 1, 27 UNOFFICIAL COPY 22 RS BR 1465
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2015. 1
(c) An administrative regulation adopted pursuant to paragraph (a)2. of this 2
subsection: 3
1. May require the ceding insurer, in calculating the amounts or forms of 4
security required to be held by the insurer pursuant to this section, to use 5
the Valuation Manual adopted by the NAIC under Section 11B(1) of the 6
NAIC Standard Valuation Law, including all amendments adopted by 7
the NAIC and in effect on the date as of which the calculation is made, 8
to the extent applicable; and 9
2. Shall not apply to cessions to an assuming insurer that: 10
a. Meets the requirements set forth in subsection (3)(f) of this 11
section; 12
b. Is certified in this state; or 13
c. Maintains at least two hundred fifty million dollars ($250,000,000) 14
in capital and surplus when determined in accordance with the 15
NAIC Accounting Practices and Procedures Manual, including all 16
amendments thereto adopted by the NAIC, excluding the impact of 17
any permitted or prescribed practices, and is: 18
i. Licensed in at least twenty-six (26) states; or 19
ii. Licensed in at least ten (10) states, and licensed or accredited 20
in a total of at least thirty-five (35) states. 21
(d) The authority to promulgate administrative regulations pursuant to paragraph 22
(a)2. of this subsection shall not limit the commissioner's general authority to 23
promulgate administrative regulations pursuant to paragraph (a)1. of this 24
subsection. 25
(9) Subsections (1) to (4) of this section shall apply to all cessions after July 14, 1992, 26
under reinsurance agreements which have had an inception, anniversary, or renewal 27 UNOFFICIAL COPY 22 RS BR 1465
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date not less than six (6) months after July 14, 1992. 1
Section 5. KRS 304.6-134 is amended to read as follows: 2
(1) The commissioner may exempt specific product forms or product lines of a 3
domestic company, that is licensed and doing business only in Kentucky, from the 4
requirements of KRS 304.6-143 if: 5
(a) The commissioner has issued an exemption in writing to the company and has 6
not subsequently revoked the exemption in writing; and 7
(b) The company computes reserves using assumptions and methods used prior to 8
the operative date of the valuation manual and any requirements established 9
by the commissioner and promulgated by administrative regulation. 10
(2) A domestic company that has less than three hundred million dollars 11
($300,000,000) of ordinary life premiums or a company that is a member of a group 12
of life insurers that has combined ordinary life premiums of less than six hundred 13
million dollars ($600,000,000) and that is licensed and doing business in Kentucky 14
is exempt from the requirements of KRS 304.6-143 and 304.6-151 if: 15
(a) [The company reported total adjusted capital of at least four hundred fifty 16
percent (450%) of authorized control level risk-based capital in the risk-based 17
capital report for the prior calendar year; 18
(b) ]The appointed actuary has provided an unqualified opinion on the reserves in 19
accordance with KRS 304.6-171 for the prior calendar year; and 20
(b)[(c)] The company has provided a certification by a qualified actuary that any 21
universal life policy with a secondary guarantee, issued or assumed by the 22
company after the operative date of the valuation manual, meets the definition 23
of a nonmaterial secondary guarantee universal life product as defined in the 24
valuation manual. 25
(3) For purposes of subsection (2) of this section, ordinary life premiums are measured 26
as direct, plus reinsurance assumed from an unaffiliated company, from the prior 27 UNOFFICIAL COPY 22 RS BR 1465
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calendar year annual statement. 1
(4) A domestic company that meets the requirements of subsection (2) of this section 2
shall file a statement with the commissioner certifying that these requirements have 3
been met for the current calendar year based on premiums and other values from the 4
prior calendar year's financial statements prior to July 1 of the current calendar year. 5
(5) For a domestic company that files a statement under subsection (4) of this section, 6
KRS 304.6-130, 304.6-132, 304.6-133, 304.6-140, 304.6-141, 304.6-145, 304.6-7
150, 304.6-155, 304.6-160, 304.6-170, 304.6-171, 304.6-180, and 304.15-410 shall 8
be applicable; however, any references to KRS 304.6-143 and 304.6-151 shall not 9
apply. 10
Section 6. KRS 304.17A-300 is amended to read as follows: 11
(1) (a) A provider-sponsored integrated health delivery network may be created 12
before the effective date of this Act by health care providers for the purpose 13
of providing health care services. 14
(b) No person shall be eligible to obtain a certificate of filing under subsection 15
(2) of this section on or after the effective date of this Act. 16
(2) No person shall in this Commonwealth be, act as, or hold itself out as a provider-17
sponsored integrated health delivery network unless it holds a certificate of filing 18
from the commissioner. Each provider-sponsored integrated health delivery network 19
that seeks to offer services shall first be certified by the department. 20
(3) To qualify as a provider-sponsored integrated health delivery network, an applicant 21
shall submit information acceptable to the department to satisfactorily demonstrate 22
that the provider-sponsored integrated health delivery network: 23
(a) Is licensed and in good standing with the licensure boards for participating 24
providers; 25
(b) Has demonstrated the capacity to administer the health plans it is offering; 26
(c) Has the ability, experience, and structure to arrange for the appropriate level 27 UNOFFICIAL COPY 22 RS BR 1465
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and type of health care services; 1
(d) Has the ability, policies, and procedures to conduct utilization management 2
activities; 3
(e) Has the ability to achieve, monitor, and evaluate the quality and cost 4
effectiveness of care provided by its provider network; 5
(f) Is financially solvent; 6
(g) Has the ability to assure enrollees adequate access to providers, including 7
geographic availability and adequate numbers and types; 8
(h) Has the ability and procedures to monitor access to its provider network; 9
(i) Has a satisfactory grievance procedure and the ability to respond to enrollees' 10
inquiries and complaints; 11
(j) Does not limit the participation of any health care provider in its provider 12
network in another provider network; 13
(k) Has the ability and policies that allow patients to receive care in the most 14
appropriate, least restrictive setting; 15
(l) Does not discriminate in enrolling members; 16
(m) Participates in coordination of benefits; 17
(n) Uses standardized electronic claims and billing processes and formats; and 18
(o) Discloses to the cooperative reimbursement arrangements with providers. 19
(4) Fees for the following services shall be paid to the commissioner by every provider-20
sponsored integrated health delivery network, and the fees shall be the same as 21
those for insurers as specified in Subtitle 4 of this chapter: 22
(a) For filing an application for a certificate of filing or amendment thereto; 23
(b) For filing an annual statement; and 24
(c) For other services deemed necessary by the commissioner. 25
(5) Provider-sponsored integrated health delivery networks shall be subject to the 26
provisions of this subtitle, and to the following provisions of this chapter, to the 27 UNOFFICIAL COPY 22 RS BR 1465
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extent applicable and not in conflict with the expressed provisions of this subtitle: 1
(a) Subtitle 1 -- Scope of Code; 2
(b) Subtitle 2 -- Commissioner of the Department of Insurance; 3
(c) Subtitle 3 -- Authorization of Insurers and General Requirements; 4
(d) Subtitle 4 -- Fees and Taxes; 5
(e) Subtitle 5 -- Kinds of Insurance--Limits of Risk--Reinsurance; 6
(f) Subtitle 6 -- Assets and Liabilities; 7
(g) Subtitle 7 -- Investments; 8
(h) Subtitle 8 -- Administration of Deposits; 9
(i) Subtitle 9 -- Agents, Consultants, Solicitors, and Adjusters; 10
(j) Subtitle 12 -- Trade Practices and Frauds; 11
(k) Subtitle 14 -- KRS 304.14-120 to 304.14-130 and 304.14-500 to 304.14-560; 12
(l) Subtitle 25 -- Continuity of Management; 13
(m) Subtitle 33 -- Insurers Rehabilitation and Liquidation; 14
(n) Subtitle 37 -- Insurance Holding Company Systems; and 15
(o) Subtitle 99 -- Penalties. 16
Section 7. KRS 304.37-010 is amended to read as follows: 17
As used in this subtitle, unless the context requires otherwise: 18
(1) "Affiliate" or person "affiliated" with a specific person means a person that directly, 19
or indirectly through one (1) or more intermediaries, controls, or is controlled by, or 20
is under common control with, the person specified; 21
(2) "Commissioner" means: 22
(a) The commissioner of insurance of this state; or[ the Department of Insurance, 23
as appropriate] 24
(b) When the context requires, the commissioner of insurance, or an equivalent 25
official, of another state; 26
(3) (a) "Control," "controlling," "controlled by," and "under common control with" 27 UNOFFICIAL COPY 22 RS BR 1465
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mean the possession, direct or indirect, of the power to direct or cause the 1
direction of the management and policies of a person, whether through the 2
ownership of voting securities, by contract other than a loan contract or 3
commercial contract for goods or nonmanagement services, or otherwise, 4
unless the power is the result of an official position with or corporate office 5
held by the person. 6
(b) Control shall be presumed to exist if any person, directly or indirectly, owns, 7
controls, holds with the power to vote, or holds proxies representing ten 8
percent (10%) or more of the voting securities of any other person. This 9
presumption may be rebutted by a showing, made in the manner provided by 10
KRS 304.37-020(13),[(12)] that control does not exist in fact. The 11
commissioner may determine, after forwarding all persons in interest notice 12
and opportunity to be heard and making specific findings of fact to support the 13
determination, that control exists in fact, notwithstanding the absence of a 14
presumption to that effect; 15
(4) "Enterprise risk" means any activity, circumstance, event, or series of events 16
involving one (1) or more affiliates of an insurer that, if not remedied promptly:[,] 17
(a) Is likely to have a material adverse effect upon the financial condition or 18
liquidity of the insurer or its insurance holding company system as a whole, 19
including but not limited to anything that would cause the insurer's risk-based 20
capital to fall into company action level as set forth in KRS 304.3-125 and 21
administrative regulations promulgated thereunder; or 22
(b) Would cause the insurer to be in hazardous financial condition in accordance 23
with KRS 304.2-065; 24
(5) "Groupwide supervisor" means the regulatory official authorized to engage in 25
conducting and coordinating groupwide supervision activities in accordance with 26
KRS 304.37-160; 27 UNOFFICIAL COPY 22 RS BR 1465
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(6) "Insurance holding company system" means two (2) or more affiliated persons, one 1
(1) or more of which is an insurer; 2
(7) "Insurer" has the same meaning as in KRS 304.1-040[includes every person 3
engaged as principal and as indemnitor, surety, or contractor in the business of 4
entering into contracts of insurance], except it shall not include agencies, 5
authorities, or instrumentalities of the United States, its possessions and territories, 6
the Commonwealth of Puerto Rico, the District of Columbia, or a state or political 7
subdivision of a state; 8
(8) "Internationally active insurance group" means an insurance holding company 9
system that: 10
(a) Includes an insurer registered under KRS 304.37-020; and 11
(b) Meets the following criteria: 12
1. Has premiums written in at least three (3) countries; 13
2. Has gross premiums written outside of the United States that are at least 14
ten percent (10%) of the system's total gross written premiums; and 15
3. Based on a three (3) year rolling average: 16
a. Has total assets that are at least fifty billion dollars 17
($50,000,000,000); or 18
b. Has total gross written premiums that are at least ten billion dollars 19
($10,000,000,000). 20
(9) "NAIC" means the National Association of Insurance Commissioners; 21
(10) "Person": 22
(a) Means an individual, a corporation, a partnership, an association, a joint stock 23
company, an unincorporated organization, any similar entity, or any 24
combination of the foregoing acting in concert; and[, but ] 25
(b) Shall not include any: 26
1. Bank in its fiduciary capacity; or 27 UNOFFICIAL COPY 22 RS BR 1465
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2. Securities broker performing no more than the usual and customary 1
broker's function; 2
(11)[(10)] "Subsidiary" of a specified person means an affiliate controlled by the person 3
directly or indirectly through one (1) or more intermediaries; 4
(12)[(11)] "Supervisory college" means a forum for cooperation and communication 5
between the involved supervisors established for the fundamental purpose of 6
facilitating the effectiveness of supervision of entities which belong to an insurance 7
group and facilitating both the supervision of the group as a whole on a groupwide 8
basis and improving the legal entity supervision of the entities within the insurance 9
group; and 10
(13)[(12)] "Voting security" includes any security convertible into or evidencing a right 11
to acquire a voting security. 12
Section 8. KRS 304.37-020 is amended to read as follows: 13
(1) As used in this section: 14
(a) "Group capital calculation instructions" means the group capital 15
calculation instructions adopted or amended by the NAIC in accordance 16
with procedures adopted by the NAIC; and 17
(b) 1. "NAIC Liquidity Stress Test Framework" means a separate NAIC 18
publication that includes: 19
a. A history of the NAIC's development of regulatory liquidity 20
stress testing; and 21
b. The following, as adopted or amended by the NAIC in 22
accordance with procedures adopted by the NAIC: 23
i. The scope criteria applicable for a specific data year, and 24
ii. The liquidity stress test instructions and reporting 25
templates for a specific data year. 26
2. As used in this paragraph, "scope criteria" means the designated 27 UNOFFICIAL COPY 22 RS BR 1465
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exposure bases, along with minimum magnitudes thereof for the 1
specified data year, used to establish a preliminary list of insurers 2
considered scoped into the NAIC Liquidity Stress Test Framework for 3
that data year. 4
(2) (a) Every insurer that[which] is authorized to do business in this state and[ 5
which] is a member of an insurance holding company system shall register 6
with the commissioner, except a foreign or alien insurer subject to disclosure 7
requirements and standards adopted by statute or regulation in the jurisdiction 8
of its domicile that[which] are substantially similar to those contained in this 9
section. 10
(b) For an alien insurer, the domiciliary state shall be deemed to be its state of 11
entry. 12
(c) Any insurer that[which] is subject to registration under this section shall 13
register[ within sixty (60) days after June 16, 1972, or] fifteen (15) days after 14
it becomes subject to registration[, whichever is later,] and annually thereafter 15
by April 1 of each year for the previous calendar year, unless the 16
commissioner for good cause shown extends the time for registration[,] and 17
then, within the extended time. 18
(d) The commissioner may require any authorized insurer that[which] is a 19
member of a holding company system but[which] is not subject to registration 20
under this section to furnish a copy of the registration statement or other 21
information filed by the insurer with the insurance regulatory authority of its 22
domiciliary jurisdiction. 23
(3)[(2)] Every insurer subject to registration shall file a registration statement on a 24
form provided by the commissioner, which shall contain current information about: 25
(a) The capital structure, general financial condition, ownership, and management 26
of the insurer and any person controlling the insurer; 27 UNOFFICIAL COPY 22 RS BR 1465
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(b) The identity of every member of the insurance holding company system; 1
(c) The following agreements in force, relationships subsisting, and transactions 2
currently outstanding between the[such] insurer and its affiliates: 3
1. Loans to, other investments in, or purchases, sales, or exchanges of 4
securities of the affiliates by the insurer or of the insurer by its affiliates; 5
2. Purchases, sales, or exchanges of assets; 6
3. Transactions not in the ordinary course of business; 7
4. Guarantees or undertakings for the benefit of an affiliate which result in 8
an actual contingent exposure of the insurer's assets to liability, other 9
than insurance contracts entered in the ordinary course of the insurer's 10
business; 11
5. All management and service contracts and all cost-sharing 12
arrangements; 13
6. All reinsurance agreements; 14
7. Dividend and other distributions to shareholders; and 15
8. Consolidated tax allocation agreements; 16
(d) Any pledge of the insurer's stock, including stock of any subsidiary or 17
controlling affiliate for a loan made to any member of the insurance holding 18
company system; 19
(e) 1. If requested by the commissioner, financial statements of, or within, an 20
insurance holding company system, including all affiliates. 21
2. Financial statements may include but are not limited to annual audited 22
financial statements filed with the United States Securities and 23
Exchange Commission, pursuant to the Securities Act of 1933, as 24
amended, or the Securities Exchange Act of 1932, as amended. 25
3. An insurer required to file financial statements pursuant to this 26
paragraph may satisfy the request by providing the commissioner with 27 UNOFFICIAL COPY 22 RS BR 1465
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the most recently filed parent corporation financial statements that have 1
been filed with the United States Securities and Exchange Commission; 2
(f) Other matters concerning transactions between registered insurers and any 3
affiliates as may be included from time to time in any registration forms 4
adopted or approved by the commissioner; 5
(g) Statements that the insurer's: 6
1. Board of directors oversees corporate governance and internal controls; 7
and[ that the insurer's ] 8
2. Officers or senior management have approved, implemented, and 9
continue to maintain and monitor corporate governance and internal 10
control procedures; and 11
(h) Any other information required by the commissioner through administrative 12
regulations. 13
(4)[(3)] (a) It shall not be necessary to disclose information on the registration 14
statement filed pursuant to subsection (3)[(2)] of this section if the 15
information is not material for the purposes of this section. 16
(b) Unless the commissioner by administrative regulation or order provides 17
otherwise, sales, purchases, exchanges, loans, or extensions of credit, or 18
investments, involving one-half of one percent (0.5%) or less of an insurer's 19
admitted assets as of the thirty-first day of December next preceding shall not 20
be deemed material for purposes of this section. 21
(c) The materiality guidelines provided in this subsection shall not apply for 22
purposes of the information required under subsections (15) and (16) of this 23
section. 24
(5)[(4)] Each registered insurer shall keep current the information required to be 25
disclosed in its registration statement by reporting all material changes or additions 26
on amendment forms provided by the commissioner within thirty (30) days after the 27 UNOFFICIAL COPY 22 RS BR 1465
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end of the month in which the insurer[it] learns of each change or addition. 1
(6)[(5)] All registration statements shall contain a summary outlining all items in the 2
current registration statement representing changes from the prior registration 3
statement. 4
(7)[(6)] Subject to KRS 304.37-030(5), each registered insurer shall report to the 5
commissioner all dividends and other distributions to shareholders within fifteen 6
(15) business days following the dividend or distribution declaration. 7
(8)[(7)] Any person within an insurance holding company system subject to 8
registration shall be required to provide complete and accurate information to an 9
insurer, if the information is reasonably necessary to enable the insurer to comply 10
with the provisions of this subtitle. 11
(9)[(8)] The commissioner shall terminate the registration of any insurer which 12
demonstrates that it no longer is a member of an insurance holding company 13
system. 14
(10)[(9)] The commissioner may require or allow two (2) or more affiliated insurers 15
subject to registration to file a consolidated registration statement or consolidated 16
reports amending their consolidated registration statement or their individual 17
registration statements. 18
(11)[(10)] The commissioner may allow an insurer that[which] is authorized to do 19
business in this state and which is part of an insurance holding company system to: 20
(a) Register on behalf of any affiliated insurer that[which] is required to register 21
under subsection (2) of this section;[(1)] and[ to ] 22
(b) File all information and material required to be filed under this section. 23
(12)[(11)] The provisions of this section shall not apply to any insurer, information, or 24
transaction if and to the extent that the commissioner by administrative regulation 25
or order exempts[shall exempt] it from the provisions of this section. 26
(13)[(12)] (a) Any person may file with the commissioner a disclaimer of affiliation 27 UNOFFICIAL COPY 22 RS BR 1465
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with any authorized insurer or a disclaimer may be filed by the insurer or any 1
member of an insurance holding company system. 2
(b) The disclaimer shall fully disclose all material relationships and bases for 3
affiliation between the persons and the insurer as well as the basis for 4
disclaiming the affiliation. 5
(c) A disclaimer of affiliation shall be deemed to have been granted unless the 6
commissioner, within thirty (30) days following receipt of a complete 7
disclaimer, notifies the filing party the disclaimer is disallowed. 8
(d) In the event of disallowance, the disclaiming party may request an 9
administrative hearing, which shall be granted. 10
(e) The disclaiming party shall be relieved of its duty to register under this section 11
if: 12
1. Approval of the disclaimer has been granted by the commissioner;[,] or 13
[if ] 14
2. The disclaimer is deemed to have been approved. 15
(14)[(13)] (a) [On and after July 15, 2014, ]The ultimate controlling person of every 16
insurer subject to registration shall also file an annual enterprise risk report. 17
(b) The report shall:[, ] 18
1. To the best of the ultimate controlling person's knowledge and belief, 19
identify the material risks within the insurance holding company system 20
that could pose enterprise risk to the insurer; and[. The report shall ] 21
2. Be filed with the lead state commissioner of the insurance holding 22
company system, as determined by the procedures within the Financial 23
Analysis Handbook adopted by the NAIC[National Association of 24
Insurance Commissioners]. 25
(15) (a) Except as provided in this subsection, the ultimate controlling person of 26
every insurer subject to registration shall concurrently file with the 27 UNOFFICIAL COPY 22 RS BR 1465
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registration an annual group capital calculation as directed by the lead state 1
commissioner. 2
(b) The report shall be: 3
1. Completed in accordance with the group capital calculation 4
instructions, which may permit the lead state commissioner to allow a 5
controlling person that is not the ultimate controlling person to file the 6
group capital calculation; and 7
2. Filed with the lead state commissioner of the insurance holding 8
company system as determined by the commissioner in accordance 9
with the procedures within the Financial Analysis Handbook adopted 10
by the NAIC. 11
(c) An insurance holding company system shall be exempt from filing the 12
group capital calculation if: 13
1. The system: 14
a. Has only one (1) insurer within its holding company structure; 15
b. Only writes business in its domestic state; and 16
c. Assumes no business from any other insurer; 17
2. a. The system is required to perform a group capital calculation 18
specified by the United States Federal Reserve Board. 19
b. The lead state commissioner shall request the calculation from 20
the Federal Reserve Board under the terms of information 21
sharing agreements in effect. If the Federal Reserve Board 22
cannot share the calculation with the lead state commissioner, 23
the insurance holding company system is not exempt from the 24
group capital calculation filing; 25
3. The system's non-United States groupwide supervisor is located within 26
a reciprocal jurisdiction, as defined in Section 4 of this Act, that 27 UNOFFICIAL COPY 22 RS BR 1465
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recognizes the United States state regulatory approach to group 1
supervision and group capital; or 2
4. The system: 3
a. Provides information to the lead state that meets the 4
requirements for accreditation under the NAIC Financial 5
Regulation Standards and Accreditation Program, either directly 6
or indirectly, through the groupwide supervisor, who has 7
determined the information is satisfactory to allow the lead state 8
to comply with the NAIC group supervision approach, as 9
detailed in the NAIC Financial Analysis Handbook; and 10
b. Has a non-United States groupwide supervisor, which is not in a 11
reciprocal jurisdiction as defined in Section 4 of this Act, that 12
recognizes and accepts, as specified by the commissioner in 13
administrative regulation, the group capital calculation as the 14
worldwide group capital assessment for United States insurance 15
groups who operate in that jurisdiction. 16
(d) Notwithstanding the provisions of paragraphs (c)3. and (c)4. of this 17
subsection, a lead state commissioner shall require the group capital 18
calculation for the United States operations of any insurance holding 19
company system not based in the United States where, after any necessary 20
consultation with other supervisors or officials, it is deemed appropriate by 21
the lead state commissioner for: 22
1. Prudential oversight and solvency monitoring purposes; or 23
2. Ensuring the competitiveness of the insurance marketplace. 24
(e) In addition to the exemptions established in paragraph (c) of this 25
subsection, the lead state commissioner may exempt the ultimate controlling 26
person from filing the annual group capital calculation or accept a limited 27 UNOFFICIAL COPY 22 RS BR 1465
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group capital filing or report in accordance with criteria specified by the 1
commissioner in administrative regulation. 2
(f) If the lead state commissioner determines that an insurance holding 3
company system no longer meets one (1) or more of the requirements for an 4
exemption from filing the group capital calculation under this subsection, 5
the system shall file the group capital calculation at the next annual filing 6
date unless given an extension by the lead state commissioner based on 7
reasonable grounds shown. 8
(16) (a) The ultimate controlling person of every insurer subject to registration and 9
also scoped into the NAIC Liquidity Stress Test Framework shall file the 10
results of a specific year's liquidity stress test. 11
(b) The filing shall be made to the lead state commissioner of the insurance 12
holding company system, as determined by the procedures within the 13
Financial Analysis Handbook adopted by the NAIC. 14
(c) 1. The NAIC Liquidity Stress Test Framework shall include scope 15
criteria: 16
a. Applicable to a specific data year; and 17
b. Reviewed at least annually by the NAIC's Financial Stability 18
Task Force or its successor. 19
2. Any change to the NAIC Liquidity Stress Test Framework or to the 20
data year for which the scope criteria are to be measured shall be 21
effective on January 1 of the year following the calendar year when 22
the changes are adopted. 23
3. a. Insurers meeting at least one (1) threshold of the scope criteria 24
shall be considered scoped into the NAIC Liquidity Stress Test 25
Framework for the specified data year unless the lead state 26
commissioner, in consultation with the NAIC Financial Stability 27 UNOFFICIAL COPY 22 RS BR 1465
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Task Force or its successor, determines the insurer should not be 1
scoped into the framework for that data year. 2
b. Insurers that do not trigger at least one (1) threshold of the scope 3
criteria shall be considered scoped out of the NAIC Liquidity 4
Stress Test Framework for the specified data year, unless the 5
lead state commissioner, in consultation with the NAIC 6
Financial Stability Task Force or its successor, determines the 7
insurer should be scoped into the framework for that data year. 8
4. The lead state commissioner, in consultation with the NAIC Financial 9
Stability Task Force or its successor, shall assess concerns related to 10
insurers being scoped in and out of the NAIC Liquidity Stress Test 11
Framework on a frequent basis as part of the scope criteria 12
determination for an insurer. 13
(d) The performance of, and the filing of the results from, a specified year's 14
liquidity stress test shall comply with: 15
1. The NAIC Liquidity Stress Test Framework's instructions and 16
reporting templates for that year; and 17
2. Any lead state commissioner determinations, made in consultation 18
with the NAIC Financial Stability Task Force or its successor, 19
provided within the NAIC Liquidity Stress Test Framework. 20
(17)[(14)] The failure to file a registration statement or any amendment thereto, a 21
summary of the registration statement,[ or ]an enterprise risk filing, or any other 22
filing or report required by this section within the time specified for the filing or 23
report shall be a violation of this subtitle. 24
Section 9. KRS 304.37-050 is amended to read as follows: 25
(1) (a) Subject to paragraph (b) of this subsection and subsection (3) of this section, 26
all documents, materials, or other information in the possession or control of 27 UNOFFICIAL COPY 22 RS BR 1465
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the department that are obtained by or disclosed to the commissioner or any 1
other person in the course of an examination, analysis, or investigation made 2
under KRS 304.37-040 and all information reported or provided to the 3
department under KRS 304.37-020, 304.37-030, and 304.37-160[,] shall: 4
1. Be confidential by law and privileged;[ and] 5
2. Not be subject to: 6
a. The Kentucky Open Records Act, KRS 61.872 to 61.884; 7
b Subpoena; or 8
c. Discovery or admission into evidence in any private civil action; 9
and 10
3. Be recognized as being proprietary and containing trade secrets. 11
(b) The commissioner may use the documents, materials, or other information in 12
the furtherance of any regulatory or legal action brought as a part of the 13
commissioner's official duties. 14
(c) The commissioner shall not otherwise make the documents, materials, or 15
other information public without the prior written consent of the insurer to 16
which it pertains unless the commissioner, after giving the insurer and its 17
affiliates who would be affected thereby notice and opportunity to be heard, 18
determines that the interests of policyholders, shareholders, or the public will 19
be served by the publication thereof, in which event the commissioner may 20
publish all or any part thereof in such manner as the commissioner may deem 21
appropriate. 22
(d) For purposes of the information reported and provided to the department 23
pursuant to Section 8 of this Act, KRS 304.37-030, 304.37-040, and 304.37-24
160, the commissioner shall maintain the confidentiality of the: 25
1. Group capital calculation and the group capital ratio produced within 26
the calculation and any group capital information received from an 27 UNOFFICIAL COPY 22 RS BR 1465
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insurance holding company supervised by the Federal Reserve Board 1
or any United States groupwide supervisor; and 2
2. Liquidity stress test results and supporting disclosures and any 3
liquidity stress test information received from an insurance holding 4
company supervised by the Federal Reserve Board and non-United 5
States groupwide supervisors. 6
(2) Neither the commissioner nor any person who received documents, materials, or 7
other information while acting under the authority of the commissioner or with 8
whom the[such] documents, materials, or other information are shared, pursuant to 9
this subtitle, shall be permitted or required to testify in any private civil action 10
concerning any confidential documents, materials, or other information subject to 11
subsection (1) of this section. 12
(3) The commissioner: 13
(a) May share documents, materials, or other information, including confidential 14
and privileged documents, materials, or other information subject to 15
subsection (1) of this section, including documents and materials containing 16
trade secrets or proprietary information, with: 17
1. Other state, federal, and international regulatory agencies;[, ] 18
2. The NAIC;[National Association of Insurance Commissioners and its 19
affiliates and subsidiaries,] 20
3. Any third-party consultants designated by the commissioner; and[ 21
with] 22
4. State, federal, and international law enforcement authorities, including 23
members of any supervisory college described in KRS 304.37-055;[,] 24
if the recipient agrees in writing to maintain the confidentiality and privileged 25
status of the documents, materials, or other information, and has verified in 26
writing the legal authority to maintain confidentiality; 27 UNOFFICIAL COPY 22 RS BR 1465
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(b) May only share confidential and privileged documents, materials, or other 1
information reported pursuant to KRS 304.37-020(14)[(13)], notwithstanding 2
paragraph (a) of this subsection, with commissioners of states having statutes 3
or regulations substantially similar to subsection (1) of this section, and who 4
have agreed in writing not to disclose the[such] information; 5
(c) 1. May receive documents, materials, or other information, including 6
confidential and privileged documents, materials, or other information, 7
including proprietary information or trade secrets, from the 8
NAIC[National Association of Insurance Commissioners] and its 9
affiliates and subsidiaries and from regulatory and law enforcement 10
officials of other foreign or domestic jurisdictions[jurisdiction]; and 11
2. Shall maintain as confidential or privileged any documents, materials, or 12
other information received with notice or the understanding that it is 13
confidential or privileged under the laws of the jurisdiction that is the 14
source of the documents, materials, or other information; and 15
(d) Shall enter into written agreements with the NAIC and any third-party 16
consultant designated by the commissioner[National Association of 17
Insurance Commissioners] governing sharing and use of information provided 18
pursuant to this subtitle[,] and consistent with this subsection that: 19
1. Specify procedures and protocols regarding the confidentiality and 20
security of information shared with the NAIC or a designated third-21
party consultant[National Association of Insurance Commissioners and 22
its affiliates and subsidiaries,] pursuant to this subtitle, including 23
procedures and protocols for sharing by the NAIC[National Association 24
of Insurance Commissioners] with other state, federal, or international 25
regulators. The agreement shall provide that the recipient agrees in 26
writing to maintain the confidentiality and privileged status of the 27 UNOFFICIAL COPY 22 RS BR 1465
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documents, materials, or other information and has verified in writing 1
the legal authority to maintain such confidentiality; 2
2. Specify that ownership of information shared with the NAIC or a third-3
party consultant[National Association of Insurance Commissioners and 4
its affiliates and subsidiaries,] pursuant to this subtitle[subsection,] 5
remains with the commissioner, and the NAIC's or a designated third-6
party consultant's[National Association of Insurance Commissioners'] 7
use of the information is subject to the direction of the commissioner; 8
3. Except for documents, material, or information reported pursuant to 9
subsection (16) of Section 8 of this Act, prohibit the NAIC or 10
designated third-party consultant from storing the information shared 11
pursuant to this subtitle in a permanent database after the underlying 12
analysis is completed; 13
4. Require prompt notice be given to an insurer whose confidential 14
information[,] in the possession of the NAIC or a designated third-party 15
consultant[National Association of Insurance Commissioners,] pursuant 16
to this subtitle[,] is subject to a request or subpoena to the NAIC or a 17
designated third-party consultant[National Association of Insurance 18
Commissioners, pursuant to this subtitle,] for disclosure or production;[ 19
and] 20
5.[4.] Require the NAIC or a designated third-party consultant[National 21
Association of Insurance Commissioners and its affiliates and 22
subsidiaries] to consent to intervention by an insurer in any judicial or 23
administrative action in which the NAIC or a designated third-party 24
consultant[National Association of Insurance Commissioners and its 25
affiliates and subsidiaries] may be required to disclose confidential 26
information about the insurer shared with the NAIC or a designated 27 UNOFFICIAL COPY 22 RS BR 1465
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third-party consultant pursuant to this subtitle; and[National 1
Association of Insurance Commissioners and its affiliates and 2
subsidiaries] 3
6. For documents, material, or information reporting pursuant to 4
subsection (16) of Section 8 of this Act, in the case of an agreement 5
involving a third-party consultant, provide for notification of the 6
identity of the consultant to the applicable insurers. 7
(4) The sharing of information by the commissioner shall not constitute a delegation of 8
regulatory authority or rulemaking, and the commissioner is solely responsible for 9
administration, execution, and enforcement of this subtitle. 10
(5) A waiver of any applicable privilege or claim of confidentiality in the documents, 11
materials, or information shall not occur as a result of disclosure to the 12
commissioner under this section or as a result of sharing as authorized in subsection 13
(3) of this section. 14
(6) Documents, materials, or information in the possession or control of the NAIC or a 15
third-party consultant designated by the commissioner[National Association of 16
Insurance Commissioners and its affiliates and subsidiaries,] pursuant to this 17
subtitle[,] shall: 18
(a) Be confidential by law and privileged; and 19
(b) Not be subject to: 20
1. The Kentucky Open Records Act, KRS 61.872 to 61.884; 21
2. Subpoena; or 22
3. Discovery or admission into evidence in any private civil action. 23
(7) (a) The group capital calculation and resulting group capital ratio, and the 24
liquidity stress test along with its results and supporting disclosures, 25
required under Section 8 of this Act are regulatory tools for assessing group 26
risks and capital adequacy and group liquidity risks, respectively, and are 27 UNOFFICIAL COPY 22 RS BR 1465
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not intended as a means to rank insurers or insurance holding company 1
systems generally. 2
(b) Except as permitted under paragraph (c) of this subsection or as may 3
otherwise be required under the provisions of this subtitle, no person shall 4
make, publish, disseminate, circulate, or place before the public, or cause 5
directly or indirectly to be made, published, disseminated, circulated, or 6
placed before the public: 7
1. In a newspaper, magazine, or other publication; 8
2. In the form of a notice, circular, pamphlet, letter, or poster; 9
3. Over any radio or television station or any electronic means of 10
communication available to the public; or 11
4. In any other way as an advertisement, announcement, or statement; 12
containing a representation or statement with regard to the group capital 13
calculation, group capital ratio, the liquidity stress test results, or 14
supporting disclosures for the liquidity stress test of any insurer or insurer 15
group or of any component derived in the calculation by any insurer, 16
broker, or other person engaged in any manner in the insurance business. 17
(c) If any materially false statement with respect to the: 18
1. Group capital calculation, resulting group capital ratio, an 19
inappropriate comparison of any amount to an insurer's or insurance 20
group's group capital calculation or resulting group capital ratio; or 21
2. Liquidity stress test result, supporting disclosures for the liquidity 22
stress test, or an inappropriate comparison of any amount to an 23
insurer's or insurance group's liquidity stress test result or supporting 24
disclosures; 25
is published in any written publication and the insurer is able to 26
demonstrate to the commissioner with substantial proof the falsity of such 27 UNOFFICIAL COPY 22 RS BR 1465
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statement or the inappropriateness, as the case may be, then the insurer 1
may publish announcements in a written publication if the sole purpose of 2
the announcement is to rebut the materially false statement. 3
Section 10. KRS 304.99-152 is amended to read as follows: 4
(1) Any insurer failing, without just cause, to file any registration statement as required 5
by Subtitle 37 of this chapter, shall be required, after notice and hearing, to pay a 6
civil penalty of ten thousand dollars ($10,000) for each day's delay to the 7
commissioner. The maximum civil penalty under this section shall be one hundred 8
thousand dollars ($100,000). The commissioner may reduce the civil penalty if the 9
insurer demonstrates to the commissioner that the imposition of the penalty would 10
constitute a financial hardship to the insurer. 11
(2) Every director or officer of an insurance holding company system who knowingly 12
violates, participates in, assents to, or who knowingly permits any of the officers or 13
agents of the insurer to engage in transactions or make investments which have not 14
been properly reported or submitted pursuant to KRS 304.37-020(2)[(1)], 304.37-15
030(2), or 304.37-030(5), or which violate Subtitle 37 of this chapter, shall pay, in 16
their individual capacities, a civil penalty of not more than five thousand dollars 17
($5,000) per violation, after notice and hearing before the commissioner. In 18
determining the amount of the civil penalty, the commissioner shall take into 19
account the appropriateness of the civil penalty with respect to the gravity of the 20
violation, the history of previous violations, and other matters justice may require. 21
(3) If it appears that any insurer subject to Subtitle 37 of this chapter, or any director, 22
officer, employee, or agent has engaged in any transaction or entered into any 23
contract which is subject to KRS 304.37-030 and which would not have been 24
approved had approval been requested, the commissioner may order the insurer to 25
cease and desist immediately any further activity under that transaction or contract. 26
After notice and hearing, the commissioner may also order the insurer to void the 27 UNOFFICIAL COPY 22 RS BR 1465
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contracts and restore the status quo if the action is in the best interest of the 1
policyholders, creditors, or the public. 2
(4) If it appears that any insurer or any director, officer, employee, or agent has 3
committed a willful violation of Subtitle 37 of this chapter, the commissioner may 4
cause criminal proceedings to be instituted in the Circuit Court for the county in 5
which the principal office of the insurer is located, or if the insurer has no office in 6
Kentucky, in the Franklin Circuit Court against the insurer or the responsible 7
director, officer, employee, or agent. Any insurer which willfully violates Subtitle 8
37 of this chapter, may be fined not more than one hundred thousand dollars 9
($100,000). Any individual who willfully violates Subtitle 37 of this chapter, may 10
be fined in his or her individual capacity not more than one thousand dollars 11
($1,000), be imprisoned for not more than one (1) to three (3) years, or both. 12
(5) Any officer, director, or employee of an insurance holding company system who 13
willfully and knowingly subscribes to or makes or causes to be made any false 14
statements or false reports or false filings with the intent to deceive the 15
commissioner in the performance of his or her duties under Subtitle 37 of this 16
chapter, upon conviction, shall be imprisoned for not more than one (1) year or 17
more than five (5) years, or fined ten thousand dollars ($10,000), or both. Any fines 18
imposed shall be paid by the officer, director, or employee in his or her individual 19
capacity. 20
(6) If it appears to the commissioner that any person has committed a violation of KRS 21
304.37-120 which prevents the full understanding of the enterprise risk to the 22
insurer by affiliates or by the insurance holding company system, the violation may 23
serve as an independent basis for disapproving dividends or distributions and for 24
placing the insurer under an order of supervision in accordance with Subtitle 33 of 25
this chapter. 26