Chapter 698

Sec. 38a-41. (Formerly Sec. 38-20). Authority to do business. Licensure. Revocation or refusal to renew license. Fines. Company owned by a state or foreign nation or company controlled by insureds not to be issued license. Appeals. Plan of operations. Type of business to be conducted. (a) No insurance company or health care center shall do any insurance business or health care center business within this state until and except while it is permitted to do so under the terms of a license issued by the commissioner. Any such company desiring to obtain such a license shall make application to the commissioner, setting forth the line or lines of business that it is seeking authorization to write. It shall file with the commissioner a certified copy of its charter or articles of association and evidence satisfactory to the commissioner that it has complied with the laws of the jurisdiction under which it is organized, a statement of its financial condition in such form as is required by the commissioner, together with such evidence of its correctness as the commissioner requires and evidence of good management in such form as is required by the commissioner. Applicant companies licensed in and operated from administrative offices in one state but domiciled in another state, as permitted by the applicable state law, shall provide justification of such arrangement, satisfactory to the commissioner, which shall demonstrate that regulatory influence of the domiciliary supervisory official has not been diminished as a result of such arrangement. An applicant shall demonstrate an orderly pattern of growth in its marketing territories in the geographic region, with the exception of a newly formed health care center, and an expertise in marketing and servicing the lines of insurance or the health care center business it desires to write. It shall submit evidence of its ability to provide continuous and timely claims settlement. If the information furnished is satisfactory to the commissioner and if all other requirements of law have been complied with, he may issue to such company a license permitting it to do business in this state. Each such license shall expire on the first day of May succeeding the date of its issuance, but may be renewed without any formalities except as required by the commissioner. Failure of a licensed company to exercise its authority to write a particular line or lines of business in this state for two consecutive calendar years may constitute sufficient cause for revocation of the company's authority to write those lines of business.

(b) The commissioner shall adopt regulations in accordance with the provisions of chapter 54 specifying the information and evidence that an insurance company or health care center desiring to obtain or renew a license to do an insurance business or health care center business shall submit and the requirements with which it shall comply.

(c) The commissioner may, at any time, for cause, suspend, revoke or refuse to renew any such license or in lieu of or in addition to suspension or revocation of such license the commissioner, after reasonable notice to and hearing of any holder of such license, may impose a fine not to exceed fifty thousand dollars. Such hearings may be held by the commissioner or any person designated by the commissioner. Whenever a person other than the commissioner acts as the hearing officer, the person shall submit to the commissioner a memorandum of the person's findings and recommendations upon which the commissioner may base a decision. The commissioner may, if the commissioner deems it in the interest of the public, publish in one or more newspapers of the state a statement that, under the provisions of this section, the commissioner has suspended or revoked the license of any insurance company or health care center to do business in this state.

(d) No license to do an insurance business within this state shall be issued to a foreign insurance company owned or financially controlled by another state of the United States or to an alien insurance company owned or financially controlled by a foreign nation or any state or province thereof.

(e) No license to do an insurance business within this state shall be issued to any company which insures or plans to insure the separate risks of the employees of an employer that directly or indirectly controls the insurer by stock ownership or otherwise or exercises control of the operations of the insurer where the premiums written annually by the insurer on the separate risks of such employees exceed or will exceed ten per cent of the total premiums which the insurer writes or will write annually or where the commissions payable, if any, on premiums covering the risks of such employees written by the insurer annually exceed or will exceed ten per cent of the total commissions to agents which are or will be paid annually by the insurer.

(f) Any company aggrieved by the action of the commissioner in revoking, suspending or refusing to renew a license or in imposing a fine may appeal therefrom, in accordance with the provisions of section 4-183, except venue for such appeal shall be in the judicial district of New Britain. Appeals under this section shall be privileged in respect to the order of trial assignment.

(g) Except as provided in section 38a-92l an insurer shall be required to be licensed to transact financial guaranty insurance in this state, as defined in subdivision (1) of section 38a-92a. Prior to the issuance of a license to transact financial guaranty insurance business, an insurer shall submit for the approval of the commissioner a plan of operation detailing the types and projected diversification of guaranties that will be issued, the underwriting procedures that will be followed, managerial oversight methods, investment policies and other matters as may be prescribed by the commissioner. An insurer licensed to transact the business of financial guaranty insurance may also be licensed to transact the business of surety, credit and residual value insurance, but may not be licensed to transact any other lines of insurance in this state.

(1949 Rev., S. 6045, 6175; 1955, S. 2786d; 1967, P.A. 159; 1969, P.A. 480, S. 1; 1971, P.A. 870, S. 95; P.A. 76-436, S. 628, 681; P.A. 77-603, S. 25, 125; P.A. 78-280, S. 5, 6, 127; P.A. 81-101, S. 7; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; 90-243, S. 6; P.A. 93-136, S. 16; 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6; P.A. 99-9, S. 2, 6; 99-215, S. 24, 29; P.A. 04-174, S. 1, 2; P.A. 08-178, S. 2; P.A. 14-235, S. 11.)

History: 1967 act authorized imposition of fine, added hearing provisions and provisions re petitions to court; 1969 act added provision prohibiting issuance of license to company which insures or plans to insure employees of employer which directly or indirectly controls insurer by stock ownership, etc.; 1971 act replaced superior court with court of common pleas, effective September 1, 1971, except that courts with cases pending retain jurisdiction unless pending matters deemed transferable; P.A. 76-436 replaced court of common pleas with superior court, effective July 1, 1978; P.A. 77-603 replaced previous provisions re petitions to court with provision re appeals in accordance with Sec. 4-183; P.A. 78-280 substituted “judicial district of Hartford-New Britain” for “Hartford county”; P.A. 81-101 divided section into Subsecs., required that insurance companies desiring to obtain a license submit evidence of good management to the commissioner, specified requirements for applicant companies licensed in one state and domiciled in another and provided that commissioner adopt regulations concerning requirements for licensure; P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; P.A. 90-243 added a provision re revocation of an insurance company's authority and inserted references to “foreign” and “alien” insurance companies; Sec. 38-20 transferred to Sec. 38a-41 in 1991; P.A. 93-136 added new Subsec. (g) re transaction of financial guaranty insurance business; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 99-9 amended section to add references to “health care centers” and “health care center business”, amended Subsec. (a) to substitute “line or lines of business which it is seeking authorization to write” for “lines of insurance which it desires to write”, to add “as permitted by the applicable state law” re justification provided by applicant companies domiciled in another state, to except newly formed health care centers from required demonstration of orderly pattern of growth, and to substitute “business” for “insurance”, and amended Subsec. (c) to substitute “the commissioner” for “he” and to make a technical change, effective May 12, 1999; P.A. 99-215 replaced “judicial district of Hartford” with “judicial district of New Britain” in Subsec. (f), effective June 29, 1999; P.A. 04-174 amended Subsec. (c) to substitute “refuse to renew” for “reissue” and make technical changes for the purposes of gender neutrality and amended Subsec. (f) to substitute “renew” for “reissue”; P.A. 08-178 increased maximum fine from $10,000 to $50,000 in Subsec. (c); P.A. 14-235 made technical changes in Subsec. (a).

Annotations to former section 38-20:

Powers of Insurance Commissioner are discretionary or quasi-judicial, rather than ministerial; courts will not interfere with the exercise of commissioner's discretion; mandamus will not lie to control action of commissioner under section. 60 C. 448. Cited. 122 C. 295; 188 C. 152.

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Sec. 38a-41a. Certificate authorizing formation of insurance company or health care center. Information required by commissioner. Costs. (a) A certificate authorizing the formation of a corporation to transact the business of an insurance company or a health care center shall be issued by the commissioner if the following is submitted to the commissioner by the incorporators and is deemed to be satisfactory: (1) The proposed articles of incorporation, which shall state that the corporation has, as a purpose, the doing of an insurance business or health care center business; (2) the proposed bylaws of the corporation; and (3) such information as the commissioner shall require to evaluate the objectives, management and control of the proposed corporation, pursuant to the provisions of chapter 54.

(b) All expenses incurred by the commissioner in connection with proceedings under this section shall be paid by the person filing the application.

(P.A. 96-106, S. 3; P.A. 99-9, S. 3, 6.)

History: P.A. 99-9 amended Subsec. (a) to add reference to a “health care center” and “health care center business” and to substitute “commissioner” for “him” and “Insurance Commissioner”, effective May 12, 1999.

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Sec. 38a-42. (Formerly Sec. 38-20b). Contracts with life, accident or health insurance producers. (a) Except as provided in subsection (b) of this section, no insurance company shall enter into any contract of remuneration with any life or accident and health insurance producer where the initial or any renewal commission is contingent upon (1) such contract being in effect more than two years, or (2) any continuing premium or other volume requirement contained in such contract.

(b) Any insurance company may enter into a contract of remuneration of the kind prohibited in subsection (a) of this section with any such insurance producer if the company has offered to such producer a contract which contains no such contingent provisions as described in subdivisions (1) and (2) of subsection (a) of this section and which provides actuarially equivalent remuneration to the contract containing such contingent provisions.

(1969, P.A. 263, S. 1, 2; P.A. 96-193, S. 1, 36; P.A. 04-10, S. 1.)

History: Sec. 38-20b transferred to Sec. 38a-42 in 1991; P.A. 96-193 substituted “producer” for “agent” and “broker”, effective June 3, 1996; P.A. 04-10 made technical changes.

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Sec. 38a-43. (Formerly Sec. 38-22). Certain insurance companies and health care centers may be prohibited from transacting business in this state. Whenever it appears to the commissioner that permission to transact business within any state of the United States or within any foreign country has been refused to any domestic insurance company or domestic health care center after (1) a certificate of the solvency and good management of such company or health care center has been issued to it by the commissioner, and (2) such company or health care center has complied with any reasonable laws of such state or foreign country requiring deposits of money or securities with the government of such state or country, the commissioner may immediately cancel the authority of each company or health care center organized under the laws of such state or foreign government and licensed to do business in this state and may refuse a certificate of authority to each such company or health care center thereafter applying for authority to do business in this state, until the commissioner's certificate has been recognized by the government of such state or country.

(1949 Rev., S. 6053; P.A. 04-10, S. 2; P.A. 16-213, S. 11.)

History: Sec. 38-22 transferred to Sec. 38a-43 in 1991; P.A. 04-10 made technical changes; P.A. 16-213 added references to domestic health care center and health care center, added Subdiv. (1) and (2) designators and made a technical change, effective July 1, 2016.

Annotation to former section 38-22:

Cited. 122 C. 295.

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Sec. 38a-44. (Formerly Sec. 38-64b). Notice to commissioner of intent to discontinue line of insurance. Any insurer licensed to do business in this state, or authorized to do business on a nonadmitted basis, which intends to discontinue offering or substantially reduce its writings in a line or subline of insurance in this state shall send, by registered or certified mail, or deliver to the Insurance Commissioner written notice of its intent to take such action at least sixty days before the initial notice of cancellation or nonrenewal is delivered or mailed to the insureds. This section shall not apply to life insurance policies or annuity contracts.

(P.A. 86-98, S. 4, 6; P.A. 93-273, S. 1.)

History: Sec. 38-64b transferred to Sec. 38a-44 in 1991; P.A. 93-273 required notification of commissioner 60 days before the initial notice of cancellation or nonrenewal is delivered or mailed to the insureds, rather than 60 days before effective date of action to discontinue offerings of insurance lines or sublines, and added provision specifically excluding life insurance policies or annuity contracts from section provisions.

Annotation to former section 38-64b:

Cited. 207 C. 77.

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Sec. 38a-45. (Formerly Sec. 38-29). Limitation on title insurance and mortgage guaranty insurance. No corporation shall insure or guarantee titles to real estate situated in this state except subject to and in accordance with all laws of this state relating to insurance or insurance companies generally or relating to the powers or duties of the commissioner. No corporation doing title insurance business may do any other line of insurance business. No corporation doing mortgage guaranty insurance business may do any other line of insurance business. The commissioner may adopt regulations, in accordance with chapter 54, which set requirements concerning the amount of deposits and the establishment and maintenance of unearned premium and loss reserves and other liabilities of domestic title insurance companies and foreign mortgage guaranty insurance companies for the purpose of protecting their policyholders.

(1949 Rev., S. 6087; February, 1965, P.A. 530; P.A. 77-23; P.A. 90-243, S. 11; P.A. 04-10, S. 3.)

History: 1965 act added provision re commissioner's power to regulate deposit amounts, unearned premium and loss reserves, etc.; P.A. 77-23 prohibited corporations doing title insurance business or mortgage guaranty insurance business from engaging in any other business; P.A. 90-243 substituted “foreign” for “nonresident” companies; Sec. 38-29 transferred to Sec. 38a-45 in 1991; P.A. 04-10 added reference to chapter 54 re adoption of regulations.

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Sec. 38a-46. (Formerly Sec. 38-30). Writing of participating and nonparticipating insurance by domestic stock and mutual insurance companies. Any domestic insurance company, either mutual or having capital stock, empowered to write fire, marine, casualty, fidelity and surety or boiler and machinery insurance, may issue any or all of its policies with or without participation in profits, savings or unabsorbed portions of premiums, may classify policies issued on a participating or nonparticipating basis and may determine the right to participate and the extent of participation of any class or classes of policies.

(1949 Rev., S. 6089.)

History: Sec. 38-30 transferred to Sec. 38a-46 in 1991.

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Sec. 38a-47. (Formerly Sec. 38-53a). Payments by domestic insurance companies for expenditures of Insurance Department and amount appropriated to Office of Health Strategy from Insurance Fund. (a) All domestic insurance companies and other domestic entities subject to taxation under chapter 207 shall, in accordance with section 38a-48, annually pay to the Insurance Commissioner, for deposit in the Insurance Fund established under section 38a-52a, an amount equal to:

(1) The actual expenditures made by the Insurance Department during each fiscal year, and the actual expenditures made by the Office of the Healthcare Advocate, including the cost of fringe benefits for department and office personnel as estimated by the Comptroller;

(2) The amount appropriated to the Office of Health Strategy from the Insurance Fund for the fiscal year, including the cost of fringe benefits for office personnel as estimated by the Comptroller, which shall be reduced by the amount of federal reimbursement received for allowable Medicaid administrative expenses;

(3) The expenditures made on behalf of the department and said offices from the Capital Equipment Purchase Fund pursuant to section 4a-9 for such year, but excluding such estimated expenditures made on behalf of the Health Systems Planning Unit of the Office of Health Strategy; and

(4) The amount appropriated to the Department of Aging and Disability Services for the fall prevention program established in section 17a-859 from the Insurance Fund for the fiscal year.

(b) The expenditures and amounts specified in subdivisions (1) to (4), inclusive, of subsection (a) of this section shall exclude expenditures paid for by fraternal benefit societies, foreign and alien insurance companies and other foreign and alien entities under sections 38a-49 and 38a-50.

(c) Payments shall be made by assessment of all such domestic insurance companies and other domestic entities calculated and collected in accordance with the provisions of section 38a-48. Any such domestic insurance company or other domestic entity aggrieved because of any assessment levied under this section may appeal therefrom in accordance with the provisions of section 38a-52.

(P.A. 80-482, S. 280, 345, 348; P.A. 82-26, S. 1; 82-456, S. 1, 2; P.A. 85-185, S. 1, 3; P.A. 86-265, S. 1, 2; P.A. 87-515, S. 3, 4; P.A. 89-165, S. 1, 3; P.A. 90-148, S. 25, 34; 90-243, S. 20; June Sp. Sess. P.A. 91-14, S. 12, 30; June Sp. Sess. P.A. 01-9, S. 66, 131; P.A. 05-102, S. 3; Sept. Sp. Sess. P.A. 09-5, S. 53; P.A. 14-116, S. 1; 14-217, S. 69; June Sp. Sess. P.A. 17-2, S. 312; P.A. 18-91, S. 64; 18-169, S. 36; P.A. 19-157, S. 88; June Sp. Sess. P.A. 21-2, S. 295.)

History: P.A. 82-26 provided that the comptroller rather than administrative services department estimate fringe benefit costs for insurance department personnel; P.A. 82-456 increased the percentage of expenditures of the insurance department paid by companies from 70% to 100% and eliminated the 8% of taxes and charges option, replacing it with various dollar amounts per fiscal year; P.A. 85-185 provided the method of calculation of the proper amount for the fiscal year commencing July 1, 1984; P.A. 86-265 added Subsec. (b), providing for an assessment for the fiscal year ending June 30, 1987, covering the total expenditures of the department in that year, and amended Subsec. (a) to provide that the amount assessed pursuant to Subsec. (b) shall be used as the basis for the calculation of the assessments for the following years; P.A. 87-515 provided that domestic insurance companies shall be assessed for the actual expenditures made by the department during each fiscal year, and removed prior limitations on the total assessment amount; P.A. 89-165 provided that domestic insurance companies shall be assessed for the expenditures made on behalf of the department from the capital equipment purchase fund; P.A. 90-148 inserted reference to Sec. 38-53b as a technical change related to certain procedural amendments occurring in said Sec. 38-53b; P.A. 90-243 inserted references to “foreign” and “alien” insurance companies to replace references to “nonresident” and “foreign” companies; Sec. 38-53a transferred to Sec. 38a-47 in 1991; June Sp. Sess. P.A. 91-14 deleted reference to deposit general fund and substituted reference to insurance fund deposits; June Sp. Sess. P.A. 01-9 added provisions re expenditures by the Office of the Managed Care Ombudsman, effective July 1, 2001; P.A. 05-102 renamed the Office of the Managed Care Ombudsman the Office of the Healthcare Advocate; Sept. Sp. Sess. P.A. 09-5 designated provision re expenditures from Capital Equipment Purchase Fund as Subdiv. (1) and added Subdiv. (2) re payment for amount appropriated to Department of Social Services for fall prevention program, effective October 5, 2009; P.A. 14-116 changed “Department of Social Services” to “Department on Aging” in Subdiv. (2), effective June 6, 2014; P.A. 14-217 made identical change as P.A. 14-116, effective June 13, 2014; June Sp. Sess. P.A. 17-2 replaced “Department on Aging” with “Department of Social Services” in Subdiv. (2), effective October 31, 2017; P.A. 18-91 designated existing provisions re annual payment to Insurance Commissioner as Subsec. (a) and amended same by deleting former Subdiv. designators (1) and (2), designating existing provisions re actual expenditures as new Subdiv. (1), adding new Subdiv. (2) re amount appropriated to Office of Health Strategy, designating existing provisions re expenditures made from Capital Equipment Purchase Fund as Subdiv. (3) and adding provision re estimated expenditures made on behalf of the Health Systems Planning Unit in Subdiv. (3), and designating existing provisions re fall prevention program as Subdiv. (4), designated existing provisions re expenditures paid for by fraternal benefit societies and foreign and alien insurance entities as Subsec. (b) and amended same by adding provision re expenditures and amounts excluded, designated existing provisions re payments made by assessment as Subsec. (c), and made technical and conforming changes, effective May 14, 2018; P.A. 18-169 replaced “Department of Social Services” with “Department of Rehabilitation Services” in Subdiv. (2), effective June 14, 2018; P.A. 19-157 amended Subsec. (a)(4) by replacing “Department of Rehabilitation Services” with “Department of Aging and Disability Services”; June Sp. Sess. P.A. 21-2 amended Subsec. (a)(2) by requiring amount appropriated be reduced by amount of federal reimbursement received for allowable Medicaid administrative expenses, effective January 1, 2022.

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Sec. 38a-48. (Formerly Sec. 38-53b). Assessment of payments by domestic insurance companies. Adjustments. Penalty. Interest. Payments credited to Insurance Fund. Allocation of assessments. (a) On or before June thirtieth, annually, the Commissioner of Revenue Services shall render to the Insurance Commissioner a statement certifying the amount of taxes or charges imposed on each domestic insurance company or other domestic entity under chapter 207 on business done in this state during the preceding calendar year. The statement for local domestic insurance companies shall set forth the amount of taxes and charges before any tax credits allowed as provided in subsection (a) of section 12-202.

(b) On or before July thirty-first, annually, the Insurance Commissioner and the Office of the Healthcare Advocate shall render to each domestic insurance company or other domestic entity liable for payment under section 38a-47: (1) A statement that includes (A) the amount appropriated to the Insurance Department, the Office of the Healthcare Advocate and the Office of Health Strategy from the Insurance Fund established under section 38a-52a for the fiscal year beginning July first of the same year, (B) the cost of fringe benefits for department and office personnel for such year, as estimated by the Comptroller, (C) the estimated expenditures on behalf of the department and the offices from the Capital Equipment Purchase Fund pursuant to section 4a-9 for such year, not including such estimated expenditures made on behalf of the Health Systems Planning Unit of the Office of Health Strategy, and (D) the amount appropriated to the Department of Aging and Disability Services for the fall prevention program established in section 17a-859 from the Insurance Fund for the fiscal year; (2) a statement of the total taxes imposed on all domestic insurance companies and domestic insurance entities under chapter 207 on business done in this state during the preceding calendar year; and (3) the proposed assessment against that company or entity, calculated in accordance with the provisions of subsection (c) of this section, provided for the purposes of this calculation the amount appropriated to the Insurance Department, the Office of the Healthcare Advocate and the Office of Health Strategy from the Insurance Fund plus the cost of fringe benefits for department and office personnel and the estimated expenditures on behalf of the department and the office from the Capital Equipment Purchase Fund pursuant to section 4a-9, not including such expenditures made on behalf of the Health Systems Planning Unit of the Office of Health Strategy shall be deemed to be the actual expenditures of the department and the office, and the amount appropriated to the Department of Aging and Disability Services from the Insurance Fund for the fiscal year for the fall prevention program established in section 17a-859 shall be deemed to be the actual expenditures for the program.

(c) (1) The proposed assessments for each domestic insurance company or other domestic entity shall be calculated by (A) allocating twenty per cent of the amount to be paid under section 38a-47 among the domestic entities organized under sections 38a-199 to 38a-209, inclusive, and 38a-214 to 38a-225, inclusive, in proportion to their respective shares of the total taxes and charges imposed under chapter 207 on such entities on business done in this state during the preceding calendar year, and (B) allocating eighty per cent of the amount to be paid under section 38a-47 among all domestic insurance companies and domestic entities other than those organized under sections 38a-199 to 38a-209, inclusive, and 38a-214 to 38a-225, inclusive, in proportion to their respective shares of the total taxes and charges imposed under chapter 207 on such domestic insurance companies and domestic entities on business done in this state during the preceding calendar year, provided if there are no domestic entities organized under sections 38a-199 to 38a-209, inclusive, and 38a-214 to 38a-225, inclusive, at the time of assessment, one hundred per cent of the amount to be paid under section 38a-47 shall be allocated among such domestic insurance companies and domestic entities.

(2) When the amount any such company or entity is assessed pursuant to this section exceeds twenty-five per cent of the actual expenditures of the Insurance Department, the Office of the Healthcare Advocate and the Office of Health Strategy from the Insurance Fund, such excess amount shall not be paid by such company or entity but rather shall be assessed against and paid by all other such companies and entities in proportion to their respective shares of the total taxes and charges imposed under chapter 207 on business done in this state during the preceding calendar year, except that for purposes of any assessment made to fund payments to the Department of Public Health to purchase vaccines, such company or entity shall be responsible for its share of the costs, notwithstanding whether its assessment exceeds twenty-five per cent of the actual expenditures of the Insurance Department, the Office of the Healthcare Advocate and the Office of Health Strategy from the Insurance Fund. The provisions of this subdivision shall not be applicable to any corporation which has converted to a domestic mutual insurance company pursuant to section 38a-155 upon the effective date of any public act which amends said section to modify or remove any restriction on the business such a company may engage in, for purposes of any assessment due from such company on and after such effective date.

(d) For purposes of calculating the amount of payment under section 38a-47, as well as the amount of the assessments under this section, the “total taxes imposed on all domestic insurance companies and other domestic entities under chapter 207” shall be based upon the amounts shown as payable to the state for the calendar year on the returns filed with the Commissioner of Revenue Services pursuant to chapter 207; with respect to calculating the amount of payment and assessment for local domestic insurance companies, the amount used shall be the taxes and charges imposed before any tax credits allowed as provided in subsection (a) of section 12-202.

(e) On or before September thirtieth, annually, for each fiscal year ending prior to July 1, 1990, the Insurance Commissioner and the Healthcare Advocate, after receiving any objections to the proposed assessments and making such adjustments as in their opinion may be indicated, shall assess each such domestic insurance company or other domestic entity an amount equal to its proposed assessment as so adjusted. Each domestic insurance company or other domestic entity shall pay to the Insurance Commissioner on or before October thirty-first an amount equal to fifty per cent of its assessment adjusted to reflect any credit or amount due from the preceding fiscal year as determined by the commissioner under subsection (g) of this section. Each domestic insurance company or other domestic entity shall pay to the Insurance Commissioner on or before the following April thirtieth, the remaining fifty per cent of its assessment.

(f) On or before September first, annually, for each fiscal year ending after July 1, 1990, the Insurance Commissioner and the Healthcare Advocate, after receiving any objections to the proposed assessments and making such adjustments as in their opinion may be indicated, shall assess each such domestic insurance company or other domestic entity an amount equal to its proposed assessment as so adjusted. Each domestic insurance company or other domestic entity shall pay to the Insurance Commissioner (1) on or before June 30, 1990, and on or before June thirtieth annually thereafter, an estimated payment against its assessment for the following year equal to twenty-five per cent of its assessment for the fiscal year ending such June thirtieth, (2) on or before September thirtieth, annually, twenty-five per cent of its assessment adjusted to reflect any credit or amount due from the preceding fiscal year as determined by the commissioner under subsection (g) of this section, and (3) on or before the following December thirty-first and March thirty-first, annually, each domestic insurance company or other domestic entity shall pay to the Insurance Commissioner the remaining fifty per cent of its proposed assessment to the department in two equal installments.

(g) If the actual expenditures for the fall prevention program established in section 17a-859 are less than the amount allocated, the Commissioner of Aging and Disability Services shall notify the Insurance Commissioner and the Healthcare Advocate. Immediately following the close of the fiscal year, the Insurance Commissioner and the Healthcare Advocate shall recalculate the proposed assessment for each domestic insurance company or other domestic entity in accordance with subsection (c) of this section using the actual expenditures made during the fiscal year by the Insurance Department, the Office of the Healthcare Advocate and the Office of Health Strategy from the Insurance Fund, the actual expenditures made on behalf of the department and the offices from the Capital Equipment Purchase Fund pursuant to section 4a-9, not including such expenditures made on behalf of the Health Systems Planning Unit of the Office of Health Strategy, and the actual expenditures for the fall prevention program. On or before July thirty-first, the Insurance Commissioner and the Healthcare Advocate shall render to each such domestic insurance company and other domestic entity a statement showing the difference between their respective recalculated assessments and the amount they have previously paid. On or before August thirty-first, the Insurance Commissioner and the Healthcare Advocate, after receiving any objections to such statements, shall make such adjustments which in their opinion may be indicated, and shall render an adjusted assessment, if any, to the affected companies. Any such domestic insurance company or other domestic entity may pay to the Insurance Commissioner the entire assessment required under this subsection in one payment when the first installment of such assessment is due.

(h) If any assessment is not paid when due, a penalty of twenty-five dollars shall be added thereto, and interest at the rate of six per cent per annum shall be paid thereafter on such assessment and penalty.

(i) The Insurance Commissioner shall deposit all payments made under this section with the State Treasurer. On and after June 6, 1991, the moneys so deposited shall be credited to the Insurance Fund established under section 38a-52a and shall be accounted for as expenses recovered from insurance companies.

(P.A. 80-482, S. 281, 345, 348; P.A. 82-26, S. 2; P.A. 84-185, S. 1; P.A. 88-326, S. 1, 11; P.A. 89-165, S. 2, 3; P.A. 90-148, S. 26, 34; June Sp. Sess. P.A. 91-14, S. 13, 30; P.A. 92-60, S. 5; June Sp. Sess. P.A. 01-9, S. 67, 131; P.A. 05-102, S. 4; P.A. 06-113, S. 1; P.A. 08-178, S. 3; Sept. Sp. Sess. P.A. 09-5, S. 54; P.A. 14-116, S. 2; 14-217, S. 70; P.A. 17-15, S. 5; 17-125, S. 4, 5; June Sp. Sess. P.A. 17-2, S. 313; P.A. 18-91, S. 65; 18-169, S. 37; P.A. 19-157, S. 89, 90; P.A. 21-157, S. 4.)

History: P.A. 82-26 amended Subsec. (b) to provide that the comptroller rather than administrative services department estimate fringe benefit costs for insurance department personnel; P.A. 84-185 amended Subsec. (g) to provide for a $10 penalty on overdue assessments and to provide the interest charges shall accrue on both the assessment and penalty; P.A. 88-326 inserted a new Subsec. (c)(2) concerning assessments which exceed 25% of the expenditures of the insurance department; P.A. 89-165 amended Subsec. (b)(1) to provide that the statement rendered to each insurance company include the estimated expenditures on behalf of the department from the capital equipment purchase fund, amended Subsec. (b)(3) to provide that the proposed assessment against each company be calculated to include such estimated expenditures, amended Subsec. (f) to provide that when the proposed assessment is recalculated the actual expenditures from such fund shall be used and deleted Subsec. (i); P.A. 90-148 amended Subsec. (e) to make assessment procedure therein applicable to state fiscal years ending prior to July 1, 1990, and inserted a new Subsec. (f), with appropriate changes in lettering for succeeding subsections, applicable to state fiscal years ending after July 1, 1990, providing for assessment procedures very similar to those in Subsec. (e) except that on June thirtieth annually, first payable June 30, 1990, each domestic company shall make an estimated payment for the following year, such payment being in addition to payments of 25% of the company's assessment for the year in each of September, December and March following; Sec. 38-53b transferred to Sec. 38a-48 in 1991; June Sp. Sess. P.A. 91-14 amended Subsec. (i) to provide that on and after June 6, 1991, moneys deposited with treasurer shall be credited to insurance fund, rather than general fund; P.A. 92-60 amended Subsec. (c) by changing the manner of assessment for domestic entities organized under certain sections of the insurance statutes; (Revisor's note: In 1997 in Subsec. (i) the phrase “... the Insurance Fund and established under section 38a-52a ...” was changed editorially by the Revisors to “... the Insurance Fund established under section 38a-52a and ...” thereby correcting an error in the codification of June Sp. Sess. P.A. 91-14, S. 13); June Sp. Sess. P.A. 01-9 added provisions re the Office of the Managed Care Ombudsman in Subsecs. (b), (c), and (e) to (g), effective July 1, 2001; P.A. 05-102 amended Subsecs. (b), (c), (e), (f) and (g) by renaming the Office of the Managed Care Ombudsman the Office of the Healthcare Advocate and making technical and conforming changes; P.A. 06-113 amended Subsec. (c)(2) to add exception for purposes of any assessment made to fund payments to Department of Public Health to purchase vaccines, making company or entity responsible for its share of costs, notwithstanding whether its assessment exceeds 25% of actual expenditures of Insurance Department and Office of the Healthcare Advocate, effective July 1, 2006; P.A. 08-178 increased penalty from $10 to $25 in Subsec. (h); Sept. Sp. Sess. P.A. 09-5 amended Subsec. (a) by making a technical change, amended Subsec. (b)(1) by designating existing provisions re content of statement as Subparas. (A) to (C) and adding Subpara. (D) requiring statement to include amount appropriated to Department of Social Services for fall prevention program, amended Subsec. (b)(3) by adding provision re amount appropriated to Department of Social Services for fall prevention program deemed to be actual program expenditures, and amended Subsec. (g) by adding provision requiring Commissioner of Social Services to notify Insurance Commissioner and Healthcare Advocate if expenditures for fall prevention program are less than amount allocated and adding provision requiring recalculated proposed assessment to include actual expenditures for fall prevention program, effective October 5, 2009; P.A. 14-116 amended Subsecs. (b) and (g) to change “Department of Social Services” to “Department on Aging”, effective June 6, 2014; P.A. 14-217 made identical changes as P.A. 14-116, effective June 13, 2014; P.A. 17-15 made technical changes in Subsec. (b); P.A. 17-125 replaced references to Sec. 12-202 with references to Sec. 12-202(a) in Subsecs. (a) and (d), effective July 1, 2017; June Sp. Sess. P.A. 17-2 replaced “Department on Aging” with “Department of Social Services” in Subsec. (b) and replaced “Commissioner on Aging” with “Commissioner of Social Services” in Subsec. (g), effective October 31, 2017; P.A. 18-91 amended Subsec. (b)(1)(A) by adding “and the Office of Health Strategy from the Insurance Fund established under section 38a-52a”, amended Subsec. (b)(1)(C) by adding provision re estimated expenditures made on behalf of Health Systems Planning Unit, amended Subsec. (b)(3) by adding “and the Office of Health Strategy from the Insurance Fund” and adding provision re expenditures made on behalf of Health Systems Planning Unit, amended Subsec. (c)(2) by adding “and the Office of Health Strategy from the Insurance Fund”, amended Subsec. (g) by adding “and the Office of Health Strategy from the Insurance Fund” and adding provision re expenditures made on behalf of Health Systems Planning Unit, and made technical and conforming changes, effective May 14, 2018; P.A. 18-169 replaced “Department of Social Services” with “Department of Rehabilitation Services” in Subsec. (b), replaced “Commissioner of Social Services” with “Commissioner of Rehabilitation Services” in Subsec. (g), and replaced “commissioner” with “Insurance Commissioner” in Subsec. (i), effective June 14, 2018; P.A. 19-157 amended Subsec. (b) by replacing “Department of Rehabilitation Services” with “Department of Aging and Disability Services” and amended Subsec. (g) by replacing “Commissioner of Rehabilitation Services” with “Commissioner of Aging and Disability Services”; P.A. 21-157 amended Subsec. (g) by adding provision authorizing domestic insurance companies and other domestic entities to pay entire assessment in one payment when first installment is due, effective July 1, 2021.

See Sec. 19a-7j re assessment of health and welfare fee on domestic insurers and health care centers doing health insurance business in state.

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Sec. 38a-49. (Formerly Sec. 38-51). Fraternal benefit societies and foreign or alien companies to reimburse state for costs of examination. All fraternal benefit societies and all foreign and alien insurance companies and other entities examined by the Insurance Commissioner shall annually reimburse the state for the costs of such examinations. The total cost of all examinations conducted during the fiscal year, including supervision and other overhead, shall be one hundred and thirty-five per cent of the total salaries paid to the examining personnel of the Insurance Department engaged in such examinations less any salary reimbursements. The commissioner shall apportion such total cost of examinations for the fiscal year among such insurance companies and other entities examined during such fiscal year on the basis of time involved in the several examinations and shall assess such fraternal benefit societies, foreign and alien insurance companies and other foreign and alien entities for their respective apportionments of the total cost. Such assessments shall be in addition to any taxes and fees otherwise payable to the state.

(1953, S. 2808d; 1959, P.A. 687, S. 1; P.A. 75-290, S. 1; P.A. 77-614, S. 163, 587, 610; P.A. 78-303, S. 85, 136; P.A. 80-482, S. 277, 345, 348; P.A. 90-243, S. 18.)

History: 1959 act increased the cost of examinations to 135%; P.A. 75-290 deleted “domestic” where the word precedes references to companies and entities; P.A. 77-614 and 78-303 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 90-243 inserted references to “foreign” and “alien” insurance companies replacing references to “nonresident” and “foreign” companies; Sec. 38-51 transferred to Sec. 38a-49 in 1991.

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Sec. 38a-50. (Formerly Sec. 38-52). Fraternal, foreign and alien life insurers to reimburse state for costs of valuation. All fraternal benefit societies and all foreign and alien life insurance companies and other foreign and alien life insurers whose policy or contract reserves are valued by the Insurance Commissioner shall annually reimburse the state for the costs of such valuations. The total cost of all valuations during the fiscal year, including supervision and other overhead, shall be one hundred and thirty-five per cent of the total salaries paid to the valuation personnel of the Insurance Department engaged in valuing such policy and contract reserves less any salary reimbursements. The commissioner shall apportion such total cost of valuations for the fiscal year among such life insurance companies and other life insurers whose policy or contract reserves are valued during such fiscal year on the basis of time involved in the several valuations and shall assess such fraternal benefit societies, foreign and alien insurance companies and other foreign and alien entities for their respective apportionments of the total cost. Such assessments shall be in addition to any other taxes and fees otherwise payable to the state.

(1953, S. 2809d; 1959, P.A. 687, S. 2; P.A. 75-290, S. 2; P.A. 77-614, S. 163, 587, 610; P.A. 78-303, S. 85, 136; P.A. 80-482, S. 278, 345, 348; P.A. 90-243, S. 19.)

History: 1959 act increased the cost of valuations to 135% of salaries and added the provision for charges in punchcard machine rentals; P.A. 75-290 made provisions applicable to all insurance companies and other life insurers where previously applicable to “domestic” companies and other insurers; P.A. 77-614 and 78-303 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 90-243 inserted references to “foreign” and “alien” insurance companies and deleted the provision for charges in punchcard machine rentals; Sec. 38-52 transferred to Sec. 38a-50 in 1991.

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Sec. 38a-51. (Formerly Sec. 38-53). Assessment of costs of examination and valuation. Payments credited to Insurance Fund. On or before August first, annually, the commissioner shall render to each insurance company or other entity liable to assessment under section 38a-49 or 38a-50 a statement of the total cost of examinations or valuations, as the case may be, for the preceding fiscal year ending June thirtieth, together with proposed assessments against each of the several such companies and other entities. On September first annually, the commissioner, after receiving any objections to the proposed assessments and making such changes as in his opinion may be indicated, shall assess each such insurance company or other entity for the costs of examinations and valuations. Each such insurance company or other entity shall pay to the commissioner the amount assessed against it within twenty days from date of invoice, with interest at the rate of six per cent per annum if the assessment is unpaid at the end of such twenty-day period. The commissioner shall deposit such receipts with the State Treasurer. On and after June 6, 1991, the moneys so deposited with the State Treasurer shall be credited to the Insurance Fund established under section 38a-52a and shall be accounted for as expenses recovered from insurance companies.

(1953, S. 2810d; 1959, P.A. 687, S. 3; 1967, P.A. 88; P.A. 75-290, S. 3; P.A. 79-109, S. 1; June Sp. Sess. P.A. 91-14, S. 14, 30.)

History: 1959 act increased the maximum assessment to $300,000; 1967 act deleted provision setting maximum assessments under Sec. 38-51, 38-52 and this section at $300,000 and providing for pro rata deduction in assessments which would otherwise exceed that amount; P.A. 75-290 made provisions applicable to insurance companies and entities generally where previously applicable to “domestic” companies and entities; P.A. 79-109 required that assessments be made on September first rather than “during the month of September” and required payment within 20 days “from date of invoice” rather than within 20 days “after receipt of a statement of the amount due”; Sec. 38-53 transferred to Sec. 38a-51 in 1991; June Sp. Sess. P.A. 91-14 provided that on and after June 6, 1991, moneys deposited with treasurer shall be credited to insurance fund, rather than general fund.

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Sec. 38a-52. (Formerly Sec. 38-54). Appeal from assessment. Any (1) domestic insurance company or other domestic entity aggrieved because of any assessment levied under section 38a-48, (2) fraternal benefit society or foreign or alien insurance company or other entity aggrieved because of any assessment levied under the provisions of sections 38a-49 to 38a-51, inclusive, or (3) domestic insurer, domestic health care center, third-party administrator licensed pursuant to section 38a-720a or exempt insurer, as defined in subdivision (1) of subsection (b) of section 19a-7j, aggrieved because of any assessment levied under said section 19a-7j, may, within one month from the time provided for the payment of such assessment, appeal therefrom to the superior court for the judicial district of New Britain, which appeal shall be accompanied by a citation to the commissioner to appear before said court. Such citation shall be signed by the same authority, and such appeal shall be returnable at the same time and served and returned in the same manner, as is required in case of a summons in a civil action. The authority issuing the citation shall take from the appellant a bond or recognizance to the state, with surety to prosecute the appeal to effect and to comply with the orders and decrees of the court in the premises. Such appeals shall be preferred cases, to be heard, unless cause appears to the contrary, at the first session, by the court or by a committee appointed by the court. Said court may grant such relief as may be equitable, and, if such assessment has been paid prior to the granting of such relief, may order the Treasurer to pay the amount of such relief, with interest at the rate of six per cent per annum, to the aggrieved company. If the appeal has been taken without probable cause, the court may tax double or triple costs, as the case demands; and, upon all such appeals which may be denied, costs may be taxed against the appellant at the discretion of the court, but no costs shall be taxed against the state.

(1953, S. 2811d; P.A. 75-290, S. 4; P.A. 78-280, S. 6, 127; P.A. 80-482, S. 279, 348; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; 90-243, S. 21; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6; P.A. 99-215, S. 24, 29; June 12 Sp. Sess. P.A. 12-1, S. 214; P.A. 16-213, S. 12.)

History: P.A. 75-290 made provisions applicable to insurance companies and entities generally where previously applicable to “domestic” companies and entities; P.A. 78-280 replaced “Hartford county” with “judicial district of Hartford-New Britain”; P.A. 80-482 specified applicability to domestic and nonresident or foreign insurance companies and entities and to fraternal benefit societies and added reference to Sec. 38-53b; P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; P.A. 90-243 inserted references to “foreign” and “alien” insurance companies; Sec. 38-54 transferred to Sec. 38a-52 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 99-215 replaced “judicial district of Hartford” with “judicial district of New Britain”, effective June 29, 1999; June 12 Sp. Sess. P.A. 12-1 designated existing provision re aggrieved insurance company or other entity as Subdivs. (1) and (2), and added Subdiv. (3) re entities that may appeal from assessment levied under Sec. 19a-7j, effective July 1, 2012 (Revisor's note: In Subdiv. (3), a reference to “section 38a-320a” was changed editorially by the Revisors to “section 38a-720a” for accuracy); P.A. 16-213 amended Subdiv. (3) by adding “domestic” re health care center, effective July 1, 2016.

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Sec. 38a-52a. Insurance Fund established. There is established a fund to be known as the “Insurance Fund”. The fund may contain any moneys required by law to be deposited in the fund and shall be held by the Treasurer separate and apart from all other moneys, funds and accounts. The interest derived from the investment of the fund shall be credited to the fund. Amounts in the fund may be expended only pursuant to appropriation by the General Assembly. Any balance remaining in the fund at the end of any fiscal year shall be carried forward in the fund for the fiscal year next succeeding.

(June Sp. Sess. P.A. 91-14, S. 11, 30.)

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Sec. 38a-53. (Formerly Sec. 38-24). Requirements re filing of annual reports and financial statements. Late filing fee. Due date extensions. (a)(1) Each domestic insurance company or domestic health care center shall, annually, on or before the first day of March, submit to the commissioner, and electronically to the National Association of Insurance Commissioners, a true and complete report, signed and sworn to by its president or a vice president, and secretary or an assistant secretary, of its financial condition on the thirty-first day of December next preceding, prepared in accordance with the National Association of Insurance Commissioners annual statement instructions handbook and following those accounting procedures and practices prescribed by the National Association of Insurance Commissioners accounting practices and procedures manual, subject to any deviations in form and detail as may be prescribed by the commissioner. An electronically filed report in accordance with section 38a-53a that is timely submitted to the National Association of Insurance Commissioners shall not exempt a domestic insurance company or domestic health care center from timely filing a true and complete paper copy with the commissioner.

(2) Each accredited reinsurer, as defined in subdivision (1) of subsection (c) of section 38a-85, and assuming insurance company, as provided in section 38a-85, shall file an annual report in accordance with the provisions of section 38a-85.

(b) Each foreign insurance company or foreign health care center doing business in this state shall, annually, on or before the first day of March, submit to the commissioner, by electronically filing with the National Association of Insurance Commissioners, a true and complete report, signed and sworn to by its president or a vice president, and secretary or an assistant secretary, of its financial condition on the thirty-first day of December next preceding, prepared in accordance with the National Association of Insurance Commissioners annual statement instructions handbook and following those accounting procedures and practices prescribed by the National Association of Insurance Commissioners accounting practices and procedures manual, subject to any deviations in form and detail as may be prescribed by the commissioner. An electronically filed report in accordance with section 38a-53a that is timely submitted to the National Association of Commissioners shall be deemed to have been submitted to the commissioner in accordance with this section.

(c) In addition to such annual report, the commissioner, when the commissioner deems it necessary, may require any insurance company or health care center doing business in this state to file financial statements on a quarterly basis. An electronically filed true and complete report filed in accordance with section 38a-53a that is timely filed with the National Association of Insurance Commissioners shall be deemed to have been submitted to the commissioner in accordance with the provisions of this section.

(d) In addition to such annual report and the quarterly report required under subsection (c) of this section, the commissioner, whenever the commissioner determines that more frequent reports are required because of certain factors or trends affecting companies writing a particular class or classes of business or because of changes in the company's management or financial or operating condition, may require any insurance company or health care center doing business in this state to file financial statements on other than an annual or quarterly basis.

(e) Any insurance company or health care center doing business in this state that fails to file any report or statement required under this section shall pay a late filing fee of one hundred seventy-five dollars per day for each day from the due date of such report or statement to the date of filing. The commissioner may extend the due date of any report or statement required under this section (1) if the insurance company or health care center cannot file such report or statement because the governor of such company's or center's state of domicile has proclaimed a state of emergency in such state and such state of emergency impairs the company's or center's ability to file the report or statement, (2) if the insurance regulatory official of the state of domicile of a foreign insurance company has permitted such company to file such report or statement late, or (3) for a domestic insurance company or a domestic health care center, for good cause shown.

(f) Each insurance company or health care center doing business in this state shall include in all reports required to be filed with the commissioner under this section a certification by an actuary or reserve specialist of all reserve liabilities prepared in accordance with regulations that shall be adopted by the commissioner in accordance with chapter 54. The regulations shall: (1) Specify the contents and scope of the certification; (2) provide for the availability to the commissioner of the workpapers of the actuary or loss reserve specialist; and (3) provide for granting companies or centers exemptions from compliance with the requirements of this subsection. The commissioner shall maintain, as confidential, all workpapers of the actuary or loss reserve specialist and the actuarial report and actuarial opinion summary provided in support of the certification. Such workpapers, reports and summaries shall not be subject to subpoena or disclosure under the Freedom of Information Act, as defined in section 1-200.

(1949 Rev., S. 6077; P.A. 76-167, S. 1; P.A. 88-326, S. 2; P.A. 90-243, S. 9; P.A. 92-112, S. 3; P.A. 05-29, S. 3; P.A. 06-117, S. 1; P.A. 07-54, S. 1; 07-225, S. 1; P.A. 08-147, S. 3; 08-178, S. 4; P.A. 09-74, S. 10; P.A. 13-134, S. 4; P.A. 15-144, S. 2; P.A. 16-213, S. 13.)

History: P.A. 76-167 added Subsecs. (b) and (c) re quarterly financial reports and other reports; P.A. 88-326 added a new Subsec. (d) imposing a late filing fee of $100 per day; P.A. 90-243 added references to health care centers re filing of financial statements with the commissioner and added Subsec. (e) re certification of the disclosure of reserve liabilities; Sec. 38-24 transferred to Sec. 38a-53 in 1991; P.A. 92-112 amended Subsec. (a) to require that reports be filed in accordance with standards set by the National Association of Insurance Commissioners; P.A. 05-29 made technical changes in Subsec. (c); P.A. 06-117 amended Subsec. (e) to require commissioner to maintain, as confidential, all workpapers of actuary or loss reserve specialist and actuarial report and opinion summary provided in support of certification and to provide that such documents shall not be subject to subpoena or disclosure under the Freedom of Information Act; P.A. 07-54 made technical changes in Subsec. (e)(3), effective May 22, 2007; P.A. 07-225 amended Subsec. (a) to limit its application to domestic insurance companies, to require such companies to “submit”, in lieu of “render”, a true and complete report of financial condition electronically to National Association of Insurance Commissioners and to require such companies to timely file a true and complete paper copy of such report with commissioner, inserted new Subsec. (b) requiring foreign insurance companies to submit report of financial condition in same manner as specified in Subsec. (a), except for submission of paper copies to commissioner, redesignated existing Subsecs. (b) to (e) as Subsecs. (c) to (f), and amended redesignated Subsec. (c) to require that electronically filed true and complete report filed in accordance with Sec. 38a-53a that is timely filed with National Association of Insurance Commissioners be deemed to have been submitted to commissioner in accordance with the provisions of section; P.A. 08-147 amended Subsec. (a) by designating existing provisions as Subdiv. (1) and adding Subdiv. (2) re filing requirements for accredited reinsurers and assuming insurance companies; P.A. 08-178 increased per day late filing fee from $100 to $175 in Subsec. (e); P.A. 09-74 made a technical change in Subsec. (a)(2), effective May 27, 2009; P.A. 13-134 made technical changes; P.A. 15-144 amended Subsec. (e) by adding provision re extension of due date by commissioner, effective July 1, 2015; P.A. 16-213 amended Subsecs. (a)(1) and (e)(3) by adding “domestic” re health care center and amended Subsec. (b) by adding “or foreign health care center”, effective July 1, 2016.

Annotations to former section 38-24:

Unpaid stock subscription notes form part of the assets of a company. 65 C. 471. Cited. 113 C. 18.

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Sec. 38a-53a. Annual statement convention blank filing with the National Association of Insurance Commissioners. Financial statements and other information filing with the National Association of Insurance Commissioners. Each domestic, foreign and alien insurer authorized to transact insurance in this state shall annually on or before March first of each year, file electronically with the National Association of Insurance Commissioners a copy of its annual statement convention blank, along with such additional filings as prescribed by the commissioner for the preceding year. The information filed with the National Association of Insurance Commissioners shall include additional filings as prescribed by the commissioner and shall include the signed jurat page and the actuarial certification. Any amendments and addendums to the annual statement or other financial statements subsequently filed with the commissioner shall also be filed with the National Association of Insurance Commissioners. Foreign insurers that are domiciled in a state that has a law substantially similar to the provisions of this section shall be deemed in compliance with this section. Upon written application of any insurer domiciled in this state that transacts no insurance business in another state, the commissioner may grant an exemption from compliance with this section if compliance would constitute a financial or organizational hardship upon the insurer. All financial analysis ratios and examination synopses concerning insurance companies that are submitted to the Insurance Department by the National Association of Insurance Commissioners are confidential and may not be disclosed or otherwise made public by the department.

(P.A. 92-112, S. 5; P.A. 95-168, S. 8; P.A. 01-139, S. 2; P.A. 03-199, S. 2.)

History: P.A. 95-168 required that all financial statements filed subsequently to annual statement be filed with the National Association of Insurance Commissioners and required insurers to file, in diskette form, any information prepared in accordance with guidelines required by the insurance commissioner with the National Association of Insurance Commissioners; P.A. 01-139 required electronic filings and substituted “that” for “which”; P.A. 03-199 substituted “include additional filings as prescribed” for “be in the same format and scope as that required” re filings, deleted requirement that insurer also file a copy in electronic form, and deleted reference to the National Association of Insurance Commissioners' Insurance Regulatory Information System.

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Sec. 38a-54. Audited reports. (a) Each domestic insurance company, domestic health care center or domestic fraternal benefit society doing business in this state shall have an annual audit conducted by an independent certified public accountant and shall annually file an audited financial report with the commissioner, and electronically to the National Association of Insurance Commissioners on or before the first day of June for the year ending the preceding December thirty-first. An electronically filed true and complete report timely submitted to the National Association of Insurance Commissioners does not exempt a domestic insurance company or a domestic health care center from timely filing a true and complete paper copy to the commissioner.

(b) Each foreign insurance company, foreign health care center or foreign fraternal benefit society doing business in this state shall have an annual audit conducted by an independent certified public accountant and shall annually file an audited financial report with the commissioner, and electronically to the National Association of Insurance Commissioners, on or before June first for the year ending the preceding December thirty-first. An electronically filed true and complete report timely submitted to the National Association of Insurance Commissioners shall be deemed to have been submitted to the commissioner in accordance with the provisions of this section.

(c) The commissioner shall adopt regulations in accordance with the provisions of chapter 54 to: (1) Specify the scope of the examination required by this section; (2) specify the contents and scope of the annual audited financial report, provided such report shall include all incurred losses; (3) provide for the review of the controls; (4) provide for the availability to the commissioner of the workpapers of the certified public accountant; and (5) provide exemptions from compliance with the requirements of this section.

(P.A. 90-243, S. 168; P.A. 91-276, S. 3; P.A. 98-98, S. 4; P.A. 07-225, S. 2; P.A. 16-213, S. 14.)

History: P.A. 91-276 added a provision requiring the inclusion of all incurred losses in the annual audited financial report; P.A. 98-98 amended Subsec. (a) to substitute “first day of June” for “thirtieth day of June” re the deadline for filing financial reports, and substituted “the preceding December thirty-first” for “the thirty-first day of December next preceding”; P.A. 07-225 amended Subsec. (a) to delete “On or after December 31, 1990,”, to limit its application to domestic insurance companies, to require electronic filing of audited financial reports with National Association of Insurance Commissioners and to require domestic insurance companies and health care centers to timely file a true and complete paper copy of such report with commissioner, inserted new Subsec. (b) requiring foreign insurance companies to conduct and file audited financial reports in same manner as specified in Subsec. (a), except for submission of paper copies to commissioner, and redesignated existing Subsec. (b) as Subsec. (c); P.A. 16-213 amended Subsec. (a) by adding “domestic” re health care center and fraternal benefit society, and amended Subsec. (b) by adding “, foreign health care center” and “foreign” re fraternal benefit society, effective July 1, 2016.

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Sec. 38a-55. Hypothecation of assets. (a) No domestic insurer, domestic health care center or domestic fraternal benefit society may pledge, hypothecate or otherwise encumber its assets to secure the debt, guaranty or obligations of any other person without the prior written consent of the Insurance Commissioner. This prohibition shall not apply to obligations of the insurer under surety bonds or insurance contracts issued in the regular course of business.

(b) (1) No domestic insurer, domestic health care center or domestic fraternal benefit society may, without the prior written consent of the Insurance Commissioner, pledge, hypothecate or otherwise encumber its assets to secure its own debt, guaranty or obligations if the amount of the assets pledged, hypothecated or otherwise encumbered, when the pledge, hypothecation or encumbrance is made, together with the aggregate amount of assets pledged, hypothecated or encumbered to secure all such debts, guarantees and obligations, exceeds the lesser of five per cent of admitted assets or twenty-five per cent of surplus as regards policyholders as reported in its last financial statement filed with the commissioner pursuant to section 38a-53 or 38a-614.

(2) Nothing in this subsection shall be construed as prohibiting a domestic insurer, domestic health care center or domestic fraternal benefit society from pledging, hypothecating or encumbering any assets in connection with: (A) Transactions in the ordinary course of business, including, but not limited to: (i) Complying with any statutory requirement, (ii) reinsurance transactions otherwise in compliance with applicable statutory requirements, or (iii) investments or investment practices otherwise in compliance with applicable statutory requirements, including, but not limited to, securities lending, repurchase transactions, reverse repurchase transactions, swap, futures and options transactions, and any other transactions which are not prohibited by the investment law and regulations of this state; (B) transactions subject to the provisions of sections 38a-129 to 38a-140, inclusive; or (C) any other transaction deemed excluded by the Insurance Commissioner. Assets pledged, hypothecated or encumbered pursuant to subparagraph (A), (B) or (C) of this subdivision shall not be charged against the limits set forth in subdivision (1) of this subsection.

(3) In the case of a domestic life insurance company, the provisions of this subsection shall apply to a separate account only to the extent that reserves for guarantees with respect to (A) benefits guaranteed as to dollar amount and duration or (B) funds guaranteed as to principal amount or stated rate of interest are held in a separate account in accordance with subdivision (3) of subsection (a) of section 38a-433.

(P.A. 90-243, S. 167; P.A. 98-60; P.A. 05-29, S. 4; P.A. 10-5, S. 3; P.A. 16-213, S. 15.)

History: P.A. 98-60 designated existing language as Subsec. (a) and substituted “domestic” for “licensed” re insurers and “shall” for “does” re prohibition, and added new Subsec. (b) re assets of domestic companies; P.A. 05-29 made a technical change in Subsec. (b)(2)(C); P.A. 10-5 amended Subsec. (b)(3) to change “subdivision (iii)” to “subdivision (3)” re reference to Sec. 38a-433(a), effective May 5, 2010; P.A. 16-213 added “domestic” re health care center and fraternal benefit society, effective July 1, 2016.

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Sec. 38a-56. (Formerly Sec. 38-19). False returns to commissioner. Any person who wilfully makes any false report to the commissioner or testifies or affirms falsely to any material fact in any matter wherein an oath or affirmation is required or authorized or makes any false entry or memorandum upon any book, paper, report or statement of any insurance company, with intent to deceive the commissioner or any agent appointed to examine the affairs of any such company or to deceive the stockholders or policyholders or any officer of any such insurance company or to injure or defraud any such company, and any person who, with like intent, aids or abets another in any violation of any provision of this section, shall be imprisoned not more than five years.

(1949 Rev., S. 8708.)

History: Sec. 38-19 transferred to Sec. 38a-56 in 1991.

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Sec. 38a-57. (Formerly Sec. 38-26a). Retention of records and assets in state. Each domestic insurance company shall maintain, within the state, such records as the commissioner may require and such portion of its assets as the commissioner may deem necessary for the purpose of adequately protecting the insured.

(1967, P.A. 37.)

History: Sec. 38-26a transferred to Sec. 38a-57 in 1991.

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Sec. 38a-58. (Formerly Sec. 38-40). Change of location of domestic insurance company. Any domestic insurance company may change its location from one town to another within this state, notwithstanding any inconsistent provision in its charter.

(1949 Rev., S. 6096; 1953, S. 2792d.)

History: Sec. 38-40 transferred to Sec. 38a-58 in 1991.

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Sec. 38a-58a. Transfer of domicile: By foreign insurance company to this state; by domestic insurance company to another state. Procedures. (a) Any insurer that is organized under the laws of any other state and is admitted to do business in this state for the purpose of writing insurance may, upon approval of the commissioner in accordance with all applicable provisions of the general statutes, become a domestic insurer. Such insurer shall comply with all of the requirements of law relative to the organization and licensing of a domestic insurer of the same type, designate its principal place of business at a location in this state and provide to the commissioner such documents and information the commissioner may reasonably require. After such insurer demonstrates, to the satisfaction of the commissioner, that, upon becoming a domestic insurer, such insurer will be in compliance with all requirements of law and its business will be consistent with the interests of prospective insureds and the public, the commissioner may, in accordance with section 38a-41, issue a new license to such insurer to reflect the change in such insurer's domiciliary state and such insurer shall be subject to the authority and jurisdiction of this state. The articles of incorporation of the domestic insurer may be amended to provide that the corporation is a continuation of the corporate existence of the original foreign corporation through adoption of this state as its corporate domicile and that the original date of incorporation in its original domiciliary state is the date of incorporation of the domestic insurer.

(b) Any domestic insurer may, upon the approval of the Insurance Commissioner, transfer its domicile to any other state in which it is admitted to transact the business of insurance, and upon such a transfer shall cease to be a domestic insurer, and shall be admitted to this state, if qualified, as a foreign insurer. The Insurance Commissioner may approve the proposed transfer if he determines that the transfer is in the interest of the policyholders of this state or in the public interest.

(c) The certificate of authority, agents' appointments and licenses, rates and other criteria within the discretion of the Insurance Commissioner which are in existence at the time any insurer licensed to transact the business of insurance in this state transfers its corporate domicile to this state or any other state by merger, consolidation or any other lawful method shall continue in full force and effect upon the transfer if the insurer remains duly qualified to transact the business of insurance in this state. All outstanding policies of any transferring insurer shall be given full force and effect and need not be endorsed as to the new name of the company or its new location unless ordered by the Insurance Commissioner. Each transferring insurer shall file new policy forms with the Insurance Commissioner on or before the effective date of the transfer, but may use existing policy forms with appropriate endorsements if allowed by, and under such conditions as approved by, the Insurance Commissioner. Each transferring insurer shall notify the Insurance Commissioner of the details of the proposed transfer and shall file promptly any resulting amendments to corporate documents filed or required to be filed with the Insurance Department. Each such insurer, upon the transfer of its domicile to this state, shall file with the Secretary of the State a true copy of its original articles of incorporation, duly certified by the proper official of the state and a certificate in such form as prescribed by the Secretary of the State and approved by the Insurance Commissioner.

(P.A. 91-232, S. 1, 2; P.A. 18-158, S. 2.)

History: P.A. 18-158 amended Subsec. (a) by adding provision re approval by commissioner of domestic insurers, adding provision re providing documents and information reasonably required by commissioner, and adding provision re commissioner's authority to issue licenses in accordance with Sec. 38a-41, deleting provision re domestic insurer entitled to like certificates and licenses to transact business in state, and making technical changes therein, effective July 1, 2018.

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Sec. 38a-58b. Definitions. As used in this section and sections 38a-58c to 38a-58g, inclusive:

(1) “Alien insurer” has the same meaning as provided in section 38a-1;

(2) “Authorized control level risk-based capital” means the number determined in accordance with the risk-based capital formula set forth in subsection (d) of section 38a-72 and regulations adopted thereunder;

(3) “Commissioner” means the Insurance Commissioner;

(4) “Domestic insurer” has the same meaning as provided in section 38a-1;

(5) “Domestication” or “domesticate” means the reorganization of a United States branch of an alien insurer, in which a domestic insurer succeeds to all the business and assets and assumes all the liabilities of the United States branch;

(6) “State” has the same meaning as provided in section 38a-1;

(7) “Trusteed assets” means the assets in a trust account established pursuant to section 38a-58d;

(8) “Trusteed surplus” means the aggregate value of the United States branch's general state deposits and trusteed assets deposited in a trust account established pursuant to section 38a-58d plus accrued investment income on such deposits and assets where such interest is collected for trustees by the state, less the aggregate net amount of all of the United States branch's reserves and other liabilities in the United States as determined in accordance with section 38a-58e;

(9) “United States” has the same meaning as provided in section 38a-1;

(10) “United States branch” means the business unit in this state through which an alien insurer transacts the business of insurance in the United States.

(P.A. 14-123, S. 16.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-58c. Applicability of state laws to alien insurer's United States branch. Unless otherwise provided, all applicable state laws that apply to domestic insurers shall apply to a United States branch established in accordance with sections 38a-58d to 38a-58g, inclusive.

(P.A. 14-123, S. 17.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-58d. Use of state as alien insurer's state of entry. Requirements. Examination of trusteed assets. Revocation of license and liquidation of United States branch. (a) An alien insurer may use this state as such insurer's state of entry through a United States branch to transact the business of insurance in the United States by:

(1) Qualifying its United States branch as an insurer licensed to do business in this state in accordance with section 38a-41; and

(2) Establishing a trust account pursuant to a trust agreement, approved by the commissioner in accordance with subsection (c) of this section, with a qualified United States financial institution, as defined in section 38a-87, with funds in an amount not less than the minimum capital and surplus or authorized control level risk-based capital, whichever is greater, required to be maintained by a domestic insurer licensed to write the same kind of insurance. Except as provided in subparagraph (H)(i)(III) of subdivision (4) of subsection (c) of this section, such minimum amount shall be maintained in such trust account at all times.

(b) Prior to authorizing a United States branch, the commissioner shall require the alien insurer to:

(1) Comply with the reporting requirements set forth in section 38a-41;

(2) Submit an English translation, as necessary, of any of the documents required under section 38a-41; and

(3) Submit to an examination of its affairs at its principal office in the United States, except that the commissioner may accept an examination report of the insurance regulatory official of the country under which laws such insurer is organized.

(c) (1) The trust agreement required under subdivision (2) of subsection (a) of this section shall set forth the terms of such agreement in a deed of trust. Such deed and all subsequent amendments to such deed shall be authenticated in a form and manner prescribed by the commissioner.

(2) No deed of trust or amendment to such deed shall be effective unless approved by the commissioner upon a finding that:

(A) Such deed or amendment is sufficient in form and conforms with applicable laws;

(B) The trustee or trustees of the trust account are eligible to serve as such; and

(C) Such deed or amendment is adequate to protect the interests of the beneficiaries of the trust. If at any time, after notice and hearing, the commissioner finds that the deed of trust no longer complies with the requirements for approval, the commissioner may withdraw such approval.

(3) The commissioner may approve modifications of or variations in any deed of trust, provided such modifications or variations are not, in the commissioner's judgment, prejudicial to the interests of the residents of this state or to policyholders or creditors in the United States of the United States branch.

(4) The deed of trust shall contain provisions that:

(A) Vest legal title to trusteed assets in the trustee or trustees and their lawfully appointed successors;

(B) Require all assets deposited in the trust be continuously kept within the United States;

(C) Provide for substitution of a new trustee or trustees, subject to approval by the commissioner, in the event of a vacancy;

(D) Require the trustee or trustees to continuously maintain a record of the trusteed assets that is at all times sufficient to identify such assets;

(E) Require the trusteed assets to consist of cash or investments or both and accrued investment income if collectible by the trustee or trustees;

(F) Require the trust to be for the exclusive benefit, security and protection of the policyholders, or the policyholders and creditors in the United States, of the United States branch;

(G) Require the trust to be maintained as long as there is any outstanding liability of the alien insurer arising out of such insurer's insurance transactions in the United States; and

(H) (i) Provide that no withdrawals of assets, other than income as specified in subdivision (5) of this subsection, shall be made or permitted by the trustee or trustees without the approval of the commissioner, except to (I) make deposits required by law in any state for the security or benefit of all policyholders, or policyholders and creditors in the United States, of the United States branch, (II) substitute other assets as permitted by law and at least equal in value and quality to the assets withdrawn, upon the specific written direction of the manager of the United States branch when such manager has been empowered by and is acting pursuant to specific or general written authority previously given to or delegated to such manager by the board of directors of such United States branch, or (III) notwithstanding the minimum amount required to be maintained under subdivision (2) of subsection (a) of this section, transfer assets to an official liquidator or rehabilitator pursuant to an order of a court of competent jurisdiction.

(ii) The approval of the commissioner for a withdrawal of assets under this subparagraph shall not be required if the withdrawal is of trusteed assets deposited in another state and the deed of trust requires the written approval of the insurance regulatory official of such state for such withdrawal, provided the minimum amount required under subdivision (2) of subsection (a) of this section is maintained in the trust. The manager of the United States branch shall notify the commissioner in writing of the nature and amount of any such withdrawal.

(5) The deed of trust may provide that income, earnings, dividends or interest accumulations of the trust assets may be paid to the manager of the United States branch upon request, provided the minimum amount required under subdivision (2) of subsection (a) of this section is maintained in the trust.

(d) The commissioner may (1) examine the trusteed assets of a United States branch at the alien insurer's expense, and (2) require the trustee or trustees of a trust account of such United States branch to file a statement, in such form as the commissioner prescribes, certifying the amounts and assets of the trust account.

(e) The commissioner may revoke the license of an alien insurer authorized to transact the business of insurance pursuant to this section or liquidate the United States branch if any trustee of a trust account of such United States branch violates or refuses to comply with any provision of this section.

(P.A. 14-123, S. 18.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-58e. Annual and quarterly statements by United States branch. (a) Not later than March first, annually, for an annual statement, and not later than May fifteenth, August fifteenth and November fifteenth, annually, for a quarterly statement, each United States branch shall file with the commissioner and the National Association of Insurance Commissioners:

(1) Annual and quarterly statements of the insurance business transacted in the United States, the assets held by or for such United States branch in the United States for the protection of policyholders and creditors in the United States and the liabilities in the United States incurred by such United States branch against such assets. The annual statement shall be filed not later than March first. The annual and quarterly statements shall not include any information about the alien insurer's or United States branch's business, assets or liabilities without the United States, and shall be in the same format required of a domestic insurer licensed to write the same kind of insurance;

(2) Annual and quarterly statements, in such form as the commissioner prescribes, of trusteed surplus as of the end of the same period covered by a statement filed pursuant to subdivision (1) of this subsection. In determining the net amount to be reported in the statement of trusteed surplus of the United States branch's liabilities in the United States, the United States branch shall adjust the total liabilities reported in the corresponding statement filed pursuant to subdivision (1) of this subsection as follows:

(A) Add back the liabilities used to offset admitted assets reported in such corresponding statement; and

(B) Deduct:

(i) Unearned premiums on insurance producers' balances or uncollected premiums not more than ninety days past due, not exceeding unearned premium reserves carried on such uncollected premiums;

(ii) Reinsurance on losses with authorized insurers, less unpaid reinsurance premiums;

(iii) Reinsurance recoverables on paid losses from unauthorized insurers that are included as assets in such corresponding statement, but only to the extent a liability for such unauthorized recoverables is included in the liabilities report in the statement of trusteed surplus;

(iv) Special state deposits held for the exclusive benefit of policyholders, or policyholders and creditors, of such United States branch, in any particular state, not exceeding the net liabilities reported by such United States branch for that state;

(v) Secured accrued retrospective premiums;

(vi) If such United States branch is transacting life insurance, (I) the amount of its policy loans to policyholders in the United States, not exceeding the amount of legal reserve required on each such policy, and (II) the net amount of uncollected and deferred premiums; and

(vii) Any other nontrusteed asset the commissioner determines secures liabilities in a substantially similar manner.

(b) The commissioner may require additional information to be provided in the annual or quarterly statements filed pursuant to subsection (a) of this section relating to the total business or assets or any portion thereof of the alien insurer.

(c) A manager, attorney-in-fact or a duly empowered assistant manager of the United States branch shall sign and verify the annual statement of insurance business transacted and annual statement of trusteed surplus under subsection (a) of this section. The trustee or trustees of a trust that hold securities and other property shall certify such holdings in the annual statement of trusteed surplus.

(d) Each examination report of a United States branch shall include a statement of trusteed surplus as of the date of examination in addition to the general statement of the financial condition of the United States branch.

(P.A. 14-123, S. 19.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-58f. Issuance and renewal of United States branch license. Proceeding against United States branch. (a) Before issuing or renewing a United States branch's license under section 38a-58d, the commissioner may require satisfactory proof, in the alien insurer's charter or by a duly certified resolution of such insurer's board of directors or as otherwise required by the commissioner, that such insurer and United States branch will not engage in any insurance business (1) in violation of sections 38a-58c to 38a-58g, inclusive, or (2) that is not authorized by such insurer's charter.

(b) The commissioner shall renew a United States branch's license under section 38a-58d if the commissioner is satisfied that neither the alien insurer nor the United States branch is in violation of any provision of sections 38a-58c to 38a-58g, inclusive, and that such renewal will not be hazardous or prejudicial to the best interests of the residents of this state.

(c) The commissioner shall not authorize a United States branch to (1) transact in this state any kind of insurance business or any combination of kinds of insurance that are prohibited for domestic insurers, or (2) transact the business of insurance in this state if such United States branch transacts anywhere in the United States any kind of business other than the business of insurance or business necessarily or properly incidental to the kind of insurance such United States branch seeks to transact in this state.

(d) The commissioner shall not authorize or reauthorize a United States branch to transact the business of insurance in this state if such United States branch fails to (1) substantially comply with any provision of sections 38a-58c to 38a-58g, inclusive, that the commissioner deems necessary to protect the interests of the policyholders of such United States branch, or (2) keep complete and accurate records of its insurance transactions. Such records shall be made available at the principal office of such United States branch for inspection by the commissioner.

(e) The commissioner may commence a proceeding pursuant to chapter 704c against a United States branch as an insurer whose condition is such that its further transaction of business will be hazardous to its policyholders, its creditors or the public, in the United States, when it appears to the commissioner from any annual or quarterly statement required under subsection (a) of section 38a-58e or any other report that the funds in the trust account of the United States branch of such insurer has been reduced below the minimum amount required to be maintained under subdivision (2) of subsection (a) of section 38a-58d.

(P.A. 14-123, S. 20.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-58g. Domestication of alien insurer's United States branch. (a) An alien insurer whose United States branch is licensed under section 38a-58d may, with the prior written approval of the commissioner, domesticate its United States branch in accordance with the provisions of this section.

(b) (1) Such alien insurer shall enter into a domestication agreement in writing with a domestic insurer that provides for the domestic insurer to succeed to all the business and assets and to assume all the liabilities of the United States branch. The agreement shall be effectuated, upon approval by the commissioner, by the filing of an instrument of transfer and assumption as set forth in subdivision (4) of this subsection.

(2) The alien insurer shall approve any such domestication agreement in accordance with the laws of the country under which the alien insurer is organized. The president or a vice president of the domestic insurer shall execute, the board of directors of the domestic insurer shall approve and the secretary of the domestic insurer shall certify under corporate seal, any such domestication agreement.

(3) The alien insurer and the domestic insurer shall submit to the commissioner for approval their respective copies of the executed domestication agreement and certified copies of their corporate proceedings approving such agreement. The commissioner shall approve such agreement if the commissioner finds that such agreement complies with the provisions of this section and that the interests of the policyholders of the United States branch and the domestic insurer will not be materially adversely affected. The commissioner shall approve or disapprove such agreement not later than sixty days after the later of the two insurers' submissions.

(4) (A) The alien insurer or the domestic insurer shall file with the commissioner a certified copy of the instrument of transfer and assumption pursuant to which the domestic insurer succeeds to all the business and assets and assumes all the liabilities of the United States branch. Such instrument shall be in a form satisfactory to the commissioner and executed by an authorized representative of the alien insurer and the domestic insurer. Upon such filing, the transfer shall be deemed effective and all rights, franchises and interests of the United States branch in and to every species of property and all liabilities of and actions relating to such United States branch shall be transferred to and vested in the domestic insurer.

(B) The commissioner shall, contemporaneously with the effectuation of the domestication agreement, direct the trustee or trustees of the United States branch's trust account to pay or transfer to the domestic insurer all trusteed assets, if any, held by such trust.

(C) For purposes of complying with any laws related to the age of companies, the domestic insurer shall be deemed to be the age of the older of the two insurers that are party to the domestication agreement.

(5) All deposits of the United States branch held by the commissioner, state officers or state regulatory agencies shall be deemed to be held as security for the satisfaction of liabilities to policyholders in the United States assumed by the domestic insurer from the United States branch. Such deposits shall be deemed assets of the domestic insurer and shall be reported as such in annual financial statements and other reports the domestic insurer is required to file. Upon the ultimate release of any such deposits by the commissioner, state officer or state regulatory agency, the cash or securities or both constituting such released deposit shall be paid or delivered to the domestic insurer as the lawful successor in interest to the United States branch.

(P.A. 14-123, S. 21; P.A. 15-118, S. 32.)

History: P.A. 14-123 effective June 6, 2014; P.A. 15-118 made a technical change in Subsec. (b)(1).

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Sec. 38a-59. (Formerly Sec. 38-42a). Change of name of domestic insurance company or domestic health care center with capital stock. An amendment to the certificate of incorporation of a domestic insurance company or a domestic health care center with capital stock that changes the name of the company or health care center shall not become effective until approved by the Insurance Commissioner after reasonable notice and a public hearing, if such notice and hearing are deemed by the commissioner to be in the public interest. A certificate of amendment conforming to the requirements of section 33-800 shall be filed in the office of the Insurance Commissioner before any amendment to the certificate of incorporation of a domestic insurance company or a domestic health care center with capital stock becomes effective.

(February, 1965, P.A. 71; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 276, 348; P.A. 96-271, S. 210, 254; P.A. 03-199, S. 3; P.A. 16-213, S. 16.)

History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; Sec. 38-42a transferred to Sec. 38a-59 in 1991; P.A. 96-271 replaced reference to Sec. 33-360 with Sec. 33-800, effective January 1, 1997; P.A. 03-199 added references to health care center and made technical changes; P.A. 16-213 added “a domestic” re health care center, effective July 1, 2016.

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Sec. 38a-60. (Formerly Sec. 38-27a). Continuity of management during national emergencies. (a) The board of directors of a domestic insurance company may at any time, and from time to time, by resolution or amendment to the company's bylaws, provide for an emergency management plan as they consider necessary or appropriate, subject to repeal or change by action of those having power to adopt bylaws for the company.

(b) If such emergency plan has not been adopted by any such corporation upon the occurrence of a national emergency caused by an attack on the United States or by a nuclear, atomic or other disaster, the following provisions shall automatically become effective and shall remain effective throughout the emergency or until superseded by such emergency plan: (1) Two directors shall constitute a quorum for the transaction of business at all meetings of the board. (2) Notice of any meeting of the board need be given only to such of the directors as it may be practical to reach at the time and by such means as may be practical at the time, including publication or radio broadcast. (3) Any vacancy in the board may be filled by a majority of the remaining directors, even if less than a quorum, or by the sole remaining director. (4) If there are no surviving directors able and willing to serve, or if no surviving directors can be located, all directorships shall be presumed to be vacant. Such vacancies in the board of directors, not to exceed three, shall be filled by the most senior surviving officers of the company able and willing to serve; seniority to be determined by rank and, within rank, first, by year of appointment to that rank and, second, by birth date. If thereafter a surviving director able and willing to serve is located, he shall automatically resume his position on the board of directors and the most junior officer serving as a director under the authority of this subdivision shall thereupon be considered to have resigned. In addition, if there are no surviving directors, one vacancy may be filled by the Insurance Commissioner or other person authorized to exercise his powers.

(c) If such emergency plan is adopted, it may provide that it will become operative automatically during any such national emergency and, notwithstanding any provision of the law or the charter or bylaws of the company, may contain any provisions reasonably necessary for the operation of the company during any such national emergency. Such provisions need not be consistent with the comparable provisions stated in subsection (b) of this section. Such provisions may provide, among other things, for (1) the designation of persons who may call a meeting of the board of directors; (2) the quorum and notice requirements for, and location of, any such meeting; (3) the filling of vacancies on the board of directors; (4) a succession list of persons by name or title who will succeed to positions of higher rank; (5) the establishment of the principal office of the company at a new location in or out of the state.

(1963, P.A. 451, S. 1, 2, 3; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 272, 348; P.A. 05-29, S. 5; P.A. 10-5, S. 4.)

History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; Sec. 38-27a transferred to Sec. 38a-60 in 1991; P.A. 05-29 made a technical change in Subsec. (c); P.A. 10-5 made a technical change in Subsec. (c), effective May 5, 2010.

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Sec. 38a-61. (Formerly Sec. 38-134). Limitation of use of power of attorney. No power of attorney to vote at any meeting of any licensed insurance company shall be used at more than one meeting of such corporation. No power of attorney may be voted later than thirty-six months from the time it was granted.

(1949 Rev., S. 6154; P.A. 77-65.)

History: P.A. 77-65 made provisions applicable to “any licensed” insurance company rather than to “a life” insurance company and prohibited voting power of attorney later than 36 months from time it was granted; Sec. 38-134 transferred to Sec. 38a-61 in 1991.

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Sec. 38a-62. (Formerly Sec. 38-27b). Indemnification of directors, officers and employees of mutual insurance companies. (a) Except as otherwise provided in this section, a domestic mutual insurance company shall indemnify any person who was or is a party, or was threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the mutual insurance company, by reason of the fact that he, or the person whose legal representative he is, (1) is or was a director, officer or employee of the mutual insurance company, or (2) is or was serving at the request of the mutual insurance company (A) as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise or (B) as an agent of such other corporation, partnership, joint venture, trust, or other enterprise other than an employee benefit plan or trust, or (3) is or was a director, officer or employee of the mutual insurance company serving at the request of the mutual insurance company as a fiduciary of an employee benefit plan or trust maintained for the benefit of employees of the mutual insurance company or employees of any such other corporation, partnership, joint venture, trust, or other enterprise, against judgments, fines, penalties, amounts paid in settlement and expenses, including attorneys' fees, actually and reasonably incurred by him and the person whose legal representative he is, in connection with such action, suit or proceeding, or any appeal therein. The mutual insurance company shall not so indemnify any such person unless it shall be concluded as provided in subsection (c) of this section that such person, and the person whose legal representative he is, acted in good faith and in a manner he reasonably believed to be in the best interests of the mutual insurance company or, in the case of a person serving as a fiduciary of an employee benefit plan or trust, either in the best interests of the mutual insurance company or in the best interests of the participants and beneficiaries of such employee benefit plan or trust and consistent with the provisions of such employee benefit plan or trust and, with respect to any criminal action or proceeding, that he had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith or in a manner which he did not reasonably believe to be in the best interests of the mutual insurance company or of the participants and beneficiaries of such employee benefit plan or trust and consistent with the provisions of such employee benefit plan or trust, or, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful.

(b) Except as otherwise provided in this section, a domestic mutual insurance company shall indemnify any person who was or is a party, or was threatened to be made a party, to any action, suit or proceeding, by or in the right of the mutual insurance company to procure a judgment in its favor by reason of the fact that he, or the person whose legal representative he is, (1) is or was a director, officer or employee of the mutual insurance company, or (2) is or was serving at the request of the mutual insurance company (A) as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise or (B) as an agent of such other corporation, partnership, joint venture, trust, or other enterprise other than an employee benefit plan or trust, or (3) is or was a director, officer, or employee of the mutual insurance company serving as a fiduciary of an employee benefit plan or trust maintained for the benefit of employees of the mutual insurance company or employees of any such other corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with such action, suit or proceeding, or any appeal therein, in relation to matters as to which such person, or the person whose legal representative he is, is finally adjudged not to have breached his duty to the mutual insurance company, or where the court, on application as provided in subsection (d) of this section, shall have determined that in view of all the circumstances such person is fairly and reasonably entitled to be indemnified, and then for such amount as the court shall determine. The mutual insurance company shall not so indemnify any such person for amounts paid to the mutual insurance company, to a plaintiff or to counsel for a plaintiff in settling or otherwise disposing of a threatened action or a pending action, with or without court approval; or for expenses incurred in defending a threatened action or a pending action which is settled or otherwise disposed of without court approval.

(c) The conclusion provided for in subsection (a) of this section may be reached by any one of the following: (1) The board of directors of the mutual insurance company by a consent in writing signed by a majority of those directors who were not parties to such action, suit or proceeding; (2) independent legal counsel selected by a consent in writing signed by a majority of those directors who were not parties to such action, suit or proceeding; or (3) the members of the mutual insurance company entitled to vote at annual meetings, by the affirmative vote of at least a majority of such members who were not parties to such action, suit or proceeding, represented at an annual or a special meeting of voting members, duly called with notice of such purpose stated. Such person shall also be entitled to apply to a court for such conclusion, upon application as provided in subsection (d), even though the conclusion reached by any of the foregoing shall have been adverse to him or to the person whose legal representative he is.

(d) An application for indemnification or for a conclusion as provided in this section shall be made to the court in which the action is pending or, in the absence thereof, to the superior court for the judicial district where the principal office of the domestic mutual insurance company is located. The application shall be made in such manner and form as may be required by the applicable rules of the court or, in the absence thereof, by direction of the court. The court may also direct that notice be given in such manner as it may require at the expense of the mutual insurance company to the members of the mutual insurance company and to such other persons as the court may designate.

(e) Expenses which may be indemnifiable under this section incurred in defending an action, suit or proceeding may be paid by the domestic mutual insurance company in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors upon agreement by or on behalf of the director, officer, employee or agent, or his legal representative, to repay such amount if he is later found not entitled to be indemnified by the mutual insurance company as authorized in this section.

(f) A domestic mutual insurance company shall not indemnify any director, officer, employee or agent or any director, officer, or employee serving at the request of the corporation as a fiduciary of an employee benefit plan or trust, against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, to an extent greater than that authorized by this section, but the mutual insurance company may procure insurance providing greater indemnification and may share the premium cost with any director, officer, employee or agent on such basis as may be agreed upon.

(1971, P.A. 293; P.A. 76-299; P.A. 78-204, S. 16, 17; 78-280, S. 2, 127.)

History: P.A. 76-299 made provisions applicable to agents of other corporations, partnerships, trusts etc. other than employee benefit plans or trusts and to directors, officers and employees of mutual insurance companies serving as fiduciaries of employee benefit plans or trusts; P.A. 78-204 added “penalties” in Subsec. (a)(3) and, with P.A. 78-280, substituted “judicial district” for “county” in Subsec. (d); Sec. 38-27b transferred to Sec. 38a-62 in 1991.

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Sec. 38a-63. Limitation of liability of director of mutual insurance company. (a) The personal liability of a director of a mutual insurance company to the company or its members for monetary damages for breach of duty as a director may be limited by the board to an amount that is not less than the compensation received by the director for serving the company during the year of the violation, provided such breach did not (1) involve a knowing and culpable violation of law by the director, (2) enable the director or an associate, as defined solely for the purposes of this section in subdivision (3) of section 33-843, to receive an improper personal economic gain, (3) show a lack of good faith and a conscious disregard for the duty of the director to the company under circumstances in which the director was aware that his conduct or omission created an unjustifiable risk of serious injury to the company, or (4) constitute a sustained and unexcused pattern of inattention that amounted to an abdication of the director's duty to the company, provided further no director who is a defendant in a lawsuit shall participate in the discussion or vote on such limitation of liability if it will affect his potential liability in such lawsuit. No such limitation shall limit or preclude the liability of a director for any act or omission occurring prior to the effective date of such provision.

(b) Notwithstanding any inconsistent provision in the charter of a domestic mutual insurance company or in the general statutes, the provisions of this section shall become effective on the date it is approved by a majority of the members present and voting, in the manner customary for such company's meetings, in person or by proxy at an annual or other meeting of such domestic mutual insurance company.

(P.A. 89-322, S. 3; P.A. 96-271, S. 211, 254.)

History: P.A. 96-271 amended Subsec. (a) to replace reference to Sec. 33-374d with Sec. 33-843, effective January 1, 1997.

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Sec. 38a-64. (Formerly Sec. 38-41). Donations by domestic mutual companies. Each domestic mutual insurance company, in addition to all other powers specially granted to it by law, shall have power, subject to such provisions and limitations as may be contained in its charter, certificate of incorporation or bylaws, or in any statute affecting it, to make donations for the public welfare or for charitable or educational purposes.

(1953, S. 2812d.)

History: Sec. 38-41 transferred to Sec. 38a-64 in 1991.

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Sec. 38a-65. (Formerly Sec. 38-48). Disposition of unclaimed dividends of insolvent company. Section 38a-65 is repealed, effective October 1, 1998.

(1949 Rev., S. 6051; 1961, P.A. 540, S. 25; P.A. 98-214, S. 32.)

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Sec. 38a-66. Reinsurance of insurance business with other insurers by agreement of bulk reinsurance. (a) Any insurance company authorized to do business in this state may, with respect to subjects of insurance resident, located or to be performed in this state, reinsure all or substantially all of its insurance business in force, or all or substantially all of a major class thereof, with another insurer by agreement of bulk reinsurance after compliance with this section. Each such agreement shall be filed with the Insurance Commissioner and shall become effective upon the expiration of twenty days after the date of filing unless disapproved by the commissioner.

(b) The Insurance Commissioner shall disapprove such an agreement within twenty days after filing if it is found:

(1) That the agreement is unfair and inequitable to any insurer or to any policyholder involved;

(2) That the reinsurance, if effectuated, would reduce the provision of service to policyholders of any insurer involved;

(3) That the agreement does not embody adequate provisions by which the reinsuring insurer becomes liable to the original insureds for any loss or damage occurring under the policies reinsured in accordance with the original terms of such policies or does not require the reinsuring insurer to furnish each such insured with a certificate evidencing such assumption of liability;

(4) That the assuming reinsurer is not authorized to transact such insurance in this state;

(5) That the assuming reinsurer will not appoint the commissioner or his successors as its irrevocable attorney for service of process, so long as any policy so reinsured or claim thereunder remains in force or outstanding;

(6) That such reinsurance would materially tend to lessen competition in the insurance business in this state or elsewhere as to the kinds of insurance involved or would materially tend to create a monopoly as to such business; or

(7) That the proposed bulk reinsurance is not free of other reasonable objections.

(c) If the Insurance Commissioner disapproves the agreement, he shall notify in writing each insurer involved specifying his reasons for doing so.

(P.A. 91-41.)

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Sec. 38a-67. Reporting requirement for cancellations and revisions of ceded reinsurance agreements. (a) Every insurer domiciled in this state shall file a report with the commissioner disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements unless such material acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements have been submitted to the commissioner for review, approval or information purposes pursuant to other provisions of the insurance code, laws, regulations or other requirements.

(b) The report required in subsection (a) of this section is due within fifteen days after the end of the calendar month in which any of the foregoing transactions occur.

(c) One complete copy of the report, including any exhibits or other attachments filed as part thereof, shall be filed with:

(1) The insurance department of the insurer's state of domicile; and

(2) The National Association of Insurance Commissioners.

(d) All reports obtained by or disclosed to the commissioner pursuant to the provisions of this section and sections 38a-67a and 38a-67b shall be given confidential treatment, shall not be subject to subpoena and shall not be made public by the commissioner, the National Association of Insurance Commissioners or any other person, except to insurance regulatory officials of other states or countries so long as the commissioner determines that such officials agree to maintain the same level of confidentiality in their jurisdiction as is available in this state, without the prior written consent of the insurer to which it pertains unless the commissioner, after giving the insurer who would be affected thereby, notice and an opportunity to be heard, determines that the interest of policyholders, shareholders or the public will be served by the publication thereof, in which event the commissioner may publish all or any part thereof in such manner as he may deem appropriate.

(P.A. 95-168, S. 5; P.A. 98-57, S. 2.)

History: P.A. 98-57 amended Subsec. (d) to substitute “insurance regulatory officials of other states or countries” for “insurance departments of other states” and added condition re disclosure of information by commissioner that he determine that officials agree to maintain the same level of confidentiality as is available in this state.

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Sec. 38a-67a. Acquisitions and dispositions of assets, reporting requirement waived, when. Asset acquisitions and dispositions, defined. Information required to be disclosed. (a) No acquisitions or dispositions of assets need be reported pursuant to section 38a-67 if the acquisitions or dispositions are not material. For purposes of sections 38a-67 to 38a-67b, inclusive, a material acquisition, or the aggregate of any series of related acquisitions during any thirty-day period or disposition, or the aggregate of any series of related dispositions during any thirty-day period, is one that is nonrecurring and not in the ordinary course of business and involves more than five per cent of the reporting insurer's total admitted assets as reported in its most recent statutory statement filed with the insurance department of the insurer's state of domicile.

(b) (1) Asset acquisitions subject to sections 38a-67 to 38a-67b, inclusive, include every purchase, lease, exchange, merger, consolidation, succession or other acquisition other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for such purpose.

(2) Asset dispositions subject to sections 38a-67 to 38a-67b, inclusive, include every sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment, whether for the benefit of creditors or otherwise, abandonment, destruction or other disposition.

(A) Date of the transaction;

(B) Manner of acquisition or disposition;

(D) Nature and amount of the consideration given or received;

(E) Purpose of, or reason for, the transaction;

(F) Manner by which the amount of consideration was determined;

(G) Gain or loss recognized or realized as a result of the transaction; and

(H) Name of the person or persons from whom the assets were acquired or to whom they were disposed.

(2) Insurers are required to report material acquisitions and dispositions on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or one hundred per cent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and such insurer has ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars in total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five per cent of the insurer's capital and surplus.

(P.A. 95-168, S. 6.)

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Sec. 38a-67b. Nonrenewals, cancellations or revisions, reporting requirement waived, when. Information required to be disclosed. (a)(1) Nonrenewals, cancellations or revisions of ceded reinsurance agreements need not be reported pursuant to section 38a-67 if the nonrenewals, cancellations or revisions are not material. For purposes of sections 38a-67 to 38a-67b, inclusive, a material nonrenewal, cancellation or revision is one that affects: (A) With respect to property and casualty business, including accident and health business written by a property and casualty insurer: (i) More than fifty per cent of an insurer's ceded written premium; or (ii) more than fifty per cent of the insurer's total ceded indemnity and loss adjustment reserves; (B) with respect to life, annuity and accident and health business: More than fifty per cent of the total reserve credit taken for business ceded, on an annualized basis, as indicated in the insurer's most recent annual statement; (C) with respect either to property and casualty or life, annuity and accident and health business, either of the following events shall constitute a material revision which shall be reported: (i) An authorized reinsurer representing more than ten per cent of a total cession is replaced by one or more unauthorized reinsurers; or (ii) previously established collateral requirements have been reduced or waived with respect to one or more unauthorized reinsurers representing collectively more than ten per cent of a total cession.

(2) However, no filing shall be required if: (A) With respect to property and casualty business, including accident and health business written by a property and casualty insurer: The insurer's total ceded written premium represents, on an annualized basis, less than ten per cent of its total written premium for direct and assumed business; or (B) with respect to life, annuity and accident and health business: The total reserve credit taken for business ceded represents, on an annualized basis, less than ten per cent of the statutory reserve requirement prior to any cession.

(b) (1) The following information shall be disclosed in any report of a material nonrenewal, cancellation or revision of ceded reinsurance agreements:

(A) Effective date of the nonrenewal, cancellation or revision;

(B) The description of the transaction with an identification of the initiator thereof;

(D) If applicable, the identity of the replacement reinsurers.

(2) Insurers shall report all material nonrenewals, cancellations or revisions of ceded reinsurance agreements on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or one hundred per cent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer has ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five per cent of the insurer's capital and surplus.

(P.A. 95-168, S. 7.)

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Sec. 38a-68. Reserved for future use.

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PART II*

FINANCIAL REQUIREMENTS

*Former chapter 681 cited. 219 C. 391.

Sec. 38a-69. Scope of provisions. Except as otherwise provided in this title, sections 38a-11, 38a-50, 38a-52, 38a-70 to 38a-76, inclusive, 38a-81 to 38a-83, inclusive, and 38a-153, and the regulations adopted to implement said sections apply to all insurers, including reinsurers, licensed to do business in this state.

(P.A. 90-243, S. 43; P.A. 98-214, S. 29; P.A. 15-118, S. 33.)

History: (Revisor's note: In 1995 a reference to Sec. 38a-79 was deleted editorially by the Revisors, that section having been repealed by P.A. 94-39); P.A. 98-214 deleted reference to Sec. 38a-65; P.A. 15-118 made a technical change.

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Sec. 38a-69a. Confidentiality of financial examination workpapers and operating and financial condition reports. Confidentiality of certain supplemental compensation exhibits and stockholder information supplements. Exceptions. (a) All financial analyses, financial examination workpapers, operating and financial condition reports concerning any insurance company, fraternal benefit society or health care center prepared by or on behalf of or for the use of the Insurance Commissioner or the Insurance Department examiner, shall be confidential, shall not be subject to subpoena and shall not be made public by the commissioner or any other person, except to the extent provided in subsection (c) of this section. The commissioner may grant access to such analyses, workpapers and reports to the National Association of Insurance Commissioners, provided it agrees, in writing, to hold such analyses, workpapers and reports confidential.

(b) Any supplemental compensation exhibit or stockholder information supplement in an annual report filed with the commissioner and prepared in accordance with the National Association of Insurance Commissioners Annual Statement Instructions shall be confidential and shall not be available for public inspection if submitted by a nonprofit insurance company that has fewer than one hundred fifty employees. The provisions of this subsection shall not apply to information in such exhibit or supplement concerning such company's three most highly compensated officers.

(c) Nothing contained in this section shall prevent or be construed as prohibiting the commissioner from disclosing the content of financial analyses, financial examination workpapers or operating and financial condition reports or any matter relating thereto, to the Insurance Department of this or any other state or country, or to law enforcement officials of this or any other state or to any agency of the federal government at any time, so long as such department, official or agency receiving the analyses, workpapers or reports or matters relating thereto agrees, in writing, to hold such analyses, workpapers or reports and matters relating thereto confidential.

(P.A. 92-95; P.A. 03-104, S. 1; P.A. 15-144, S. 3.)

History: P.A. 03-104 designated existing provisions as Subsec. (a), made a technical change therein and added Subsec. (b) re supplemental compensation exhibits or stockholder information supplements; P.A. 15-144 amended Subsec. (a) by deleting provision re confidentiality exemption for documents that are public records or deemed to be in public interest to disclose and adding provision re exemption from subpoena and provision re permitted disclosures under Subsec. (c) or to National Association of Insurance Commissioners, and added Subsec. (c) re permitted disclosures, effective July 1, 2015.

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Sec. 38a-70. Accounting standards. When adopting accounting rules and minimum valuation standards, the commissioner shall follow those accounting and valuation procedures and practices published in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions, including the preamble, all appendices and actuarial guidelines, and the National Association of Insurance Commissioners Annual Statement Instructions Manual, subject to any deviations the commissioner may prescribe.

(P.A. 90-243, S. 44; P.A. 92-112, S. 4; P.A. 00-30, S. 1, 14; P.A. 03-30, S. 1.)

History: P.A. 92-112 amended section to require that accounting rules be filed in accordance with standards set by the National Association of Insurance Commissioners; P.A. 00-30 substituted “published in” for “prescribed by”, inserted “version effective January 1, 2001, and subsequent revisions” re the practices and procedures manual, and made technical changes for purposes of gender neutrality, effective January 1, 2001; P.A. 03-30 added reference to minimum valuation standards and valuation procedures and referenced the procedure manual preamble, all appendices and actuarial guidelines.

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Sec. 38a-71. Minimum asset requirements. Minimum capital and minimum surplus requirements. (a) As used in this section:

(1) “Qualified assets” means:

(A) Investments, securities, properties and loans permitted or authorized by law, and the income due thereon;

(B) The net amount of uncollected and deferred premiums for a life insurer which carries the full annual mean tabular reserve liability;

(C) Premiums in the course of collection, other than for life insurance, not more than ninety days past due, with the ninety-day limitation being inapplicable to premiums payable directly or indirectly by the United States government or any of its instrumentalities;

(D) Installment premiums, other than life insurance premiums, in accordance with the regulations adopted by the commissioner in accordance with the provisions of chapter 54, or in the absence of these regulations then in accordance with practices formulated or adopted by the National Association of Insurance Commissioners;

(E) Notes and similar written obligations which are not past due, taken for premiums other than life insurance premiums, on policies permitted to be issued on that basis, to the extent of the unearned premium reserves carried on the policies;

(F) Amounts recoverable or receivable from reinsurers under a reinsurance contract;

(G) Tangible components of health care delivery systems for health care centers governed by sections 38a-175 to 38a-194, inclusive, with the cost of these assets having a finite useful life being depreciated in full over periods provided by regulations adopted by the commissioner in accordance with the provisions of chapter 54;

(H) Electronic data processing equipment and operating software, the cost of which is depreciated in full over a period not to exceed three years;

(I) Tangible components of the service delivery systems of legal service corporations governed by sections 38a-230 to 38a-245, inclusive, with the cost of these assets having a finite useful life being depreciated in full over periods provided by regulations adopted by the commissioner in accordance with the provisions of chapter 54;

(J) Cash or currency; and

(K) Other assets authorized by regulations adopted by the commissioner in accordance with the provisions of chapter 54.

(2) “Minimum capital and minimum surplus” means the capital and surplus that must constantly be maintained by a stock insurance company as required by section 38a-72.

(3) “Surplus” means total statutory surplus less capital stock, adjusted for the par value of any treasury stock, calculated in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions. Except for assessable mutuals, the minimum surplus of a mutual insurer is essentially the same as the minimum required capital requirement which applies to stock-insurers.

(4) “Capital” means the capital stock component of statutory surplus, as defined in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

(b) Each insurer authorized to do business in this state shall maintain qualified assets in the amount equal to the total of the insurer's (1) liabilities, and (2) minimum capital and minimum surplus required under section 38a-72.

(P.A. 90-243, S. 45; P.A. 93-239, S. 2; P.A. 00-30, S. 2, 14; P.A. 17-198, S. 14.)

History: P.A. 93-239 deleted former Subsecs. (c) and (d) re the commissioner's determination of the sufficiency of surplus and the evidence used to evaluate such sufficiency, respectively; P.A. 00-30 amended definition of “qualified assets” in Subsec. (a) to revise the calculation of premium in Subpara. (a)(1)(C) to delete reduction for commissions payable on premiums, and to amend Subpara. (a)(1)(H) to substitute “electronic data processing equipment and operating software” for “electronic and mechanical machines constituting a data processing and accounting system”, amended Subdiv. (a)(2) to substitute “minimum capital and minimum surplus” for “minimum capital”, amended definition of “surplus” in Subdiv. (a)(3), added Subdiv. (a)(4) to define “capital”, and amended Subsec. (b) to substitute “minimum capital and minimum surplus” for “minimum capital or minimum surplus”, effective January 1, 2001; P.A. 17-198 amended Subsec. (a)(1)(G) by replacing reference to Sec. 38a-192 with reference to Sec. 38a-194, effective July 1, 2017.

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Sec. 38a-72. (Formerly Sec. 38-93). Financial requirements to license an insurance company. (a) No property or casualty insurance company and no life insurance company shall be licensed initially to do business in this state unless the company complies with the following minimum capital and minimum surplus requirements to write these specified lines of insurance:

Stock Insurance Companies
	Capital	Surplus
Health	$ 500,000	$ 500,000
Life	1,000,000	2,000,000
Liability	500,000	500,000
Fidelity and Surety	500,000	500,000
Financial Guaranty	15,000,000	60,000,000
Marine	500,000	250,000
Mortgage Guaranty	2,000,000	2,000,000
Property	500,000	250,000
Workers' Compensation	500,000	500,000
Title	500,000	500,000
Residual Value	2,000,000	1,000,000
Reinsurance
(Property and Casualty)	2,000,000	2,000,000
Reinsurance (Life)	1,000,000	2,000,000

Mutual Insurance Companies
	Surplus
Health	$ 1,000,000
Life	3,000,000
Liability	1,000,000
Fidelity and Surety	1,000,000
Financial Guaranty	75,000,000
Marine	750,000
Mortgage Guaranty	4,000,000
Property	750,000
Workers' Compensation	1,000,000
Title	1,000,000
Residual Value	3,000,000
Reinsurance
(Property and Casualty)	4,000,000
Reinsurance (Life)	3,000,000

(b) Except with respect to the transaction of life and health insurance, companies desiring to transact more than one of the above forms of insurance shall meet the total minimum requirements, as to capital and surplus, of all forms to be transacted except that a company transacting all lines permitted to be combined need have no more than two million dollars capital and two million dollars surplus in the aggregate. Companies that transact both life and health insurance need have no more than one million dollars capital and two million dollars surplus in the aggregate. The commissioner may license any such company to write additional forms of insurance when the amount of capital and surplus of such company is sufficient by recognized insurance standards to protect the public interest. The commissioner may also license any mutual insurance company to write any or all forms of insurance when the surplus of such company is at least as great as the capital and surplus requirements for companies with capital stock.

(c) No alien property, marine or casualty insurance company shall be licensed to transact business in this state unless it furnishes a certificate showing that it has, for the protection of all policyholders, a cash deposit with the Treasurer of this state, or with the proper officer of some other state, of not less than the minimum capital and surplus requirements for similar foreign insurance companies or seven hundred and fifty thousand dollars, whichever amount is less; nor unless it has a trusteed surplus, as defined in section 38a-58b, at least as great as the minimum capital and surplus requirements for similar foreign insurance companies.

(d) No insurance company shall be licensed to transact business in this state or remain so licensed unless (1) its surplus funds bear a reasonable relationship to its liabilities based upon the type, volume and nature of insurance business transacted, and (2) risk-based capital related to its total adjusted capital is adequate for the types of business transacted. As used in this section, “total adjusted capital” means the sum of capital and surplus of an insurer, its asset valuation reserves, and any other item in the nature of capital as deemed appropriate by the commissioner. “Risk-based capital” means the capital and surplus adjusted to recognize the level of risk inherent in its business, including (A) risk with respect to the insurer's assets, (B) the risk of adverse insurance experience with respect to the insurer's liabilities and obligations, (C) the interest rate risk with respect to the insurer's business, and (D) all other business risks and such other relevant risks as the commissioner may determine. The commissioner shall adopt such reasonable regulations, in accordance with the provisions of chapter 54, as are deemed proper to implement the purposes of this section, including but not limited to, provisions concerning: The preparation and filing of reports by insurers of risk-based capital levels and the calculation thereof; the preparation and filing of comprehensive financial plans when such capital levels are reduced below minimum threshold levels; the confidentiality of such reports and plans; and the regulatory corrective actions the commissioner may take in the event minimum risk-based capital levels are not maintained, or the insurer's financial plans filed with the commissioner are deficient, or the insurer fails to otherwise comply with the provisions of the regulations promulgated.

(e) An insurer licensed in this state and issuing or reinsuring in this state policies of financial guaranty insurance, as defined in subdivision (1) of section 38a-92a shall fully comply with the requirements of subsection (a) of this section.

(1949 Rev., S. 6097–6100; 1951, 1953, 1955, S. 2824d; 1967, P.A. 382; P.A. 76-110; P.A. 79-376, S. 57; P.A. 90-243, S. 46; P.A. 92-112, S. 6, 35; P.A. 93-57, S. 5; 93-136, S. 17; 93-239, S. 17; P.A. 94-39, S. 1; P.A. 96-227, S. 3; P.A. 98-79, S. 1; P.A. 00-30, S. 3, 4, 14; P.A. 14-123, S. 22; 14-235, S. 53.)

History: 1967 act divided section into Subsecs., raised capital requirement for transacting fire or marine insurance or accident and health insurance from $250,000 to $5090,000, for liability insurance from $300,000 to $500,000 and for fidelity and surety business from $400,000 to $500,000 and required paid-in surplus of $250,000 for fire and marine insurance and $500,000 for other lines where previously surplus must equal 50% or more of minimum required capital in Subsec. (a) and added exception to requirements for companies transacting all lines in Subsec. (b); P.A. 76-110 imposed capital requirements for transacting workmen's compensation insurance, title insurance and mortgage guaranty insurance and required surplus of $2,000,000 for mortgage guaranty insurance in Subsec. (a) and raised required capital and surplus for companies transacting all lines in Subsec. (b) from $1,500,000 to $2,000,000 each; P.A. 79-376 replaced “workmen's compensation” with “workers' compensation”; P.A. 90-243 changed the minimum financial requirements for licensing new property, casualty and life insurance companies, specified exceptions with respect to life and health insurance re total combined financial capital and surplus and added Subsec. (d) requiring that company's surplus funds must bear a reasonable relationship to its liabilities in order to obtain or retain its license; Sec. 38-93 transferred to Sec. 38a-72 in 1991; P.A. 92-112 amended Subsec. (d) to require insurers to have sufficient surplus funds based upon the type, volume and nature of the insurance business transacted in order to secure or retain licensing; P.A. 93-57 amended Subsec. (d) to require that risk-based capital of an insurer be related to the total adjusted capital adequate for the type of business the insurer transacts and defined “risk-based capital” and “total adjusted capital”; P.A. 93-136 amended tables in Subsec. (a) to include the minimum required capital and surplus for companies transacting financial guaranty insurance and added a new Subsec. (e) re the minimum required combined capital and surplus requirements for financial guaranty insurance insurers for the period between October 1, 1993, and July 1, 1995; P.A. 93-239 amended Subsec. (b) to eliminate the reduction of certain capital and surplus requirements; P.A. 94-39 made technical revisions to correct a grammatical error; P.A. 96-227 amended Subsec. (a) to correct the minimum surplus for stock financial guaranty companies from $600,000,000 to $60,000,000; P.A. 98-79 added capital and minimum surplus requirements for residual value insurance, property casualty reinsurance and life reinsurance; P.A. 00-30 amended Subsec. (b) to delete “paid-in” and “net” re surplus, and made technical changes for purposes of gender neutrality and amended Subsec. (d) to delete “statutory” re “capital and surplus”, effective January 1, 2001; P.A. 14-123 amended Subsec. (c) to replace reference to Sec. 38a-74 with reference to Sec. 38a-58b, effective June 6, 2014; P.A. 14-235 amended Subsec. (e) to delete provision re capital and surplus requirements between October 1, 1993, and July 1, 1995.

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Sec. 38a-72a. Regulations. The Insurance Commissioner shall adopt regulations, in accordance with chapter 54, to establish standards that will govern the reduction of liabilities or establishment of assets in the financial statements of life and accident and health insurers and property and casualty insurers with respect to their accident and health insurance business filed with him for reinsurance ceded to another insurer.

(P.A. 92-112, S. 7, 35; P.A. 93-57, S. 2.)

History: P.A. 93-57 amended the section to include “accident and health” insurers and “property and casualty insurers with respect to accident and health insurance business”.

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Sec. 38a-73. (Formerly Sec. 38-110). Limitation of risks. (a) No stock insurance company doing business in this state shall expose itself to loss on any one risk to an amount exceeding ten per cent of its paid-up capital and surplus; but, in determining the amount of such risk, no portion thereof that has been reinsured in any insurance company that meets the requirements of section 38a-85 or 38a-86 shall be included.

(b) No mutual insurance company doing business in this state shall expose itself to loss on any one risk to an amount exceeding ten per cent of its net surplus which limit on any one risk shall, in no case, exceed the amount authorized by the charter, bylaws or board of directors of the company; but, in determining the amount of such risk, no portion thereof that has been reinsured in any insurance company that meets the requirements of section 38a-85 or 38a-86 shall be included.

(1949 Rev., S. 6115; P.A. 90-243, S. 52; P.A. 93-239, S. 18; P.A. 17-59, S. 4.)

History: P.A. 90-243 deleted the references to “fire” insurance companies; Sec. 38-110 transferred to Sec. 38a-73 in 1991; P.A. 93-239 deleted references limiting applicability to risks “in this state”, and eliminated provision including two and one-half times the amount of the total cash premiums or premium deposits in determining a limitation of risks; P.A. 17-59 designated existing provisions re stock insurance companies doing business in this state as Subsec. (a), designated existing provisions re mutual insurance companies doing business in this state as Subsec. (b), replaced references to insurance companies authorized to do business in this state with references to insurance companies that meet the requirements of Secs. 38a-85 or 38a-86, and made technical changes.

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Secs. 38a-74 and 38a-75. (Formerly Secs. 38-94 and 38-95). Estimation of trusteed surplus. Appointment of trustees; examinations by commissioner. Sections 38a-74 and 38a-75 are repealed, effective June 6, 2014.

(1949 Rev., S. 6100, 6101; 1951, S. 2825d, 2826d; P.A. 90-243, S. 48; P.A. 14-123, S. 26.)

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Sec. 38a-76. (Formerly Sec. 38-25). Reserves. (a) Each insurance company transacting business in this state shall, at all times, maintain reserves equal in amount to its liability under all its policy contracts, as the same are computed in accordance with the provisions of the statutes or with the requirements of the commissioner adopted upon reasonable consideration of ascertained experience for the purpose of adequately protecting the insured or securing the solvency of such company.

(b) A domestic insurer transacting insurance only in a foreign country may calculate its reserves on insurance written in that foreign country in accordance with the reserve standards required or otherwise approved by such foreign country. For purposes of this section and section 38a-77, (1) a domestic insurer shall be deemed to “transact insurance” or “do business” in a state, district or territory of the United States if, within any state, district or territory of the United States, that insurer sells or issues any policy contract or otherwise makes any solicitation or inducement or engages in any negotiations with respect to the same; but (2) an insurer shall not be deemed to transact insurance or do business in a state, district or territory of the United States by reason of the fact that such insurer (A) holds a license to transact insurance in a state, district or territory of the United States; (B) has issued insurance policies or contracts to residents of a foreign country who subsequently reside in a state, district or territory of the United States; or (C) performs administrative or oversight functions in a state, district or territory of the United States. A domestic insurer transacting insurance only in a foreign country may invest its funds in a manner consistent with the laws, regulations and administrative practices of the foreign country in which it transacts insurance without limitations under sections 38a-102 to 38a-102h, inclusive.

(1949 Rev., S. 6078; P.A. 98-79, S. 2.)

History: Sec. 38-25 transferred to Sec. 38a-76 in 1991; P.A. 98-79 designated existing language as Subsec. (a) and added new Subsec. (b) re calculating reserves and investments for a domestic insurer transacting insurance only in a foreign country.

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Sec. 38a-77. (Formerly Sec. 38-130). Valuation of reserve. (a) The commissioner, upon receipt of the annual report of each domestic, foreign and alien life insurance company doing business in this state, as determined under subsection (b) of section 38a-76, shall make a valuation of all its outstanding policies, additions thereto, unpaid dividends and other obligations. The provisions of this section shall not apply to policies or certificates in which the amount of insurance or benefit is determined by an assessment collected from the surviving and associated holders of like policies or certificates, and not by a guaranty or pledge of insurance irrespective of the amount thus collected; provided any amount collected upon such assessments, until expended for the purpose for which it was collected, shall be charged as a liability against the company or association holding the same.

(b) All valuations made by the commissioner or by his authority shall be made upon the net premium basis, according to the standard of valuations adopted by the company for the obligation to be valued, provided, in each case, the standard of valuation employed shall be stated in his annual report. Any company may adopt different standards for obligations of different dates or classes, but, if the total value determined by any such standard for the obligations for which it has been adopted is less than that determined by the legal minimum standard hereinafter prescribed, or, if the company adopts no standard, the legal minimum standard shall be used.

(c) The commissioner may vary the standards of interest and mortality in the case of corporations from foreign countries and in particular cases of invalid lives and other extra hazards, and may value policies in groups, use approximate averages for fractions of a year and otherwise and calculate value by net premiums or otherwise, and accept the valuation of the department of insurance of any other state in place of the valuation herein required if the insurance department of such state accepts as sufficient and valid for all purposes the certificate of valuation of the Insurance Commissioner of this state.

(d) Except as otherwise provided herein, the legal minimum standard for contracts issued before January 1, 1901, shall be the actuaries' or combined experience table of mortality with interest at four per cent per annum and, for contracts issued on or after said day, shall be the “American Experience Table of Mortality” with interest at three and one-half per cent per annum. Any company may adopt as a legal minimum standard the “American Men Ultimate Table of Mortality” with three and one-half per cent per annum interest for contracts issued on or after January 1, 1928, in lieu of said “American Experience Table of Mortality”. Any company may adopt as a legal minimum standard the “Commissioners' 1941 Standard Ordinary Table of Mortality” with three and one-half per cent per annum interest for contracts issued on or after January 1, 1945, in lieu of either of the legal minimum standards hereinabove allowed. Any company may adopt as a legal minimum standard any mortality table approved or adopted by the National Association of Insurance Commissioners and certified by the commissioner as adequate with three and one-half per cent per annum interest for contracts issued on or after January 1, 1957; and four per cent per annum interest for contracts issued on or after January 1, 1974, in lieu of any of the legal minimum standards hereinabove allowed. The valuation of contracts on female risks issued on or after January 1, 1957, may be calculated, at the option of the company with approval of the commissioner, according to an age not more than three years younger than the actual age of the insured. All annuity contracts written after January 1, 1973, and prior to January 1, 1981, other than single premium immediate annuity contracts and annuities purchased under group annuity contracts may be valued based on the 1971 individual annuity mortality table with the rate of interest not to exceed four per cent per annum. Single premium immediate annuity contracts and annuities purchased under group annuity contracts after January 1, 1973, and prior to January 1, 1981, may be valued based on the 1971 individual annuity mortality table for individual contracts and the 1971 group annuity mortality table for annuities issued under group contracts with interest not to exceed six per cent per annum. All annuity contracts, both individual and group, issued prior to January 1, 1973, will continue to be reserved on the tables in use prior to January 1, 1973, unless changes in the reserve bases of these annuity contracts are approved by the Insurance Commissioner.

(e) This section shall apply only to those contracts, policies, and annuities to which sections 38a-78, 38a-439 and 38a-440 do not apply.

(1949 Rev., S. 6138; 1957, P.A. 133, S. 1; P.A. 73-181; P.A. 78-312, S. 5; P.A. 90-243, S. 54; P.A. 98-79, S. 3.)

History: P.A. 73-181 imposed 4% per annum interest for contracts issued on or after January 1, 1974, and added provisions re contracts after January 1, 1973, and before January 1, 1981; P.A. 78-312 added provision limiting application of provisions to “contracts, policies and annuities to which sections 38-130c to 38-130e, inclusive, do not apply”; P.A. 90-243 divided the section into Subsecs. and made technical corrections substituting “foreign” for “nonresident”, “alien” for “foreign”, “the commissioner” for “him” and “the” for “said”; Sec. 38-130 transferred to Sec. 38a-77 in 1991; P.A. 98-79 amended Subsec. (a) to add reference to Subsec. 38a-76(b) re doing business in this state.

See Secs. 38a-438 to 38a-440, inclusive, re Standard Nonforfeiture Law.

Annotation to former section 38-130:

Term “reinsurance reserve” discussed. 71 C. 751.

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Sec. 38a-78. (Formerly Sec. 38-130e). Ascertainment of reserves for insurance policies and contracts issued prior to and on or after operative date of NAIC Valuation Manual. Actuarial opinions and memoranda. Confidentiality. (a)(1)(A) The provisions of this subdivision shall apply, unless otherwise provided in this title, to policies and contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a. As used in this section, “Valuation Manual” means the manual of valuation instructions adopted by NAIC as set forth in section 38a-78a and as amended from time to time.

(B) The commissioner shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this state except that in the case of an alien company, the valuation shall be limited to its United States business. In calculating such reserves, the commissioner may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves required of any foreign or alien company, the commissioner may accept any valuation made, or caused to be made, by the insurance regulatory official of any state or other jurisdiction when such valuation complies with the minimum standard provided in subsection (d) of this section.

(2) (A) The provisions of this subdivision shall apply to policies and contracts issued on or after the operative date of the Valuation Manual, as set forth in section 38a-78a.

(B) As used in this subdivision, subsections (c), (m) and (n) of this section and section 38a-78a:

(i) “Accident and health insurance contract” means a policy or contract that incorporates morbidity risk and provides protection against economic loss resulting from accident, sickness or medical conditions as may be specified in the Valuation Manual;

(ii) “Appointed actuary” means a qualified actuary who is appointed in accordance with the Valuation Manual to prepare the actuarial opinion required under subsection (c) of this section;

(iii) “Company” means an entity that has written, issued or reinsured life insurance contracts, accident and health insurance contracts or deposit-type contracts (I) in this state and has at least one such contract in force or on claim, or (II) in any state and holds a certificate of authority to write life insurance contracts, accident and health insurance contracts or deposit-type contracts in this state;

(iv) “Deposit-type contract” means a policy or contract that does not incorporate mortality or morbidity risk and as may be specified in the Valuation Manual and NAIC Accounting Practices and Procedures Manual;

(v) “Life insurance contract” means a policy or contract that incorporates mortality risk and as may be specified in the Valuation Manual. “Life insurance contract” includes annuity and pure endowment contracts;

(vi) “NAIC” means the National Association of Insurance Commissioners;

(vii) “Policyholder behavior” means any action a policyholder, contract holder, certificate holder or any other person with the right to elect options may take under a policy or contract subject to this section. “Policyholder behavior” includes, but is not limited to, lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization or benefit elections prescribed by the policy or contract, except that “policyholder behavior” does not include events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract;

(viii) “Principle-based valuation” means a reserve valuation that uses one or more methods or one or more assumptions determined by a company and is required to comply with subsection (c) of section 38a-78a;

(ix) “Qualified actuary” means a member in good standing of the American Academy of Actuaries who is qualified in accordance with the standards of the American Academy of Actuaries to prepare and sign the actuarial opinion required under subsection (c) of this section and who meets the requirements specified in the Valuation Manual;

(x) “Tail risk” means a risk that occurs where the frequency of low probability events is greater than expected under a normal probability distribution or where there are observed events of very significant size or magnitude.

(C) The commissioner shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance contracts, accident and health contracts and deposit-type contracts of every company. In lieu of the valuation of the reserves required of any foreign or alien company, the commissioner may accept a valuation made, or caused to be made, by the insurance regulatory official of any state or other jurisdiction when such valuation complies with the minimum standard provided in subsection (c) of section 38a-78a.

(b) (1) The provisions of this subsection shall apply, unless otherwise provided in this title, to opinions submitted by and supporting memoranda prepared and provided by qualified actuaries prior to the operative date of the Valuation Manual, as set forth in section 38a-78a, for policies and contracts issued prior to said operative date.

(2) Every life insurance company doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulations adopted in accordance with the provisions of chapter 54 are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this state. The commissioner shall define by regulation the specifics of such opinion and add any other items the commissioner deems necessary to its scope. For the purposes of this subsection and subsection (i) of this section, “qualified actuary” means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in regulations adopted in accordance with the provisions of chapter 54.

(3) (A) Every life insurance company shall also include in the opinion required under subdivision (2) of this subsection, unless exempted by regulations adopted in accordance with the provisions of chapter 54, an opinion of the same qualified actuary as to whether the reserves and related actuarial items held by the company in support of such policies and contracts, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under such policies and contracts, make adequate provision for the company's obligations under such policies and contracts, including, but not limited to, the benefits under and expenses associated with such policies and contracts.

(B) Every qualified actuary that provides an opinion under this subsection shall prepare and provide to the life insurance company a memorandum that supports such opinion. If a life insurance company fails to provide a supporting memorandum at the request of the commissioner or the commissioner determines that a supporting memorandum provided by a life insurance company fails to meet the standards prescribed by the commissioner or is otherwise unacceptable to the commissioner, the commissioner may engage the services by employment or by contract of a qualified actuary at such company's expense to review such opinion and the basis for such opinion and to prepare the supporting memorandum required under this subdivision. The commissioner shall adopt regulations, in accordance with the provisions of chapter 54, to specify (i) the form and substance of and standards for the supporting memorandum, and (ii) the time period for a life insurance company to provide a supporting memorandum after the commissioner has requested such memorandum.

(4) The commissioner may adopt regulations, in accordance with the provisions of chapter 54, to provide for a transition period for a life insurance company to establish any higher reserves that the qualified actuary may deem necessary in order to render the opinion required under this subsection.

(5) Every opinion required under this subsection shall:

(A) Be submitted with the annual statement reflecting the valuation of such reserves for each year ending on or after December 31, 1991;

(B) Apply to all business in force including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by regulation; and

(C) Be based on standards adopted from time to time by the Actuarial Standards Board and on such additional standards as the commissioner may prescribe by regulations adopted in accordance with the provisions of chapter 54.

(6) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance regulatory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

(7) Except in cases of fraud or wilful misconduct, the qualified actuary shall not be liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision or conduct with respect to the actuary's opinion.

(8) (A) Except as provided in subparagraphs (C) to (E), inclusive, of this subdivision, any memorandum submitted pursuant to subparagraph (B) of subdivision (3) of this subsection and all documents, materials or other information in the possession or control of the Insurance Department relating to such memorandum shall (i) be confidential by law and privileged, (ii) not be subject to disclosure under section 1-210, (iii) not be subject to subpoena, and (iv) not be subject to discovery or admissible in evidence in any civil action in this state. The commissioner may use such memorandum, documents, materials or other information in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties.

(B) Neither the commissioner nor any person who receives such memorandum or documents, materials or other information relating to such memorandum while acting under the authority of the commissioner shall be permitted or required to testify in any civil action in this state concerning such memorandum, documents, materials or other information.

(C) A supporting memorandum submitted pursuant to subparagraph (B) of subdivision (3) of this subsection and any documents, materials or other information in the possession or control of the Insurance Department relating to such memorandum may be subject to subpoena for the purpose of defending an action for damages from the qualified actuary who prepared such memorandum by reason of an action required by this subsection or any regulations adopted thereunder.

(D) The commissioner may release such memorandum or documents, materials or other information in the possession or control of the Insurance Department relating to such memorandum (i) with the written consent of the life insurance company, or (ii) to the American Academy of Actuaries upon request from said academy that such memorandum, documents, materials or other information are required for the purpose of professional disciplinary proceedings, if such request sets forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum and documents, materials or other information relating to such memorandum.

(E) If any portion of such memorandum is (i) referred to by the life insurance company in such company's marketing, (ii) referred to by the life insurance company before a governmental agency other than a state insurance department, or (iii) released by such company to the news media, all portions of the memorandum shall no longer be confidential.

(9) To assist the commissioner in the performance of the commissioner's duties, the commissioner may:

(A) Share documents, materials or other information, including documents, materials or other information deemed confidential and privileged pursuant to subdivision (8) of this subsection, with (i) other state and federal regulatory officials and international supervisory officials, (ii) the National Association of Insurance Commissioners and its affiliates and subsidiaries, and (iii) state, federal and international law enforcement officials, provided the recipient of any such documents, materials or other information agrees, in writing, to maintain the confidentiality and privileged status of any such documents, materials and other information;

(B) Receive documents, materials or other information, including confidential and privileged documents, materials or other information, from (i) the National Association of Insurance Commissioners or its affiliates or subsidiaries, and (ii) regulatory and law enforcement officials of other states or jurisdictions. The commissioner shall maintain as confidential and privileged any documents, materials or other information received with notice or the understanding that such documents, materials or other information are confidential and privileged under the laws of the jurisdiction that is the source of the documents, materials or other information; and

(C) Enter into written agreements governing the sharing and use of documents, materials and other information that are consistent with the provisions of this subdivision and subdivision (8) of this subsection.

(10) No waiver of any applicable privilege or claims of confidentiality in any documents, materials or other information shall occur as a result of disclosure to the commissioner or sharing authorized under subdivision (9) of this subsection.

(c) (1) The provisions of this subsection shall apply to opinions submitted by and supporting memoranda prepared and provided by appointed actuaries for policies and contracts in force on or after the operative date of the Valuation Manual, as set forth in section 38a-78a. The provisions of this subsection shall not apply to a society subject to section 38a-614, unless such society elects to use the standards pursuant to subdivision (9) of subsection (a) of section 38a-614.

(2) Every company with outstanding life insurance contracts, accident and health insurance contracts or deposit-type contracts in this state shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of such policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this state. The Valuation Manual shall prescribe the specifics of such opinion and add any other items deemed to be necessary to its scope.

(3) (A) Every company with outstanding life insurance contracts, accident and health insurance contracts or deposit-type contracts in this state shall also include in the opinion required under subdivision (2) of this subsection, unless exempted by the Valuation Manual, an opinion of the same appointed actuary as to whether the reserves and related actuarial items held by the company in support of such policies and contracts, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under such policies and contracts, make adequate provision for the company's obligations under such policies and contracts, including, but not limited to, the benefits under and expenses associated with such policies and contracts.

(B) Every appointed actuary that provides an opinion under this subsection shall prepare and provide to the company a memorandum that supports such opinion, in such form and substance as may be specified in the Valuation Manual and acceptable to the commissioner. If a company fails to provide a supporting memorandum at the request of the commissioner within the time period specified in the Valuation Manual or the commissioner determines that a supporting memorandum provided by a company fails to meet the standards prescribed by the Valuation Manual or is otherwise unacceptable to the commissioner, the commissioner may engage the services by employment or by contract of a qualified actuary at such company's expense to review such opinion and the basis for such opinion and to prepare the supporting memorandum required under this subdivision.

(4) Every opinion required under this subsection shall:

(A) Be submitted with the annual statement reflecting the valuation of such reserves for each year ending on or after December thirty-first of the year of the operative date of the Valuation Manual;

(B) Apply to all policies and contracts subject to subparagraph (A) of subdivision (3) of this subsection and any other actuarial liabilities as may be specified in the Valuation Manual; and

(C) Be based on standards adopted from time to time by the Actuarial Standards Board or its successor and on such additional standards as may be prescribed in the Valuation Manual.

(5) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance regulatory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

(6) Except in cases of fraud or wilful misconduct, the appointed actuary shall not be liable for damages to any person, other than the company and the commissioner, for any act, error, omission, decision or conduct with respect to the actuary's opinion.

(7) (A) For the purposes of this subdivision:

(i) “Confidential information” includes:

(I) A supporting memorandum submitted pursuant to subparagraph (B) of subdivision (3) of this subsection or subparagraph (B) of subdivision (3) of subsection (b) of this section and all workpapers, documents, materials, data and other information and copies thereof created, produced or obtained by or disclosed to the commissioner or any other person in connection with such memorandum;

(II) Except as provided in subparagraph (B)(iii) of this subdivision, all workpapers, documents, materials, data and other information and copies thereof created, produced or obtained by or disclosed to the commissioner or any other person in the course of an examination under subparagraph (B) of subdivision (2) of subsection (c) of section 38a-78a;

(III) All reports, workpapers, documents, materials, data and other information developed by a company in support of or in connection with the annual certification required under subparagraph (B) of subdivision (3) of subsection (m) of this section and all workpapers, documents, materials, data and other information and copies thereof created, produced or obtained by or disclosed to the commissioner or any other person in connection with such certification;

(IV) Any principle-based valuation report developed pursuant to subparagraph (C) of subdivision (3) of subsection (m) of this section and all workpapers, documents, materials, data and other information and copies thereof created, produced or obtained by or disclosed to the commissioner or any other person in connection with such report; and

(V) All workpapers, documents, materials, data and other information submitted pursuant to subsection (n) of this section and all workpapers, documents, materials, data and other information created or produced in connection with such submission, in each case that includes any potentially company-identifying or personally identifiable information, that is obtained by or provided to the commissioner, and all workpapers, documents, materials, data and other information created, produced or obtained by or disclosed to the commissioner or any other person in connection with such submission.

(ii) “NAIC” and “regulatory agency” include their employees, agents, consultants and contractors.

(B) (i) Except as provided in subparagraphs (B)(iii) to (B)(vi), inclusive, of this subdivision, a company's confidential information shall (I) be confidential by law and privileged, (II) not be subject to disclosure under section 1-210, (III) not be subject to subpoena, and (IV) not be subject to discovery or admissible in evidence in any civil action in this state. The commissioner may use such confidential information in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties.

(ii) Neither the commissioner nor any person who receives confidential information while acting under the authority of the commissioner shall be permitted or required to testify in any civil action concerning such confidential information.

(iii) If an examination report or other materials prepared in connection with an examination under section 38a-14 or 38a-14a are not held as confidential under said sections, an examination report under subparagraph (B) of subdivision (2) of subsection (c) of section 38a-78a or workpapers, documents, materials, data and other information and copies set forth in subparagraph (A)(i)(II) of this subdivision shall not be confidential information to the same extent as if such examination report under subparagraph (B) of subdivision (2) of subsection (c) of section 38a-78a or workpapers, documents, materials, data and other information and copies set forth in subparagraph (A)(i)(II) of this subdivision had been prepared under section 38a-14 or 38a-14a.

(iv) Any confidential information specified in subparagraph (A)(i)(I) or (A)(i)(IV) of this subdivision in the possession or control of the Insurance Department may be subject to subpoena for the purpose of defending an action for damages from the appointed actuary who prepared such supporting memorandum or principle-based valuation report by reason of an action required by this section or any regulations adopted thereunder.

(v) The commissioner may release any confidential information specified in subparagraph (A)(i)(I) or (A)(i)(IV) of this subdivision in the possession or control of the Insurance Department with the written consent of the company.

(vi) If any portion of a supporting memorandum submitted pursuant to subparagraph (B) of subdivision (3) of this subsection or a principle-based valuation report filed pursuant to subparagraph (C) of subdivision (3) of subsection (m) of this section is (I) referred to by the company in such company's marketing, (II) referred to by the company before a governmental agency other than a state insurance department, (III) publicly volunteered by such company, or (IV) released by such company to the news media, all portions of the memorandum or report shall no longer be confidential.

(i) Share confidential information with (I) other state, federal and international regulatory agencies, (II) NAIC and its affiliates and subsidiaries, and (III) in the case of confidential information specified in subparagraphs (A)(i)(I) and (A)(i)(IV) of this subdivision, the Actuarial Board for Counseling and Discipline or its successor upon request from said board that such confidential information is required for the purpose of professional disciplinary proceedings, and state, federal and international law enforcement officials. The recipient of any such confidential information shared pursuant to this subparagraph shall agree, in writing, and shall have the legal authority to agree, to maintain the confidentiality and privileged status of any such confidential information in the same manner and to the same extent as required for the commissioner;

(ii) Receive workpapers, documents, materials, data and other information, including confidential and privileged workpapers, documents, materials, data and other information, from (I) NAIC or its affiliates or subsidiaries, (II) the Actuarial Board for Counseling and Discipline or its successor, and (III) regulatory and law enforcement officials of other states or jurisdictions. The commissioner shall maintain as confidential and privileged any workpapers, documents, materials, data or other information received with notice or the understanding that such workpapers, documents, materials, data or other information are confidential and privileged under the laws of the jurisdiction that is the source of the workpapers, documents, materials, data or other information; and

(iii) Enter into written agreements governing the sharing and use of workpapers, documents, materials, data and other information, that are consistent with the provisions of this subdivision.

(D) No waiver of any applicable privilege or claims of confidentiality in any confidential information shall occur as a result of disclosure to the commissioner or sharing authorized under subparagraph (C) of this subdivision.

(E) A privilege established under the law of any state or jurisdiction that is substantially similar to a privilege established under subparagraph (B) of this subdivision shall be available and enforced in any proceeding in, and in any court of, this state.

(d) (1) The provisions of this subsection shall apply, unless otherwise provided in this title, to policies and contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a.

(2) Except as otherwise provided in subsections (e), (f) and (l) of this section, the minimum standard for the valuation of all such policies and contracts issued prior to the effective date specified in accordance with the provisions of subsection (h) of section 38-130e of the general statutes, revision of 1958, revised to 1981, shall be that provided by the laws in effect immediately prior to such date, except that the minimum standard for the valuation of annuities and pure endowments purchased prior to January 1, 1973, under group annuity and pure endowment contracts shall be the 1971 Group Annuity Mortality Table, or any modification of this table approved by the commissioner, and an interest rate of five per cent per annum. Except as otherwise provided in subsections (e), (f) and (l) of this section, the minimum standard for the valuation of all such policies and contracts issued on and after such effective date shall be the commissioners' reserve valuation methods defined in subsections (g), (h) and (j) of this section, with four and one-half per cent interest and the following tables: (A) For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, the Commissioners' 1958 Standard Ordinary Mortality Table for such policies issued prior to the compliance date established by subdivision (11) of subsection (e) of section 38a-439, provided for any category of such policies issued on female risks, all modified net premiums and present values referred to in this section may be calculated according to an age not more than six years younger than the actual age of the insured and for such policies issued on or after the compliance date established by subdivision (11) of subsection (e) of section 38a-439, (i) the Commissioners' 1980 Standard Ordinary Mortality Table, (ii) at the election of the company for any one or more specified plans of life insurance, the Commissioners' 1980 Standard Ordinary Mortality Table with ten-year select mortality factors, (iii) on or after January 1, 2005, until January 1, 2009, at the election of the company for any one or more specified plans of life insurance issued on or after January 1, 2004, on the basis of the Commissioners' 2001 Standard Ordinary Mortality Table, except that with respect to such plans issued before April 1, 2005, such mortality table shall be used solely for the basis of valuation and nonforfeiture and shall not be used to increase the previously agreed required premium, (iv) issued on or after January 1, 2009, the Commissioners' 2001 Standard Ordinary Mortality Table, or (v) any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such policies; (B) for all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies, the Commissioners' 1961 Standard Industrial Mortality Table or any industrial mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such policies; (C) for total and permanent disability benefits in or supplementary to ordinary policies or contracts, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such policies. These tables shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies; (D) for accidental death benefits in or supplementary to policies, the 1959 Accidental Death Benefits Table or any accidental death benefits table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such policies. These tables shall be combined with a mortality table permitted for calculating the reserves for life insurance policies; and (E) for group life insurance, life insurance issued on the substandard basis and other special benefits, such tables as may be approved by the commissioner.

(e) (1) The provisions of this subsection shall apply, unless otherwise provided in this title, to policies and contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a.

(2) Except as otherwise provided in subsection (f) of this section, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after the effective date as specified in accordance with the provisions of subsection (h) of section 38-130e of the general statutes, revision of 1958, revised to 1981, and for all annuities and pure endowments purchased on or after such effective date under group annuity and pure endowment contracts, shall be the commissioners' reserve valuation methods defined in subsections (g) and (h) of this section and the following tables and interest rates: (A) For individual single premium immediate annuity contracts issued on or after such effective date, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the commissioner, and seven and one-half per cent interest; (B) for individual annuity and pure endowment contracts issued on or after such effective date, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such contract, or any modification of these tables approved by the commissioner, and five and one-half per cent interest for single premium deferred annuity and pure endowment contracts and four and one-half per cent interest for all other such annuity and pure endowment contracts; (C) for all annuities and pure endowments purchased on or after such effective date under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table or any group annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one-half per cent interest.

(f) (1) The provisions of this subsection shall apply, unless otherwise provided in this title, to policies and contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a.

(2) The interest rates used in determining the minimum standard for the valuation of the following shall be the calendar year statutory valuation interest rates as defined in this subsection: (A) Life insurance policies issued in a particular calendar year, on or after the compliance date established by subdivision (11) of subsection (e) of section 38a-439; (B) individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982; (C) annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts; and (D) the net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts.

(3) The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearest one-quarter of one per cent:

(A) For life insurance,

$I is equal to .03 plus W times Open parenthesis R sub 1 minus .03 close parenthesis plus start fraction W over 2 End fraction times Open parenthesis R sub 2 minus .09 close parenthesis$

(B) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,

I is equal to .03 plus W times Open parenthesis R minus .03 close parenthesis

Where	R₁ is the lesser of R and .09,
	R₂ is the greater of R and .09,
	R is the reference interest rate defined in subdivision (5) of this subsection and
	W is the weighting factor defined in subdivision (4) of this subsection.

(C) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in subparagraph (B) of this subdivision, the formula for life insurance stated in subparagraph (A) of this subdivision shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of ten years and the formula for single premium immediate annuities stated in subparagraph (B) of this subdivision shall apply to annuities and guaranteed interest contracts with guarantee durations of ten years or less.

(D) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in subparagraph (B) of this subdivision shall apply.

(E) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in subparagraph (B) of this subdivision shall apply.

(F) If the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this subdivision differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one per cent, the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the foregoing, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980 using the reference interest rate defined for 1979 and shall be determined for each subsequent calendar year regardless of the compliance date established by subdivision (11) of subsection (e) of section 38a-439;

(4) The weighting factors referred to in the formulas stated in subdivision (3) of this subsection are given in the following tables:

(A) Weighting Factors For Life Insurance:

Guarantee Duration (Years)	Weighting Factors
10 or less	.50
More than 10, but not more than 20	.45
More than 20	.35

For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy.

(B) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options: .80

(C) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subparagraph (B) of this subdivision, shall be as specified in the tables in subparagraphs (C)(i), (C)(ii) and (C)(iii) of this subdivision according to the rules and definitions in subparagraphs (C)(iv), (C)(v) and (C)(vi) of this subdivision:

(i) For annuities and guaranteed interest contracts valued on an issue year basis:

Guarantee Duration (Years)	Weighting Factor For Plan Type
	A	B	C
5 or less	.80	.60	.50
More than 5, not more than 10	.75	.60	.50
More than 10, not more than 20	.65	.50	.45
More than 20	.45	.35	.35

(ii) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in subparagraph (C)(i) of this subdivision increased by:

Plan Type
A	B	C
.15	.25	.05

(iii) For annuities and guaranteed interest contracts valued on an issue year basis, other than those with no cash settlement options, that do not guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis that do not guarantee interest rates on considerations received more than twelve months beyond the valuation date, the factors shown in subparagraph (C)(i) of this subdivision or derived in subparagraph (C)(ii) of this subdivision increased by:

Plan Type
A	B	C
.05	.05	.05

(iv) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

(v) Plan type as used in the tables in this subparagraph is defined as follows:

a. Plan Type A: At any time policyholder may withdraw funds only: (1) With an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without such adjustment but in installments over five years or more, or (3) as an immediate life annuity, or (4) no withdrawal permitted.

b. Plan Type B: Before expiration of the interest rate guarantee, policyholder may withdraw funds only: (1) With an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without such adjustment but in installments over five years or more, or (3) no withdrawal permitted. At the end of the interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five years.

c. Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either: (1) Without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(vi) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options shall be valued on an issue year basis. As used in this subsection, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract. The change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in fund;

(5) The reference interest rate referred to in subdivision (3) of this subsection shall be defined as follows: (A) For all life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year next preceding the year of issue, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.; (B) for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or year of purchase of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.; (C) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subparagraph (B) of this subdivision, with guarantee duration in excess of ten years, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.; (D) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subparagraph (B) of this subdivision, with guarantee duration of ten years or less, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.; (E) for other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.; (F) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in subparagraph (B) of this subdivision, the average over a period of twelve months, ending on June thirtieth of the calendar year of the change in the fund, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc.

(6) In the event that the monthly average of the composite yield on seasoned corporate bonds is no longer published by Moody's Investors Service, Inc., or in the event that the National Association of Insurance Commissioners determines that the monthly average of the composite yield on seasoned corporate bonds as published by Moody's Investors Service, Inc. is no longer appropriate for the determination of the reference interest rate, an alternative method for determination of the reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54, may be substituted.

(g) (1) The provisions of this subsection shall apply, unless otherwise provided in this title, to policies and contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a.

(2) Except as otherwise provided in subsections (h), (j) and (l) of this section, reserves according to the commissioners' reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of subparagraph (A) of this subdivision over subparagraph (B) of this subdivision, as follows: (A) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided such net level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of such policy; and (B) a net one year term premium for such benefits provided for in the first policy year provided for any life insurance policy issued on or after January 1, 1985, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioners' reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall, except as otherwise provided in subsection (j) of this section, be the greater of the reserve as of such policy anniversary calculated as described in this subsection and the reserve as of such policy anniversary calculated as described in this subsection but with the value defined in subparagraph (A) of this subdivision being reduced by fifteen per cent of the amount of such excess first year premium, all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, the policy being assumed to mature on such date as an endowment, and the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in subsections (e) and (f) of this section shall be used. Reserves according to the commissioners' reserve valuation method for: (i) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums; (ii) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended; (iii) disability and accidental death benefits in all policies and contracts; and (iv) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of this subsection.

(h) This subsection shall apply, unless otherwise provided in this title, to all annuity and pure endowment contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a, other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended. Reserves according to the commissioners' annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.

(i) (1) The provisions of this subsection shall apply, unless otherwise provided in this title, to policies and contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a.

(2) In no event shall a company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after the effective date as specified in accordance with the provisions of subsection (h) of section 38-130e of the general statutes, revision of 1958, revised to 1981, be less than the aggregate reserves calculated in accordance with the methods set forth in this subsection and subsections (f), (g) and (k) of this section, and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.

(3) In no event shall the aggregate reserves for all policies, contracts and benefits be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required under subdivision (2) of subsection (b) of this section.

(4) Reserves for any category of policies, contracts or benefits as established by the commissioner may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for in the policies or contracts.

(5) Any such company which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum herein provided; provided, for the purposes of this subsection, the holding of additional reserves previously determined by a qualified actuary to be necessary to render the opinion required under subdivision (2) of subsection (b) of this section shall not be deemed to be the adoption of a higher standard of valuation.

(j) (1) The provisions of this subsection shall apply, unless otherwise provided in this title, to policies and contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a.

(2) If in any contract year the gross premium charged by any life insurance company on any policy or contract, in force as of or written after the effective date as specified in accordance with the provisions of subsection (h) of section 38-130e of the general statutes, revision of 1958, revised to 1981, is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the most recent minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum standards of mortality and rate of interest in effect in the year that the policy or contract was issued and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this subsection are those standards stated in subsections (d) and (f) of this section. For any life insurance policy issued on or after January 1, 1985, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this subsection shall be applied as if the method actually used in calculating the reserve for such policy were the method described in subsection (g) of this section. The minimum reserve at each policy anniversary of such policy shall be the greater of the minimum reserve calculated in accordance with subsection (g) of this section and the minimum reserve calculated in accordance with this subsection.

(k) (1) The provisions of this subsection shall apply, unless otherwise provided in this title, to policies and contracts issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a.

(2) In the case of any plan of life insurance that provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance or annuity that is of such nature that the minimum reserves cannot be determined by the methods described in subsections (g), (h) and (j) of this section, the reserves that are held under any such plan shall be appropriate in relation to the benefits and the pattern of premiums for that plan, and be computed by a method that is consistent with the principles of this standard valuation law, as determined by regulations adopted by the commissioner in accordance with the provisions of chapter 54.

(l) The commissioner shall adopt regulations in accordance with the provisions of chapter 54 containing the minimum standards applicable to the valuation of health insurance plans issued prior to the operative date of the Valuation Manual, as set forth in section 38a-78a.

(m) (1) The provisions of this subsection shall apply to policies and contracts issued on or after the operative date of the Valuation Manual, as set forth in section 38a-78a. The provisions of this subsection shall not apply to a society subject to section 38a-614, unless such society elects to use the standards pursuant to subdivision (9) of subsection (a) of section 38a-614.

(2) For policies or contracts subject to a principle-based valuation as specified in the Valuation Manual, a company shall establish reserves using a principle-based valuation that:

(A) Quantifies the benefits, guarantees and funding associated with such policies or contracts and their risks, at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of such policies or contracts. For policies or contracts with significant tail risk, the principle-based valuation shall reflect appropriately adverse conditions to quantify the tail risk;

(B) Incorporates assumptions, risk analysis methods, financial models and management techniques that are consistent with, but not necessarily identical to, those utilized within the company's overall risk assessment process while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods;

(C) Incorporates assumptions derived in one of the following ways: (i) The assumption is prescribed in the Valuation Manual; or (ii) for an assumption not prescribed in the Valuation Manual, (I) the assumption is established utilizing the company's available experience, to the extent such experience is relevant and statistically credible, or (II) to the extent company data is not available, relevant or statistically credible, the assumption is established utilizing other relevant and statistically credible experience; and

(D) Provides margins for uncertainty including adverse deviation and estimation error, such that the greater the uncertainty, the larger the margin and resulting reserves.

(3) A company using principle-based valuation for one or more policies or contracts subject to subdivision (2) of subsection (a) of this section shall:

(A) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the Valuation Manual;

(B) Provide to the commissioner and such company's board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. Such controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation and that such valuations are made in accordance with the Valuation Manual. The certification shall be based on the internal controls in place as of the end of the preceding calendar year; and

(C) Develop and file with the commissioner upon request a principle-based valuation report that complies with standards prescribed in the Valuation Manual.

(4) A principle-based valuation may include a prescribed formulaic reserve component.

(n) (1) The provisions of this subsection shall apply to policies and contracts issued on or after the operative date of the Valuation Manual, as set forth in section 38a-78a. The provisions of this subsection shall not apply to a society subject to section 38a-614, unless such society elects to use the standards pursuant to subdivision (9) of subsection (a) of section 38a-614.

(2) A company shall submit mortality, morbidity, policyholder behavior or expense experience and other data as prescribed in the Valuation Manual.

(o) (1) The provisions of sections 38a-77 and 38a-433 shall apply to policies issued by a company before the date of its election to comply with section 38-130e of the general statutes, revision of 1958, revised to 1981, or January 1, 1981, whichever occurred first.

(2) The provisions of section 38-130e of the general statutes, revision of 1958, revised to 1981, shall apply to policies issued by a company on and after the date of such election or on and after January 1, 1981, whichever occurred first, and before October 1, 1981.

(P.A. 78-312, S. 4; P.A. 81-170, S. 2; P.A. 90-243, S. 56; P.A. 91-175, S. 2; P.A. 05-162, S. 2; P.A. 14-195, S. 1; P.A. 17-15, S. 6, 7; P.A. 18-68, S. 1; 18-158, S. 3.)

History: P.A. 81-170 authorized the use of new mortality tables, specified the formula used in calculating the interest rate for determining a company's maximum reserves and provided for the reference interest rate as an average over a specified time period of Moody's Corporate Index; P.A. 90-243 made technical corrections substituting “alien” for “foreign”, “the” for “such”, “foreign” for “nonresident” and amended the method for calculating the reserves on life insurance policies in Subsec. (h); Sec. 38-130e transferred to Sec. 38a-78 in 1991; P.A. 91-175 amended Subsec. (a) to include the phrase “or cause to be valued” to allow the insurance companies to submit to the insurance commissioner an independent evaluation of the reserves, inserted a new Subsec. (b) requiring that every life insurance company annually submit the opinion of a qualified actuary re the computation and adequacy of the reserves, the reserving practices of that particular insurance company and provide a written memorandum to the insurance commissioner, inserted a new Subsec. (c) requiring that the insurance company provide an actuarial opinion to the insurance commissioner which contains a determination of whether the company's reserve and actuarial items which support the policies and contracts are sufficient to meet the company's obligations, relettered former Subsecs. (b) to (f) as (d) to (h) and amended internal references, relettered Subsec. (g) as Subsec. (i), amended all internal references, added a provision re aggregate reserves for all policies, contracts and benefits and added a provision that the adoption of additional reserves determined by a qualified actuary in the rendition of his annual opinion would not heighten the standard of valuation, relettered Subsecs. (h) and (i) as (j) and (k) and amended internal references, added new Subsec. (l) requiring the insurance commissioner to adopt regulations for the minimum standards valuation of health insurance plans and relettered Subsec. (j) as (m) and amended internal references; P.A. 05-162 amended Subsec. (d) to insert new Subdiv. (1)(C) and (1)(D) re the Commissioners' 2001 Standard Ordinary Mortality Table, and redesignate existing Subdiv. (1)(C) as Subdiv. (1)(E), effective July 1, 2005; P.A. 14-195 substantially revised section re ascertainment of reserves for insurance policies and contracts issued prior to and on or after operative date of NAIC Valuation Manual, and made technical and conforming changes, effective June 12, 2014; P.A. 17-15 made technical changes in Subsecs. (d)(2)(A) and (g)(2)(B); P.A. 18-158 amended Subsec. (a)(2)(A) by deleting provision re society subject to Sec. 38a-614; P.A. 18-68 amended Subsec. (b)(4) by substituting “actuary may deem” for “acteem”.

See Secs. 38a-438 to 38a-440, inclusive, re Standard Nonforfeiture Law.

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Sec. 38a-78a. NAIC Valuation Manual. Operative date changes. Requirements. (a)(1) The operative date of the Valuation Manual, as defined in subsection (a) of section 38a-78, shall be January first of the first calendar year following the first July first as of which all of the following have occurred:

(A) The Valuation Manual has been adopted by NAIC, as defined in subsection (a) of section 38a-78, by an affirmative vote of at least forty-two NAIC members or three-quarters of NAIC members voting, whichever is greater;

(B) The Standard Valuation Law, as amended by NAIC in 2009, or legislation including substantially similar terms and provisions has been enacted by states representing greater than seventy-five per cent of the direct written premiums as reported in the following annual statements submitted to NAIC for 2008: Life insurance, accident and health insurance, health insurance or fraternal annual statements; and

(C) The Standard Valuation Law, as amended by NAIC in 2009, or legislation including substantially similar terms and provisions has been enacted by at least forty-two of the following fifty-five jurisdictions: The fifty states of the United States, the District of Columbia, the United States Virgin Islands, the Commonwealth of Puerto Rico, American Samoa and Guam.

(2) After all the events set forth in subdivision (1) of this subsection have occurred, the commissioner shall certify that all such events have occurred and notify companies of such certification and the effective date of the operation of the Valuation Manual.

(b) (1) Unless a later effective date has been specified, a change to the Valuation Manual shall apply on January first of the first calendar year following the date as of which both of the following have occurred:

(A) The change to the Valuation Manual has been adopted by NAIC by an affirmative vote of at least three-quarters of NAIC members voting but not less than a majority of the total NAIC membership; and

(B) The change to the Valuation Manual has been adopted by NAIC members representing jurisdictions totaling greater than seventy-five per cent of the direct written premiums, as reported in the most recent annual statements submitted to NAIC prior to the vote in subparagraph (A) of this subdivision, for the following: Life insurance, accident and health insurance, health insurance or fraternal annual statements.

(2) After both events set forth in subdivision (1) of this subsection have occurred, the commissioner shall certify that both such events have occurred and notify companies of such certification, the change to the Valuation Manual and the effective date of such change.

(A) The minimum valuation standards for policies or contracts subject to subparagraph (C) of subdivision (2) of subsection (a) of section 38a-78 as follows: (i) For life insurance contracts, other than annuity contracts, the commissioners' reserve valuation method, and (ii) for annuity contracts, the commissioners' annuity reserve valuation method. The Valuation Manual shall specify minimum reserves for all other policies or contracts subject to subparagraph (C) of subdivision (2) of subsection (a) of section 38a-78;

(B) The specific policies or contracts or types of policies or contracts subject to this section that are required to establish reserves using a principle-based valuation as set forth in subdivision (2) of subsection (m) of section 38a-78 and the minimum valuation standards consistent with such requirements;

(C) For policies or contracts subject to a principle-based valuation, (i) requirements for the format of reports submitted to the commissioner pursuant to subparagraph (C) of subdivision (3) of subsection (m) of section 38a-78, including the information deemed necessary to determine if the valuation is appropriate and in compliance with this section, (ii) the assumptions prescribed for risks over which the company does not have significant control or influence, and (iii) the procedures for the corporate governance and oversight of the actuarial function and a process for appropriate waiver or modification of such procedures;

(D) For policies or contracts not subject to a principle-based valuation, the minimum valuation standard, which shall (i) be consistent with the minimum valuation standard in effect prior to the operative date of the Valuation Manual, or (ii) develop reserves that quantify the benefits, guarantees and funding associated with the policies or contracts and their risks, at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring;

(E) Other requirements including, but not limited to, reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosures, certifications, reports, actuarial opinions and memoranda, transition rules and internal controls; and

(F) The data a company is required to submit under subdivision (5) of subsection (m) of section 38a-78, the form of such data and to whom such data shall be submitted and other information that may be required, including data analyses and reporting of such analyses.

(2) (A) In the absence of a specific valuation requirement or if a specific valuation requirement in the Valuation Manual is not, in the opinion of the commissioner, in compliance with this subsection or subsection (m) of section 38a-78 with respect to such requirement, the commissioner shall direct a company to comply with the minimum valuation standards prescribed by regulations adopted in accordance with the provisions of chapter 54.

(B) The commissioner may engage the services by employment or by contract of a qualified actuary, at a company's expense, to perform an actuarial examination of the company and provide an opinion on the appropriateness of any reserve assumption or method used by the company or to review and provide an opinion on the company's compliance with any requirement set forth in this subsection, subdivision (2) of subsection (a) of section 38a-78 or subsection (c), (m) or (n) of section 38a-78. The commissioner may rely on the opinion, regarding requirements set forth in this subsection, subdivision (2) of subsection (a) of section 38a-78 or subsection (c), (m) or (n) of section 38a-78, of a qualified actuary engaged by the insurance regulatory official of another state, district or territory of the United States.

(C) The commissioner may require a company to change any assumption or method that the commissioner deems necessary to comply with the requirements of this subsection, subdivision (2) of subsection (a) of section 38a-78 or subsection (c), (m) or (n) of section 38a-78 or the Valuation Manual, and the company shall adjust its reserves as required by the commissioner.

(P.A. 14-195, S. 2.)

History: P.A. 14-195 effective June 12, 2014.

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Sec. 38a-79. (Formerly Sec. 38-26). Valuation of securities. Section 38a-79 is repealed.

(1949 Rev., S. 6084; P.A. 90-243, S. 10; P.A. 94-39, S. 10.)

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Sec. 38a-79a. Short title: Standard Valuation Law. Sections 38a-77, 38a-78 and 38a-78a shall be known as the “Standard Valuation Law”.

(P.A. 91-175, S. 1; P.A. 14-195, S. 4.)

History: P.A. 14-195 added reference to Sec. 38a-78a, effective June 12, 2014.

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Sec. 38a-80. (Formerly Sec. 38-164). Premium reserve for health, accident and liability business. Each domestic, foreign and alien insurance company which, in this state, makes insurance upon the health of individuals or which, in this state, insures persons against bodily injury or death by accident, or any person, firm or corporation against loss or damage on account of the bodily injury or death by accident of any person for which loss or damage such person, firm or corporation is responsible, shall maintain a premium reserve on all such policies in force, whether issued in this state or elsewhere, calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

(1949 Rev., S. 6176; P.A. 90-243, S. 67; P.A. 00-30, S. 5, 14.)

History: P.A. 90-243 substituted “foreign” for “nonresident” and “alien” for “foreign” insurance companies; Sec. 38-164 transferred to Sec. 38a-80 in 1991; P.A. 00-30 substituted “calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions” for “equal to the unearned portion of the gross premiums charged for covering the risks”, effective January 1, 2001.

See Secs. 38a-199 to 38a-209, inclusive, re hospital service corporations.

See Secs. 38a-214 to 38a-225, inclusive, re medical service corporations.

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Sec. 38a-81. (Formerly Sec. 38-132). Sale of property taken for debts. In any case in which any domestic life insurance company has legally acquired, in payment of a debt previously contracted, any property, real or personal, situated in this state or elsewhere, such company may, upon the sale of such property, take in payment or part payment thereof the stocks or bonds of any company or corporation purchasing such property.

(1949 Rev., S. 6152.)

History: Sec. 38-132 transferred to Sec. 38a-81 in 1991.

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Sec. 38a-82. (Formerly Sec. 38-133). Improvement of real estate. Domestic life insurance companies may improve any real estate obtained in conformity to law whether such estate is situated in this or any other state.

(1949 Rev., S. 6153.)

History: Sec. 38-133 transferred to Sec. 38a-82 in 1991.

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Sec. 38a-83. (Formerly Sec. 38-43). Securities required by other states deposited with State Treasurer. (a) When any state requires insurance companies of other states to deposit with some officer of such other state securities in trust for policyholders of the companies as a prerequisite to their transacting business in that state, the Treasurer of this state may receive on deposit from any domestic insurance company the securities required by the laws of that other state. The legal title to the securities shall be transferred to the Treasurer in trust for the policyholders of the insurance company, and the Treasurer shall hold the securities in trust for the policyholders. The insurance company may collect and receive the interest and dividends on the securities and may withdraw the securities on depositing with the Treasurer other securities of like character and par value. The Treasurer shall issue a certificate, under seal, of any such deposit for each state which requires such a certificate, which shall state the items and the par value of securities deposited. The Treasurer shall charge a fee of thirty-five dollars to the insurance company for each certificate so issued.

(b) Any insurance company which has deposited securities with the State Treasurer, has caused all of its unexpired policies to be paid, cancelled or reinsured, and all of its liabilities under such policies to be extinguished or to be assumed by some other responsible company having a similar deposit with the treasurer or with the proper officer of some other state, or has subsequently made a similar deposit of the sum required with the proper officer of some other state, may apply to the Treasurer for a return of such deposited securities. The Treasurer, on receipt of an application from the company, verified by the oath of its president or secretary, and on being satisfied by an examination of the company's books, and of its officers under oath, that all of the company's policies are so paid, cancelled, extinguished or reinsured, or that such subsequent deposit was duly made and has not since been withdrawn, as evidenced by a certificate from the proper officer of such other state, shall deliver such securities to the company.

(1949 Rev., S. 6046; P.A. 74-32, S. 1; P.A. 90-243, S. 16; P.A. 91-68, S. 2.)

History: P.A. 74-32 rephrased certificate provisions re par value to delete reference to market value and treasurer's statement that he is satisfied market value is accurately represented; P.A. 90-243 divided section into Subsecs. and authorized state treasurer to receive, on deposit, legal title to securities required to be collected by the laws of other states as a prerequisite of doing business in that state, to hold the securities in trust for the policyholders and to return all deposited securities once all obligations have been met; Sec. 38-43 transferred to Sec. 38a-83 in 1991; P.A. 91-68 imposed a $35 fee for each certificate.

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Sec. 38a-84. (Formerly Sec. 38-47). Securities to be delivered to receiver. Whenever a receiver is appointed in this state of any insurance company which has deposited securities with the State Treasurer in trust for the policyholders of such company, the court to which such receiver is accountable shall, after finding that such receiver has qualified, authorize such receiver to receive the securities so deposited; and the State Treasurer, when tendered by such receiver a certified copy of the order authorizing such receiver to receive such securities, shall transfer and deliver such securities to such receiver; and such receiver shall administer the trust fund invested in such securities for the benefit of the policyholders of such company under the orders of the court to which such receiver is accountable.

(1949 Rev., S. 6050.)

History: Sec. 38-47 transferred to Sec. 38a-84 in 1991.

Annotation to former section 38-47:

Disposition of income received after securities delivered to receiver. 78 C. 442.

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Sec. 38a-85. Credit allowed a domestic ceding insurer. Filing of annual reports, certifications and financial statements. Assuming insurers and reciprocal jurisdictions. Suspension or revocation of accreditation or certification. Proportionality and diversification of reinsurance recoverables and program. (a)(1) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of:

(A) Subsection (b) of this section;

(B) Subsection (c) of this section;

(D) Subsections (e), (h) and (i) of this section;

(E) Subsections (f) and (i) of this section;

(F) Subsection (g) of this section;

(G) Subsection (h) of this section; or

(H) Any regulation adopted pursuant to subsection (b) of section 38a-88.

(2) Credit shall be allowed under subsection (b), (c) or (d) of this section only as respects cessions of those kinds or classes of business which the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile, or, in the case of a United States branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under subsection (d) or (e) of this section only if the applicable requirements of subsection (i) of this section have been satisfied.

(b) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this state.

(c) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited by the commissioner as a reinsurer in this state. To be eligible for accreditation, an insurer shall (A) file with the commissioner evidence of its submission to this state's jurisdiction, (B) submit to this state's authority to examine its books and records, (C) be licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state, (D) file annually with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement, and (E) demonstrate to the satisfaction of the commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from a domestic insurer. An assuming insurer shall be deemed to meet the requirements of this subparagraph if it maintains a surplus with regard to policyholders of not less than twenty million dollars at the time of accreditation and its accreditation has not been denied by the commissioner within ninety days after the date the insurer submitted its application.

(2) Each accredited reinsurer doing business in this state shall, annually, on or before the first day of March, submit to the commissioner, by electronically filing with the National Association of Insurance Commissioners, a true and complete report, signed and sworn to by its president or a vice president, and secretary or an assistant secretary, of its financial condition on the thirty-first day of December next preceding, prepared in accordance with the National Association of Insurance Commissioners annual statement instructions handbook and following those accounting procedures and practices prescribed by the National Association of Insurance Commissioners accounting practices and procedures manual, subject to any deviations in form and detail as may be prescribed by the commissioner. An electronically filed report in accordance with section 38a-53a that is timely submitted to the National Association of Insurance Commissioners shall be deemed to have been submitted to the commissioner in accordance with this subdivision.

(d) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled and licensed in, or in the case of a United States branch of an alien assuming insurer is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable in this state and the assuming insurer or United States branch of an alien assuming insurer (1) maintains a surplus with regard to policyholders in an amount not less than twenty million dollars, and (2) submits to the authority of this state to examine its books and records. The requirement of subdivision (1) of this subsection shall not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.

(e) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust that complies with the requirements of subdivisions (2) and (3) of this subsection in a qualified United States financial institution, as defined in section 38a-87, for the payment of the valid claims of its United States policyholders and ceding insurers, and their assigns and successors in interest. The assuming insurer shall (A) report annually to the commissioner information substantially the same as that required to be reported in the National Association of Insurance Commissioners' Annual Statement form by licensed insurers, to enable the commissioner to determine the sufficiency of the trust fund, and (B) submit to, and pay the expenses of, examination of its books and records by the commissioner.

(2) (A) No credit for reinsurance shall be allowed under subdivision (1) of this subsection unless:

(i) The form of the trust and any amendments to the trust have been approved by (I) the insurance regulatory official of the state of domicile of the trust, or (II) the insurance regulatory official of another state who has, pursuant to the terms of the trust instrument, accepted principal regulatory oversight of the trust;

(ii) The form of the trust and any amendments to the trust have been filed with the insurance regulatory officials of each state in which ceding insurer beneficiaries of the trust are domiciled; and

(iii) The trust instrument (I) provides that a contested claim shall be valid and enforceable upon the entry of a final order of a court of competent jurisdiction in the United States, and (II) vests legal title to its assets in its trustees for the benefit of the assuming insurer's domestic and foreign policyholders and ceding insurers, and their assigns and successors in interest.

(B) (i) The trust shall be subject to examination by the commissioner and shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust.

(ii) Not later than March first, annually, the trustee of the trust shall (I) report to the commissioner, in writing, the balance and a list of the investments of the trust at the end of the preceding calendar year, and (II) certify to the commissioner the date of termination of the trust, if so planned, or that the trust will not expire prior to the following December thirty-first.

(3) (A) (i) In the case of a single assuming insurer, the trust shall consist of a trusteed account with funds in an amount not less than the assuming insurer's liabilities attributable to reinsurance ceded by domestic and foreign ceding insurers and, unless otherwise provided in subparagraph (A)(ii) of this subdivision, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars.

(ii) (I) The insurance regulatory official with principal oversight of the trust may authorize a reduction in the required trusteed surplus.

(II) For a trust over which the commissioner has principal regulatory oversight, at any time after the assuming insurer has permanently discontinued for at least three full years underwriting new business secured by the trust, the commissioner may authorize a reduction in the required trusteed surplus. Such reduction shall be made only after the commissioner finds, based on a risk assessment, that the reduced surplus level is adequate to protect domestic and foreign policyholders and ceding insurers and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including, when applicable, the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. The minimum required surplus shall not be reduced to an amount less than thirty per cent of the assuming insurer's liabilities attributable to reinsurance ceded by domestic and foreign ceding insurers covered by the trust.

(B) In the case of an assuming insurer that is a group including incorporated and individual unincorporated underwriters:

(i) (I) For reinsurance ceded under a reinsurance agreement with an inception date prior to January 1, 1993, and not amended or renewed after said date, the trust shall consist of a trusteed account with funds in an amount not less than such underwriters' several insurance and reinsurance liabilities attributable to business written in the United States; or

(II) For reinsurance ceded under a reinsurance agreement with an inception date on or after January 1, 1993, the trust shall consist of a trusteed account with funds in an amount not less than such underwriters' several liabilities attributable to business ceded by domestic and foreign ceding insurers to any underwriter who is a member of the group;

(ii) In addition to a trust specified in subparagraph (B)(i)(I) or (B)(i)(II) of this subdivision, the group shall maintain, for all years of account, a trusteed surplus of which one hundred million dollars shall be held jointly for the benefit of domestic and foreign ceding insurers of any member of the group;

(iii) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and solvency control by the group's domiciliary insurance regulatory official as are the unincorporated members; and

(iv) Not later than ninety days after its financial statements are due to be filed with the group's domiciliary insurance regulatory official, the group shall provide to the commissioner an annual certification by the group's domiciliary insurance regulatory official of the solvency of each underwriter who is a member of the group or, if such certification is not provided by the group's domiciliary insurance regulatory official, financial statements prepared by independent public accountants of each such underwriter.

(i) The group shall be accredited and have continuously transacted an insurance business outside the United States for at least three years immediately prior to applying for accreditation;

(ii) The trust shall consist of a trusteed account with funds in an amount not less than such underwriters' several liabilities attributable to business ceded by domestic and foreign ceding insurers pursuant to a reinsurance contract issued in the name of the group to any underwriter who is a member of the group;

(iii) In addition to such trust, the group shall maintain (I) an aggregate policyholders' surplus of not less than ten billion dollars, and (II) a joint trusteed surplus of which one hundred million dollars shall be held jointly for the benefit of domestic and foreign ceding insurers of any member of the group as additional security for these liabilities; and

(iv) Not later than ninety days after its financial statements are due to be filed with the group's domiciliary insurance regulatory official, the group shall make available to the commissioner an annual certification by the group's domiciliary insurance regulatory official of the solvency of each underwriter who is a member of the group and financial statements prepared by independent public accountants of each such underwriter.

(f) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is certified in accordance with section 38a-85a by the commissioner as a reinsurer in this state and such certified reinsurer maintains security in a form and amounts set forth in subdivision (3) of subsection (e) of this section or, for a multibeneficiary trust set forth in subdivision (2) of subsection (e) of section 38a-85a, in accordance with the provisions of subdivision (2) of subsection (e) of section 38a-85a.

(2) If the security is not sufficient with respect to obligations incurred by a certified reinsurer, the commissioner shall reduce the credit allowed by an amount proportionate to the deficiency and may impose further reductions in the credit allowed if the commissioner finds there is a material risk that such obligations will not be paid in full when due.

(g) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the conditions set forth below:

(A) The assuming insurer shall have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. A “reciprocal jurisdiction” is a jurisdiction that meets one of the following:

(i) A non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and the European Union, is a member state of the European Union. For purposes of this subsection, a “covered agreement” is an agreement entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 USC Sections 313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance;

(ii) A United States jurisdiction that meets the requirements for accreditation under the National Association of Insurance Commissioners' financial standards and accreditation program; or

(iii) A qualified jurisdiction, as determined by the commissioner pursuant to subsection (c) of section 38a-85a, which is not otherwise described in subparagraph (A)(i) or (A)(ii) of this subdivision and which meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner in regulations adopted in accordance with the provisions of chapter 54.

(B) The assuming insurer shall have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth in regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to be set forth in regulation.

(C) The assuming insurer shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, which will be set forth in regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.

(D) The assuming insurer shall agree and provide adequate assurance to the commissioner, in a form specified by the commissioner pursuant to regulation, as follows:

(i) The assuming insurer shall provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subparagraph (B) or (C) of this subdivision, or if any regulatory action is taken against it for serious noncompliance with applicable law;

(ii) The assuming insurer shall consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may require that consent for service of process be provided to the commissioner and included in each reinsurance agreement. Nothing in this provision shall limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws;

(iii) The assuming insurer shall consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained;

(iv) Each reinsurance agreement shall include a provision requiring the assuming insurer to provide security in an amount equal to one hundred per cent of the assuming insurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate; and

(v) The assuming insurer shall confirm that it is not presently participating in any solvent scheme of arrangement that involves this state's ceding insurers, and agree to notify the ceding insurer and the commissioner and to provide security in an amount equal to one hundred per cent of the assuming insurer's liabilities to the ceding insurer, should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of subsection (f) of this section and sections 38a-85a and 38a-86 and as specified in regulations adopted by the commissioner in accordance with the provisions of chapter 54.

(E) The assuming insurer or its legal successor shall provide, if requested by the commissioner, on behalf of itself and any legal predecessors, certain documentation to the commissioner, as specified by the commissioner in regulation.

(F) The assuming insurer shall maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set forth in regulation.

(G) The assuming insurer's supervisory authority shall confirm to the commissioner on an annual basis, as of the preceding December thirty-first or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subparagraphs (B) and (C) of this subdivision.

(H) Nothing in this provision precludes an assuming insurer from providing the commissioner with information on a voluntary basis.

(2) The commissioner shall timely create and publish a list of reciprocal jurisdictions.

(A) A list of reciprocal jurisdictions is published through the National Association of Insurance Commissioners' committee process. The commissioner's list shall include any reciprocal jurisdiction as defined under subparagraphs (A)(i) and (A)(ii) of subdivision (1) of this subsection, and shall consider any other reciprocal jurisdiction included on the National Association of Insurance Commissioners' list. The commissioner may approve a jurisdiction that does not appear on the National Association of Insurance Commissioners' list of reciprocal jurisdictions in accordance with criteria to be developed under regulations adopted by the commissioner in accordance with the provisions of chapter 54.

(B) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set forth in regulations adopted by the commissioner pursuant to chapter 54, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined under subparagraphs (A)(i) and (A)(ii) of subdivision (1) of this subsection. Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this section and sections 38a-85a to 38a-88, inclusive.

(3) The commissioner shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this subsection and to which cessions shall be granted credit in accordance with this subsection. The commissioner may add an assuming insurer to such list if a National Association of Insurance Commissioners accredited jurisdiction has added such assuming insurer to a list of such assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the commissioner as required under subparagraph (D) of subdivision (1) of this subsection and complies with any additional requirements that the commissioner may impose by regulation, except to the extent that they conflict with an applicable covered agreement.

(4) If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subsection, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection in accordance with procedures set forth in regulation.

(A) While an assuming insurer's eligibility is suspended, no reinsurance agreement issued, amended or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer's obligations under the contract are secured in accordance with section 38a-86.

(B) If an assuming insurer's eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer's obligations under the contract are secured in a form acceptable to the commissioner and consistent with the provisions of section 38a-86.

(5) If subject to a legal process of rehabilitation, liquidation or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.

(6) Nothing in this subsection shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this section and sections 38a-85a to 38a-88, inclusive, or other applicable law or regulation.

(7) Credit may be taken under this subsection only for reinsurance agreements entered into, amended or renewed on or after October 1, 2021, and only with respect to losses incurred and reserves reported on or after the later of the date on which the assuming insurer has met all eligibility requirements pursuant to subdivision (1) of this subsection, and the effective date of the new reinsurance agreement, amendment or renewal.

(A) This subsection does not alter or impair a ceding insurer's right to take credit for reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance qualifies for credit under any other applicable provision of this section or sections 38a-85a to 38a-88, inclusive.

(B) Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.

(C) Nothing in this subsection shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.

(h) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subsection (b), (c), (d), (e), (f) or (g) of this section but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction.

(i) If the assuming insurer is not licensed, accredited or certified to transact insurance or reinsurance in this state, the credit permitted by subsection (d) or (e) of this section shall not be allowed unless the assuming insurer agrees (1) that in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall (A) submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, (B) comply with all requirements necessary to give such court jurisdiction, and (C) abide by the final decision of such court or any appellate court in the event of an appeal, and (2) to designate the commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding company. This provision is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement.

(j) If the assuming insurer does not meet the requirements of subsection (b), (c), (d) or (g) of this section, the credit permitted by subsection (e) or (f) of this section shall not be allowed unless the assuming insurer agrees to the following conditions in the trust instrument:

(1) Notwithstanding any provision of the trust instrument, if the trust contains an amount less than the amount required under subdivision (3) of subsection (e) of this section or if the grantor of the trust has been declared insolvent or placed in receivership, rehabilitation, liquidation or a similar proceeding under the laws of its state or country of domicile, the trustee shall comply with an order of the insurance regulatory official with principal regulatory oversight of the trust or with an order of a court of competent jurisdiction that directs the trustee to transfer all trust assets to the insurance regulatory official with principal regulatory oversight of the trust;

(2) The trust assets shall be distributed by and claims filed with and valued by the insurance regulatory official with principal regulatory oversight of the trust in accordance with the laws of the trust's state of domicile that are applicable to the liquidation of domestic insurance companies;

(3) The trustee shall distribute any trust assets or part thereof that are returned by the insurance regulatory official with principal regulatory oversight of the trust, based on such regulatory official's determination that such assets or part thereof are not necessary to satisfy the claims of domestic and foreign ceding insurers of the grantor of the trust, in accordance with the trust instrument; and

(4) The grantor of the trust waives any right otherwise available to the grantor under law that is inconsistent with subdivisions (1) to (3), inclusive, of this subsection.

(k) (1) (A) The commissioner may suspend or revoke a reinsurer's accreditation or certification if, after notice and hearing, the commissioner finds such reinsurer no longer meets the requirements for accreditation or certification.

(B) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, as set forth in section 38a-85a, the commissioner may suspend the reinsurer's certification indefinitely, in lieu of revocation.

(2) The commissioner may suspend or revoke a reinsurer's accreditation or certification without notice and a hearing if:

(A) The reinsurer waives its right to a hearing;

(B) The commissioner's action is based on (i) regulatory action taken by a regulatory official of the reinsurer's state of domicile, or (ii) the voluntary surrender or termination of the reinsurer's eligibility to transact the business of insurance or reinsurance in its state of domicile or its primary certifying jurisdiction as described in subdivision (2) of subsection (a) of section 38a-85a; or

(C) The commissioner finds that immediate action is required to protect the public and a court of competent jurisdiction has not stayed the commissioner's action.

(3) (A) While a reinsurer's accreditation or certification is suspended, no credit shall be allowed under this section for a reinsurance contract issued or renewed by the reinsurer on or after the effective date of such suspension, except to the extent that such reinsurer's obligations under such contract are secured in accordance with the provisions of section 38a-86.

(B) If a reinsurer's accreditation or certification is revoked, no credit shall be allowed under this section on and after the effective date of such revocation, except to the extent that such reinsurer's obligations under such contract are secured in accordance with the provisions of subsection (e) of section 38a-85a or section 38a-86.

(4) A reinsurer whose certification has been suspended, revoked or voluntarily surrendered or is inactive shall be treated as a certified reinsurer required to secure one hundred per cent of its obligations, except that this requirement shall not apply to a reinsurer whose certification has been suspended or is inactive if the commissioner continues to assign a high rating to such reinsurer pursuant to section 38a-85a.

(5) Any person aggrieved by the action of the commissioner in revoking or suspending an accreditation or a certification may appeal therefrom in accordance with the provisions of section 38a-19.

(l) (1) A domestic ceding insurer shall manage its reinsurance recoverables in proportion to its own book of business. Such insurer shall notify the commissioner not later than thirty days after (A) reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers exceed fifty per cent of the domestic ceding insurer's last reported surplus to policyholders, or (B) the domestic ceding insurer determines that reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers are likely to exceed such limit. Any such notice shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

(2) A ceding insurer shall manage its reinsurance program to ensure diversification. A domestic ceding insurer shall notify the commissioner not later than thirty days after (A) it has ceded to any single assuming insurer or group of affiliated assuming insurers more than twenty per cent of the domestic ceding insurer's gross written premiums in the prior calendar year, or (B) the domestic ceding insurer determines that the reinsurance ceded to any single assuming insurer or group of affiliated assuming insurers is likely to exceed such limit. Any such notice shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

(P.A. 90-41, S. 1, 6; P.A. 94-19; P.A. 08-147, S. 1; P.A. 12-139, S. 1; P.A. 15-144, S. 4; P.A. 17-59, S. 1; P.A. 21-157, S. 6.)

History: P.A. 94-19 added a reference in Subsec. (e)(1) to “incorporated groups” of underwriters and a requirement that incorporated members of the group not be engaged in any business other than underwriting and subjecting such group to the same level of solvency regulation and control as is exercised on unincorporated members; P.A. 08-147 designated existing provisions in Subsec. (c) as Subsec. (c)(1) and made conforming changes therein, added Subsec. (c)(2) re accredited reinsurers electronically filing a true and complete financial report, and added Subsec. (e)(4) re assuming insurers electronically filing with National Association of Insurance Commissioners, and filing of paper copy with commissioner, a true and complete financial report; P.A. 12-139 amended Subsec. (c)(1) to add Subpara. (E) re demonstration of financial capacity and add provision re assuming insurer's maintenance of a surplus, deleted former Subsec. (e)(2) to (4) and substantially revised existing Subsec. (e)(1) provisions re trust requirements as Subsec. (e)(1) to (3), added new Subsec. (f) re reinsurance ceded to a certified insurer, redesignated existing Subsecs. (f) and (g) as Subsecs. (g) and (h), added Subsec. (i) re trust instrument conditions, added Subsec. (j) re suspension or revocation of accreditation or certification, added Subsec. (k) re management of reinsurance recoverables and programs, and made technical and conforming changes; P.A. 15-144 amended Subsec. (e)(3) by redesignating existing Subpara. (A)(ii) as Subpara. (A)(ii)(II) and adding Subpara. (A)(ii)(I) re authorization of reduction in required trusteed surplus by insurance regulatory official with principal oversight of trust, effective July 1, 2015; P.A. 17-59 amended Subsec. (a) by adding Subdiv. (7) re regulations adopted pursuant to Sec. 38a-88(b) and making technical changes; P.A. 21-157 amended Subsec. (a) by designating existing provisions as Subdiv. (1), redesignating existing Subdivs. (1) to (6) as Subparas. (A) to (F), adding Subdiv. (1)(G), redesignating former Subdiv. (7) as Subpara. (H) and adding new Subdiv. (2) re when credit is allowed, added new Subsec. (g) re when credit is allowed for reinsurance ceded to an assuming insurer, lists of reciprocal jurisdictions and assuming insurers, revocation or suspension of eligibility of assuming insurers, orders requiring posting of security for outstanding ceded liabilities and scope of Subsec., redesignated existing Subsecs. (g) to (k) as Subsecs. (h) to (l), and made technical and conforming changes.

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Sec. 38a-85a. Certification as a reinsurer. Regulations. (a)(1) To be eligible for certification by the commissioner as a reinsurer in this state for the purposes of section 38a-85, an assuming insurer shall:

(A) Be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as set forth in subsection (c) of this section;

(B) Maintain minimum capital and minimum surplus requirements or their equivalent in an amount prescribed by the commissioner pursuant to regulations adopted in accordance with the provisions of chapter 54;

(C) Maintain financial strength ratings from two or more rating agencies that are deemed acceptable by the commissioner pursuant to regulations adopted in accordance with the provisions of chapter 54;

(D) Agree to submit to the jurisdiction of this state and appoint the commissioner as its agent for service of process in this state;

(E) Agree to provide security for one hundred per cent of such insurer's liabilities attributable to reinsurance ceded by domestic and foreign ceding insurers if the assuming insurer resists enforcement of a final judgment entered by a court in this or another state;

(F) Agree in the trust instrument, if the assuming insurer chooses to secure its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer in the form of a multibeneficiary trust, as set forth in subdivision (2) of subsection (e) of this section, that such assuming insurer shall, upon termination of any trust account of such trust, fund any deficiency of any other trust account of such trust out of the remaining surplus of the trust;

(G) Agree to meet applicable filing requirements as prescribed by the commissioner; and

(H) Comply with any other requirements deemed necessary for certification by the commissioner.

(2) If an applicant for certification has been certified as a reinsurer in a jurisdiction accredited by the National Association of Insurance Commissioners, the commissioner may certify such applicant as a certified reinsurer in this state and may accept the rating assigned to such certified reinsurer by such jurisdiction.

(b) In the case of an assuming insurer that is a group including incorporated and individual unincorporated underwriters, in addition to the requirements of subsection (a) of this section:

(1) Such group shall comply with the minimum capital and minimum surplus requirements under subsection (a) of this section through the capital and surplus equivalents, less current liabilities, of the group and its members. Such equivalents shall include a joint central fund in an amount determined by the commissioner to provide adequate financial protection for unsatisfied obligations of the group or any of its members;

(2) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the group's domiciliary insurance regulatory official as the unincorporated members; and

(3) Not later than ninety days after its financial statements are due to be filed with the group's domiciliary insurance regulatory official, the group shall provide to the commissioner an annual certification by the group's domiciliary insurance regulatory official of the solvency of each underwriter who is a member of the group or, if such certification is not provided by the group's domiciliary insurance regulatory official, financial statements prepared by independent public accountants of each such underwriter.

(c) The commissioner shall publish a list of qualified jurisdictions from which an assuming insurer, domiciled and licensed to transact insurance or reinsurance in such jurisdiction, shall be eligible for certification as a reinsurer in this state.

(1) In determining such list, the commissioner shall consider the list of qualified jurisdictions published by the National Association of Insurance Commissioners. Any state that meets the requirements for accreditation under the National Association of Insurance Commissioners' financial standards and accreditation program shall be recognized as a qualified jurisdiction.

(2) If the commissioner qualifies a jurisdiction that is not included in the National Association of Insurance Commissioners' list, the commissioner shall publish documented justification for such qualification. The commissioner shall adopt regulations, in accordance with the provisions of chapter 54, to establish criteria to justify a qualification.

(3) To determine if the domiciliary jurisdiction of an alien assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall (A) evaluate initially and on an ongoing basis the appropriateness and effectiveness of such domiciliary jurisdiction's reinsurance regulatory system, and (B) consider (i) the rights, benefits and extent of reciprocity afforded by such domiciliary jurisdiction to domestic and foreign reinsurers, including whether such domiciliary jurisdiction has agreed to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled in such jurisdiction, and (ii) any other factors deemed relevant by the commissioner. The commissioner shall not recognize a domiciliary jurisdiction of an alien assuming insurer as a qualified jurisdiction if the commissioner determines that such domiciliary jurisdiction does not adequately and promptly enforce final United States judgments or United States arbitration awards.

(d) After giving due consideration to the financial strength ratings assigned by rating agencies deemed acceptable to the commissioner, the commissioner shall assign a rating to each certified reinsurer and shall publish a list of certified reinsurers and their ratings. The commissioner shall adopt regulations, in accordance with chapter 54, to establish the acceptable rating agencies, the methodology of the commissioner's rating system and the levels of security required for each such rating.

(e) (1) A certified reinsurer shall secure obligations assumed from domestic and foreign ceding insurers at a level consistent with its rating, in accordance with regulations adopted pursuant to subsection (d) of this section.

(2) (A) If a certified reinsurer chooses to secure its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer in the form of a multibeneficiary trust, such reinsurer shall maintain separate trust accounts for (i) such obligations incurred, with reduced security as permitted under this subdivision or comparable laws of other states, and (ii) its obligations subject to subsection (e) of section 38a-85.

(B) The minimum trusteed surplus requirements set forth in subsection (e) of section 38a-85 shall not apply to a multibeneficiary trust established pursuant to this subdivision. Such multibeneficiary trust shall maintain a trusteed surplus of not less than ten million dollars.

(f) If a certified reinsurer ceases to assume new business in this state, such reinsurer may file a request with the commissioner to maintain its certification in inactive status to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this section. The commissioner shall assign a new rating to such inactive certified reinsurer that takes into account the reasons, if relevant, why the reinsurer is not assuming new business.

(P.A. 12-139, S. 2.)

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Sec. 38a-86. Reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer. Regulations. (a) A credit for an asset or a reduction in liability shall be allowed for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of section 38a-85, in an amount not exceeding the liabilities carried by the ceding insurer. Such credit or reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations thereunder, if such security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified United States financial institution, as defined in section 38a-87. Such security may be in the form of (1) cash, (2) securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, including those deemed exempt from filing by the Purposes and Procedures Manual of said office, and qualifying as admitted assets, (3) clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified institution, that is effective not later than December thirty-first of the year for which filing is being made, and in the possession of or in trust for the ceding insurer on or before the filing date of its annual statement, provided letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs. As used in this subdivision, “qualified institution” means an institution that (A) is organized or, in the case of a United States office of a foreign banking organization, licensed, under the laws of the United States or any state thereof, (B) is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies, and (C) has been determined by the commissioner or the Securities Valuation Office of the National Association of Insurance Commissioners to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner, or (4) any other form of security acceptable to the commissioner.

(b) The commissioner may adopt regulations in accordance with the provisions of chapter 54 to establish additional requirements for credit for an asset or a reduction in liability that are consistent with the requirements established in section 38a-88.

(P.A. 90-41, S. 2, 6; P.A. 12-139, S. 3; P.A. 17-59, S. 2.)

History: P.A. 12-139 added provision re credit for an asset to be allowed for reinsurance ceded by a domestic insurer, amended Subdiv. (2) to add provision re securities deemed exempt from filing by Purposes and Procedures Manual, amended Subdiv. (3) to include letters of credit that are in trust for the ceding insurer as a form of security and add definition of “qualified institution”, and made technical and conforming changes; P.A. 17-59 designated existing provisions re credit for asset or reduction in liability as Subsec. (a) and added Subsec. (b) re adoption of regulations.

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Sec. 38a-87. Qualified United States financial institutions. For purposes of those provisions of sections 38a-85 to 38a-89, inclusive, specifying those institutions that are eligible to act as a fiduciary of a trust, “qualified United States financial institution” means an institution that (1) is organized or, in the case of a United States branch or agency office of a foreign banking organization, licensed, under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers and (2) is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.

(P.A. 90-41, S. 3, 6; P.A. 12-139, S. 6.)

History: P.A. 12-139 deleted former Subsec. (a) re definition of “qualified United States financial institution” for purposes of Sec. 38a-86(3), deleted Subsec. (b) designator and made a technical change.

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Sec. 38a-88. Regulations. (a) The commissioner shall adopt regulations in accordance with the provisions of chapter 54 to implement the provisions of sections 38a-85 to 38a-89, inclusive.

(b) (1) The commissioner may adopt regulations in accordance with the provisions of chapter 54 to establish, in addition to the requirements of sections 38a-85 and 38a-86, requirements relating to or setting forth (A) the valuation of assets or reserve credits, (B) the circumstances under which credit will be reduced or eliminated, and (C) the amounts and forms of security supporting reinsurance agreements relating to (i) life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits, (ii) universal life insurance policies with provisions that permit a policyholder to keep such policy in force over a secondary guarantee period, (iii) variable annuities with guaranteed death or living benefits, (iv) long-term care insurance policies, or (v) any other life insurance, health insurance or annuity products for which the National Association of Insurance Commissioners adopts model regulatory credit for reinsurance requirements.

(2) Any regulation adopted pursuant to subdivision (1) of this subsection that relates to policies described in subparagraph (C)(i) or (C)(ii) of subdivision (1) of this subsection may apply to reinsurance agreements that include such policies issued on or after January 1, 2015, and such policies issued prior to January 1, 2015, if risk pertaining to such policies is ceded, in whole or in part, in connection with such agreement on or after January 1, 2015.

(3) Any regulations adopted pursuant to subdivision (1) of this subsection may require the ceding insurer, in calculating the amounts or forms of security supporting reinsurance agreements, to use the Valuation Manual, as defined in section 38a-78, in effect on the date such calculation is made, to the extent applicable.

(4) Any regulation adopted pursuant to this subsection shall not apply to cessions to an assuming insurer that (A) meets the conditions set forth in subsection (g) of section 38a-85, (B) is certified as a reinsurer in accordance with the provisions of section 38a-85a, or (C) maintains at least two hundred fifty million dollars in capital and surplus, determined in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, including all amendments adopted by the National Association of Insurance Commissioners and excluding the impact of any permitted or prescribed practices, and (i) is licensed in at least twenty-six states, or (ii) is licensed in at least ten states and licensed or accredited in a total of at least thirty-five states.

(5) The authority to adopt regulations pursuant to this subsection does not limit the commissioner's general authority to adopt regulations pursuant to subsection (a) of this section.

(P.A. 90-41, S. 4, 6; P.A. 17-59, S. 3; P.A. 21-157, S. 9.)

History: P.A. 17-59 designated existing provisions re commissioner to adopt regulations as Subsec. (a) and added Subsec. (b) re commissioner may adopt regulations re credits for reinsurance; P.A. 21-157 amended Subsec. (b) by redesignating existing Subdiv. (3)(A) as Subdiv. (3), redesignating existing Subdiv. (3)(B) as Subdiv. (4), adding “any regulation adopted pursuant to this subsection shall” therein, adding Subdiv. (4)(A) re conditions set forth in Sec. 38a-85(g), redesignating existing Subdiv. (3)(B)(i) as Subdiv. (4)(B), existing Subdiv. (3)(B)(ii)(I) as Subdiv. (4)(C) and existing Subdiv. (3)(B)(ii)(II) as Subdiv. (4)(C)(i), designating provision re assuming insurers licensed in at least 10 states and licensed or accredited in a total of at least 35 states as Subdiv. (4)(C)(ii), adding Subdiv. (5) re commissioner's authority to adopt regulations and making conforming and technical changes.

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Sec. 38a-88a. Insurance business investments through fund managers. Invest CT funds. Tax credits. Regulations. (a) As used in this section:

(1) “Facility” means an insurance business facility;

(2) “Insurance business” means a business with a North American Industry Classification System code of 524113 to 524298, inclusive, that is engaged in the business of insuring risks or of providing services necessary to the business of insuring risks;

(3) “New job” means a job that did not exist in the business of a subject insurance business in this state prior to the subject insurance business's application to the commissioner for an eligibility certificate under this section for a new facility and that is filled by a new employee, but does not include a job created when an employee is shifted from an existing location of the subject insurance business in this state to a new facility;

(4) “New employee” means a person who resides in Connecticut and is hired by a subject insurance business to fill a position for a new job or a person shifted from an existing location of the subject insurance business outside this state to a new facility in this state, provided (A) in no case shall the total number of new employees allowed for purposes of this credit exceed the total increase in the taxpayer's employment in this state, which increase shall be the difference between (i) the number of employees employed by the subject insurance business in this state at the time of application for an eligibility certificate to the commissioner plus the number of new employees who would be eligible for inclusion under the credit allowed under this section without regard to this calculation, and (ii) the highest number of employees employed by the subject insurance business in this state in the year preceding the subject insurance business's application for an eligibility certificate to the commissioner, and (B) a person shall be deemed to be a “new employee” only if such person's duties in connection with the operation of the facility are on a regular, full-time, or equivalent thereof, and permanent basis;

(5) “New facility” means a facility which (A) is acquired by, leased to, or constructed by, a subject insurance business on or after the date of the subject insurance business's application to the commissioner for an eligibility certificate under this section, unless, upon application of the subject insurance business and upon good and sufficient cause shown, the commissioner waives the requirement that such activity take place after the application, and (B) was not in service or use during the one-year period immediately prior to the date of the subject insurance business's application to said commissioner for an eligibility certificate under this section, unless upon application of the subject insurance business and upon good and sufficient cause shown, the commissioner consents to waiving the one-year period;

(6) “Related person” means (A) a corporation, limited liability company, partnership, association or trust controlled by the taxpayer or subject insurance business, as the case may be, (B) an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer or subject insurance business, as the case may be, (C) a corporation, limited liability company, partnership, association or trust controlled by an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer or subject insurance business, as the case may be, or (D) a member of the same controlled group as the taxpayer or subject insurance business, as the case may be. For purposes of this section, “control”, with respect to a corporation, means ownership, directly or indirectly, of stock possessing fifty per cent or more of the total combined voting power of all classes of the stock of such corporation entitled to vote. “Control”, with respect to a trust, means ownership, directly or indirectly, of fifty per cent or more of the beneficial interest in the principal or income of such trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in Section 267(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, other than paragraph (3) of Section 267(c) of said internal revenue code;

(7) “Moneys of the taxpayer” means all amounts invested in a fund, directly or indirectly, on behalf of a taxpayer, including but not limited to (A) direct investments made by the taxpayer, and (B) loans made to the fund for the benefit of the taxpayer which loans are guaranteed by the taxpayer, provided no amounts represented by any such loan shall be used for the purpose of obtaining any tax credit by any person making such loan against any tax levied by this state;

(8) “Income year” means (A) with respect to corporations subject to taxation under chapter 208, the income year as determined under said chapter, (B) with respect to insurance companies, hospital service corporations and medical service corporations subject to taxation under chapter 207, the income year as determined under said chapter, and (C) with respect to taxpayers subject to taxation under chapter 229, the taxable year determined under chapter 229;

(9) “Taxpayer” means any person as defined in section 12-1, whether or not subject to any taxes levied by this state; and

(10) “Commissioner” means the Commissioner of Economic and Community Development.

(b) (1) On or before July 1, 2000, the commissioner shall register managers of funds created for the purpose of investing in insurance businesses. Any manager registered under this subsection shall have its primary place of business in this state. Each applicant shall submit an application under oath to the commissioner to be registered and shall furnish evidence satisfactory to the commissioner of its financial responsibility, integrity, and professional competence to manage investments. Failure to maintain adequate fiduciary standards shall constitute cause for the commissioner to revoke, after hearing, any registration granted under this section. The fund manager shall make a report on or before the first day of March in each year, under oath, to the Commissioner of Revenue Services specifying the name, address and Social Security number or employer identification number of each investor, the year during which each investment was made by each investor, the amount of each investment and a description of the fund's investment objectives and relative performance.

(2) There shall be allowed as a credit against the tax imposed under chapter 207, 208 or 229 or section 38a-743 an amount equal to the following percentage of the moneys of the taxpayer invested through a fund manager in an insurance business with respect to the following income years of the taxpayer: (A) With respect to the income year in which the investment in the subject insurance business was made and the two next succeeding income years, zero per cent; (B) with respect to the third full income year succeeding the year in which the investment in the subject insurance business was made and the three next succeeding income years, ten per cent; (C) with respect to the seventh full income year succeeding the year in which the investment in the subject insurance business was made and the two next succeeding income years, twenty per cent. The sum of all tax credit granted pursuant to the provisions of this subsection shall not exceed fifteen million dollars with respect to investments made by a fund or funds in any single insurance business, and with respect to all investments made by a fund shall not exceed the total amount originally invested in such fund. Any fund manager may apply to the Commissioner of Economic and Community Development for a credit that exceeds the limitations established by this subdivision. The commissioner shall evaluate the benefits of such application and make recommendations to the General Assembly if he determines that the proposal would be of economic benefit to the state.

(3) The credit allowed by this subsection may be claimed only by a taxpayer who has invested in an insurance business through a fund (A) which has a total asset value of not less than thirty million dollars for the income year for which the initial credit is taken; (B) has not less than three investors who are not related persons with respect to each other or to any insurance business in which any investment is made other than through the fund at the date the investment is made; and (C) which invests only in insurance businesses that are not related persons with respect to each other.

(4) The credit allowed by this subsection may be claimed only with respect to a subject insurance business which (A) occupies the new facility for which an eligibility certificate has been issued by the commissioner and with respect to which the certification required under subdivision (6) of this subsection has been issued as its home office, and (B) employs not less than twenty-five per cent of its total work force in new jobs.

(5) The credit allowed by this subsection may be claimed only with respect to an income year for which a certification of continued eligibility required under subdivision (6) of this subsection has been issued. If, with respect to any year for which a tax credit is claimed, any subject insurance business ceases at any time to employ at least twenty-five per cent of its total work force in new jobs, then, except as provided in subdivision (6) of this subsection, the entitlement to the credit allowed by this subsection shall not be allowed for the taxable year in which such employment ceases, and there shall not be a pro rata application of the credit to such taxable year; provided, if the reason for such cessation is the dissolution, liquidation or reorganization of such insurance business in a bankruptcy or delinquency proceeding, as defined in section 38a-905, the credit shall be allowed.

(6) The commissioner, upon application, shall issue an eligibility certificate for an insurance business occupying a new facility in this state and employing new employees, after it has been established, to his satisfaction, that subject insurance business has complied with the provisions of this subsection. If the commissioner determines that such requirements have been met as a result of transactions with a related person for other than bona fide business purposes, he shall deny such application. The commissioner shall require the subject insurance business to submit annually such information as may be necessary to determine whether the appropriate occupancy and employment requirements have been met at all times during an income year. If the commissioner determines that such requirements have been so met, he shall issue a certification of continued eligibility to that effect to the subject insurance business on or before the first day of the third month following the close of the subject insurance business's income year.

(7) The commissioner shall, upon request, provide a copy of the eligibility certificate and the certification required under subdivision (6) of this subsection to the Commissioner of Revenue Services.

(8) (A) If (i) the number of new employees on account of which a taxpayer claimed the credit allowed by this subsection decreases to less than twenty-five per cent of its total work force for more than sixty days during any of the taxable years for which a credit is claimed, (ii) those employees are not replaced by other employees who have not been shifted from an existing location of the subject insurance business in this state, and (iii) the subject insurance business has relocated operations conducted in the new facility to a location outside this state, the taxpayer shall be required to recapture a percentage, as determined under the provisions of subparagraph (B) of this subdivision, of the credit allowed under this subsection on its tax return and no subsequent credit shall be allowed. If the credit claimed by the taxpayer under this subsection is attributable to investments made in more than one insurance business, the credit recaptured and disallowed under this subdivision shall be that portion of the credit attributable to the investment in the insurance business as described in subparagraphs (A)(i) to (A)(iii), inclusive, of this subdivision.

(B) If the taxpayer is required under the provisions of subparagraph (A) of this subdivision to recapture a portion of the credit during (i) the first year such credit was claimed, then ninety per cent of the credit allowed shall be recaptured on the tax return required to be filed for such year, (ii) the second of such years, then sixty-five per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (iii) the third of such years, then fifty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (iv) the fourth of such years, then thirty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (v) the fifth of such years, then twenty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, and (vi) the sixth or subsequent of such years, then ten per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year. Any credit recaptured pursuant to this subdivision shall not be in excess of the credit that would be allowed for the applicable investment. The Commissioner of Revenue Services may recapture such credits from the taxpayer who has claimed such credits. If the commissioner is unable to recapture all or part of such credits from such taxpayer, the commissioner may seek to recapture such credits from any taxpayer who has assigned such credits to another taxpayer. If the commissioner is unable to recapture all or part of such credits from any such taxpayer, the commissioner may recapture such credits from the fund.

(C) The recapture provisions of this subdivision shall not apply and tax credits may continue to be claimed under this subsection if, for the entire period that the credit is applicable, such decrease in the percentage of total work force employed in this state does not result in an actual decrease in the number of persons employed by the subject insurance business in this state on a regular, full-time, or equivalent thereof, and permanent basis as compared to the number of new employees on account of which the taxpayer claimed the credit allowed by this subsection.

(A) “Allocation date” means the date an invest CT fund receives an investment of eligible capital equaling the amount of credits against the tax imposed under chapter 207 and section 38a-743 allocated to taxpayers who invest in such invest CT fund;

(B) “Cybersecurity business” means an eligible business primarily engaged in providing information technology products, goods or services intended to detect, prevent or respond to activity intended to result in unauthorized access to, exfiltration of, manipulation of, or impairment to the integrity, confidentiality or availability of an information technology system or information stored on, or transiting, an information technology system;

(C) “Eligible business” means a business that has its principal business operations in Connecticut, has fewer than two hundred fifty employees at the time of investment and not more than ten million dollars in net income in the previous year;

(D) “Eligible capital” means an investment of cash by a taxpayer in an invest CT fund that fully funds the purchase price of an equity interest in the invest CT fund or an eligible debt instrument issued by an invest CT fund, at par value or a premium, that (i) has an original maturity date of at least five years after the date of issuance, (ii) has a repayment schedule that is not faster than a level principal amortization over five years, and (iii) has no interest, distribution or payment features tied to the invest CT fund's profitability or the success of the investments;

(E) “Green technology business” means an eligible business with not less than twenty-five per cent of its employment positions being positions in which green technology is employed or developed and may include the occupation codes identified as green jobs by the Department of Economic and Community Development and the Labor Department for such purposes;

(F) “Income year” means the income year as determined in chapter 207 for the taxpayer;

(G) “Invest CT fund” means a Connecticut partnership, corporation, trust or limited liability company, whether organized on a profit or not-for-profit basis, that (i) is managed by at least two principals or persons that have at least four years of experience each in managing venture capital or private equity funds, with at least fifty million dollars of such funds from people unaffiliated with the manager, (ii) has received an equity investment of capital other than eligible capital equal to no less than five per cent of the total amount of the eligible capital to be invested in such invest CT fund on or before June 30, 2015, and equal to not less than ten per cent of the total amount of eligible capital to be invested in such invest CT fund on or after September 1, 2015, and (iii) is not, or will not be after the receipt of eligible capital, controlled by or under common control with, one or more insurance companies. An investment of eligible capital shall not result in insurance company control unless such investment exceeds forty million dollars per taxpayer and results in insurance companies having the right to vote more than fifty per cent of the equity interests of the invest CT fund cash invested in such invest CT fund, provided this provision shall not prohibit the interim control of an invest CT fund by one or more insurance companies upon a breach of any payment obligation of the invest CT fund or contractual or other agreement by the invest CT fund that is designed to ensure compliance with this section; and

(H) “Principal business operations” means at least eighty per cent of the business organization's employees reside in the state or eighty per cent of the business payroll is paid to individuals living in this state.

(2) A taxpayer that makes an investment of eligible capital shall, in the year of investment, earn a vested credit against the premium tax imposed pursuant to chapter 207 and section 38a-743. Such credit shall be available as follows: (A) With respect to investments of eligible capital made on or before June 30, 2015, (i) commencing with the tax return due for the first to third, inclusive, tax years, zero per cent; (ii) commencing with the tax return due for the fourth to seventh, inclusive, tax years, not more than ten per cent; and (iii) commencing with the tax return due for the eighth to tenth, inclusive, tax years, not more than twenty per cent; and (B) with respect to investments of eligible capital made on or after September 1, 2015, (i) commencing with the tax return due for the first to fifth, inclusive, tax years, zero per cent; and (ii) commencing with the tax return due for the sixth to tenth, inclusive, tax years, not more than twenty per cent. The maximum amount of eligible capital for which credits may be allowed under this subsection shall not result in more than forty million dollars of tax credits being used in any one year exclusive of any carried forward credits and no fund shall apply for more than the total amount of credits available under this section.

(3) On or before July 1, 2010, the Commissioner of Economic and Community Development shall begin to accept applications for certification as an invest CT fund and for allocations of tax credits under this subsection with allocation dates of June 30, 2015, or earlier. On and after September 1, 2015, the commissioner shall accept applications for certification as an invest CT fund and for allocations of tax credits under this subsection with allocation dates of September 1, 2015, or later. Applications shall include: (A) The amount of eligible capital the applicant will raise; (B) a nonrefundable application fee of seven thousand five hundred dollars; (C) evidence of satisfaction of the requirements of the definition of “invest CT fund” pursuant to subparagraph (G) of subdivision (1) of this subsection; (D) an affidavit by each taxpayer committing an investment of eligible capital; (E) a business plan detailing (i) the approximate percentage of eligible capital the applicant will invest in eligible businesses by the third, fifth, seventh and ninth anniversaries of its allocation date, (ii) the industry segments listed by the North American Industrial Classification System code and percentage of eligible capital in which the applicant will invest, (iii) the number of jobs that will be created or retained as a result of the applicant's investments once all eligible capital has been invested, (iv) the percentage of eligible capital to be invested in eligible businesses primarily engaged in conducting research and development or manufacturing, processing or assembling technology–based products, and (v) a revenue impact assessment demonstrating that the applicant's business plan has a revenue neutral or positive impact on the state; (F) a commitment to invest at least twenty-five per cent of its eligible capital in green technology businesses; (G) with respect to applications submitted on or before June 30, 2015, a commitment to invest, by the third anniversary of its allocation date, three per cent of its eligible capital in preseed investments, and with respect to applications submitted on or after September 1, 2015, a commitment to invest, by the fourth anniversary of the allocation date, seven per cent of its eligible capital in preseed investments, in consultation with Connecticut Innovations, Incorporated, pursuant to the corporation's program for preseed financing established pursuant to section 32-41x; and (H) with respect to applications submitted on or after September 1, 2015, a commitment to invest at least three per cent of its eligible capital in cybersecurity businesses and at least twenty-five per cent of its eligible capital in eligible businesses located in municipalities with a population greater than eighty thousand. The commissioner may require the applicant to obtain a revenue impact assessment conducted by an independent third party.

(4) Applications for tax credits pursuant to this subsection shall be accepted and approved on a first-come, first-served basis with all applications received on the same date deemed to be received simultaneously and approvals being made on a pro rata basis if such applications exceed the amount of remaining credits.

(5) The commissioner shall issue an allocation of credits subject to confirmation by the fund on a form prescribed by the commissioner that an investment of eligible capital was received within five business days. If an invest CT fund does not receive an investment of eligible capital equaling the amount of credits against the tax imposed under chapter 207 and section 38a-743 allocated to a taxpayer, for which it filed an affidavit with its application prior to the fifth business day after receipt of certification, the invest CT fund shall notify the commissioner by overnight common carrier delivery service and that portion of eligible capital allocated to the insurance company shall be forfeited. Such invest CT fund and forfeiting taxpayer shall each be assessed a twenty-five-thousand-dollar administrative penalty. The commissioner shall reallocate the forfeited eligible capital among all other remaining taxpayers that invested eligible capital.

(6) To continue to be certified, an invest CT fund shall (A) be in compliance with the investment parameters set forth in its business plan, provided an invest CT fund may apply to the commissioner to amend its business plan based on unavoidable or reasonably unanticipated changes to various conditions, including, but not limited to, the general economic climate of the state or particular sectors of the economy, technological advances and high employment and revenue growth opportunities, with approval for such changes not to be unreasonably withheld by the commissioner; (B) be in compliance with the revenue impact assessment provided in the application demonstrating that the fund's business plan continues to have a revenue neutral or positive impact on the state; (C) have invested one hundred per cent of its eligible capital in eligible businesses by the tenth anniversary of its allocation date, with a minimum of twenty-five per cent of eligible capital invested in green technology businesses; (D) for allocation dates of June 30, 2015, or earlier: (i) Have invested sixty per cent of its eligible capital in eligible businesses by the fourth anniversary of such allocation date, and (ii) have invested a minimum of three per cent of such eligible capital in preseed investments, as described in subdivision (3) of this subsection, by the third anniversary of such allocation date; and (E) for allocation dates of September 1, 2015, or later: (i) Have invested sixty per cent of its eligible capital in eligible businesses by the sixth anniversary of such allocation date, (ii) have invested a minimum of seven per cent of its eligible capital in preseed investments, as described in subdivision (3) of this subsection, by the fourth anniversary of such allocation date, (iii) have invested a minimum of three per cent of its eligible capital in cybersecurity businesses, and (iv) have invested a minimum of twenty-five per cent of its eligible capital in eligible businesses located in municipalities with a population greater than eighty thousand. An invest CT fund shall only invest eligible capital in eligible businesses, bank deposits, certificates of deposit or other fixed income securities and may not invest more than fifteen per cent of its eligible capital in any one eligible business without prior approval of the commissioner.

(7) Not later than January thirty-first annually, each invest CT fund shall report to the commissioner: (A) The amount of eligible capital remaining at the end of the preceding year; (B) each investment in an eligible business during the preceding year and, with respect to each eligible business, its location and North American Industrial Classification System code; (C) the percentage of eligible capital invested in green technology businesses, preseed investments, cybersecurity businesses and eligible businesses located in municipalities with a population greater than eighty thousand; and (D) distributions made by the invest CT fund in the preceding year. In the annual report due in the third, fifth, seventh and ninth years after its allocation date, each invest CT fund shall also report to the commissioner its compliance with the investment parameters set forth in its business plan and the revenue impact assessment provided in the application demonstrating that the fund's business plan continues to have a revenue neutral or positive impact on the state. Each invest CT fund shall provide to the commissioner annual audited financial statements.

(8) To make a distribution or payment, an invest CT fund certified by the commissioner on or before June 30, 2015, must have invested one hundred per cent of its eligible capital in eligible businesses, with a minimum of twenty-five per cent of eligible capital invested in green technology businesses and a minimum of three per cent of eligible capital invested in preseed investment, as described in subdivision (3) of this subsection, with principal business operations in this state at the time of such determination except: (A) Distributions related to the payment of any projected increase in federal or state taxes, including penalties and interest related to state and federal income taxes, of the equity owners of the invest CT fund resulting from the earnings or other tax liability of the invest CT fund to the extent that the increase is related to the ownership, management or operation of the invest CT fund; (B) payments of interest and principal on the debt of the invest CT fund, provided after such payment, the invest CT fund still has cash and other marketable securities in an amount that, when added to the cumulative investments it has made in eligible recipients, equals not less than sixty per cent of the eligible capital invested in such reinvestment fund; or (C) payments related to the reasonable costs and expenses of forming, syndicating, managing and operating the fund, provided the distribution or payment is not made directly or indirectly to an insurance company that has invested eligible capital in the invest CT fund, including: (i) Reasonable and necessary fees paid for professional services, including legal and accounting services, related to the formation and operation of the invest CT fund; and (ii) an annual management fee in an amount that does not exceed two and one-half per cent of the eligible capital of the invest CT fund. The state shall receive a share of any distribution, except as set forth in subparagraphs (A), (B) and (C) of this subdivision and distributions made to return any equity capital invested in the invest CT fund that is not eligible capital, in the following percentages: (I) Ten per cent when less than eighty per cent but more than sixty per cent of the jobs set forth in the invest CT fund's business plan are created or retained, and (II) twenty per cent when sixty per cent or less of the jobs set forth in the invest CT fund's business plan are created or retained.

(9) To make a distribution or payment, an invest CT fund certified by the commissioner on or after September 1, 2015, must have invested one hundred per cent of its eligible capital in eligible businesses, with a minimum of twenty-five per cent of eligible capital invested in green technology businesses, a minimum of seven per cent of eligible capital invested in preseed investments, as described in subdivision (3) of this subsection, a minimum of three per cent of eligible capital invested in cybersecurity businesses, and a minimum of twenty-five per cent of eligible capital invested in businesses located in municipalities with a population greater than eighty thousand, with principal business operations in this state at the time of such determination, except: (A) Distributions related to the payment of any projected increase in federal or state taxes, including penalties and interest related to state and federal income taxes, of the equity owners of the invest CT fund resulting from the earnings or other tax liability of the invest CT fund to the extent that the increase is related to the ownership, management or operation of the invest CT fund; (B) payments of interest and principal on the debt of the invest CT fund, provided after such payment, the invest CT fund still has cash and other marketable securities in an amount that, when added to the cumulative investments it has made in eligible recipients, equals not less than sixty per cent of the eligible capital invested in such reinvestment fund; or (C) payments related to the reasonable costs and expenses of forming, syndicating, managing and operating the fund, provided the distribution or payment is not made directly or indirectly to an insurance company that has invested eligible capital in the invest CT fund, including: (i) Reasonable and necessary fees paid for professional services, including legal and accounting services, related to the formation and operation of the invest CT fund; and (ii) an annual management fee in an amount that does not exceed two and one-half per cent of the eligible capital of the invest CT fund. The state shall receive a share of any distribution, except as set forth in subparagraphs (A), (B) and (C) of this subdivision and distributions made to return any equity capital invested in the invest CT fund that is not eligible capital, in the following percentages: (I) Ten per cent when less than eighty per cent but more than sixty per cent of the jobs set forth in the invest CT fund's business plan are created or retained, and (II) twenty per cent when sixty per cent or less of the jobs set forth in the invest CT fund's business plan are created or retained.

(10) The commissioner shall review each annual report to ensure compliance with subdivisions (6), (7), (8) and (9) of this subsection. A material variation from subdivision (6), (7), (8) or (9) of this subsection is grounds for decertification of the invest CT fund. If the commissioner determines that an invest CT fund is not in compliance with subdivision (6), (7), (8) or (9) of this subsection or the investment parameters of its business plan, the commissioner shall notify the officers of the invest CT fund, in writing, that the invest CT fund may be subject to decertification after the one hundred twentieth day after the date of mailing the notice, unless the deficiencies are waived by the commissioner or are corrected and the invest CT fund returns to compliance with subdivisions (6), (7), (8) and (9) of this subsection.

(11) Decertification of an invest CT fund shall cause the forfeiture of future credits against the tax imposed by chapter 207 and section 38a-743 to be claimed with respect to an invest CT fund when (A) such decertification occurs on or before the fourth anniversary of an allocation date of June 30, 2015, or earlier, or on or before the sixth anniversary of an allocation date of September 1, 2015, or later, and (B) such fund has invested less than sixty per cent of its eligible capital in eligible businesses by said anniversary. The commissioner shall send written notice to the last-known address of each taxpayer whose credit against the tax imposed by chapter 207 is subject to recapture or forfeiture.

(d) (1) The tax credits allowed by this section shall only be available for investments (A) in funds that are not open to additional investments or investors beyond the amount subscribed at the formation of the fund, or (B) under subsection (c) of this section, in invest CT funds that are not open to additional investments or investors after submission of the invest CT fund's application to the commissioner pursuant to subsection (c) of this section.

(2) On and after June 30, 2010, no eligibility certificate shall be provided under subdivision (6) of subsection (b) of this section for investments made in an insurance business.

(3) On and after July 1, 2011, no credit shall be allowed under subdivision (2) or (6) of subsection (b) of this section for an investment of less than one million dollars for which the commissioner has issued an eligibility certificate. A fund manager who has received an eligibility certificate but is not yet eligible to receive a certificate of continued eligibility shall provide documentation satisfactory to the commissioner not later than June 30, 2011, of its investment of one million dollars or more. Such documentation shall include, but is not limited to, cancelled checks, wire transfers, investment agreements or other documentation as the commissioner may request. On and after July 1, 2011, the commissioner shall revoke the certificate of eligibility for any insurance business for which its fund manager failed to provide sufficient documentation of said investment of not less than one million dollars.

(4) Any credit allowed under subsection (b) or subsection (g) of this section that has not been claimed prior to January 1, 2010, may be carried forward pursuant to subsection (i) of this section.

(e) The maximum amount of credit allowed under subsection (c) of this section shall be five hundred fifty million dollars in the aggregate and forty million dollars per year.

(f) (1) The Commissioner of Revenue Services may treat one or more corporations that are properly included in a combined unitary tax return under section 12-222 as one taxpayer in determining whether the appropriate requirements under this section are met. Where corporations are treated as one taxpayer for purposes of this subsection, then the credit shall be allowed only against the amount of the combined unitary tax for all corporations properly included in a combined unitary tax return that, under the provisions of subdivision (2) of this subsection, is attributable to the corporations treated as one taxpayer.

(2) The amount of the combined unitary tax for all corporations properly included in a combined unitary tax return that is attributable to the corporations that are treated as one taxpayer under the provisions of this subsection shall be in the same ratio to such combined unitary tax that the net income apportioned to this state of each corporation treated as one taxpayer bears to the net income apportioned to this state, in the aggregate, of all corporations included in such combined unitary tax return. Solely for the purpose of computing such ratio, any net loss apportioned to this state by a corporation treated as one taxpayer or by a corporation included in such combined unitary tax return shall be disregarded.

(g) (1) Any taxpayer allowed a credit under subsection (b) of this section may assign such credit to another person, provided such person may claim such credit only with respect to a calendar year for which the assigning taxpayer would have been eligible to claim such credit. The fund manager shall include in the report filed with the Commissioner of Revenue Services in accordance with subdivision (1) of subsection (b) of this section information requested by the commissioner regarding such assignments including the current holders of credits as of the end of the preceding calendar year.

(2) Any taxpayer allowed a credit under subsection (c) of this section may sell, assign or otherwise transfer such credit, in whole or in part, to one or more taxpayers, provided no such transferee may claim such credit for an income year other than the transferee's income year in which such transferee bought, was assigned or was otherwise transferred such credit.

(h) No taxpayer shall be eligible for a credit under this section and section 12-217e for the same investment. No two taxpayers shall be eligible for any tax credit with respect to the same investment, employee or facility.

(i) Any tax credit that is not sold, assigned or otherwise transferred pursuant to subdivision (2) of subsection (g) of this section and is not used in the income year for which it was allowed may be carried forward for the five immediately succeeding income years until the full credit has been claimed.

(j) The commissioner, with the approval of the Commissioner of Revenue Services and the Secretary of the Office of Policy and Management, may adopt regulations in accordance with chapter 54 to carry out the purposes of this section.

(P.A. 94-214, S. 1, 4; P.A. 95-79, S. 139, 189; 95-303, S. 2, 3; P.A. 97-292, S. 1, 4; P.A. 98-214, S. 31; P.A. 00-170, S. 30, 31, 42; P.A. 01-139, S. 3; June Sp. Sess. P.A. 01-6, S. 39, 72, 80, 85; P.A. 02-24, S. 1; P.A. 06-159, S. 21; P.A. 08-82, S. 1; P.A. 10-75, S. 14; P.A. 11-104, S. 6, 7; 11-140, S. 2; P.A. 15-244, S. 163, 171; June Sp. Sess. P.A. 15-5, S. 139, 153; P.A. 16-146, S. 9; P.A. 17-15, S. 98; 17-244, S. 2; June Sp. Sess. P.A. 21-2, S. 428; P.A. 22-110, S. 43.)

History: P.A. 94-214, effective June 7, 1994, and applicable (1) to income years of corporations under chapter 208 commencing on or after January 1, 1994, (2) to income years of insurance companies, hospital and medical services corporations under chapter 207 commencing on or after January 1, 1994, or (3) taxable years of taxpayers under chapter 229 commencing on or after January 1, 1994, as the case may be; P.A. 95-79 redefined “related person” to include a limited liability company, effective May 31, 1995; P.A. 95-303 added Subsec. (a)(7) defining “moneys of the taxpayer” and (a)(8) defining “income year”, amended Subsec. (c) to add reference to Sec. 38a-743 and to delete Subsec. (c)(1) and (2), and added new Subsec. (c)(1) to (3) re amount of credit, made technical changes to Subsec. (d), added proviso to Subsec. (f) re dissolution as the result of bankruptcy or delinquency proceeding, added provision to Subsec. (i) re credit claimed which is attributable to investments in more than one insurance business, deleted reference to Ch. 207 in Subsec. (l), and made technical changes to Subsec. (m), effective July 6, 1995, and applicable (1) to income years of corporations under Ch. 208 commencing on or after January 1, 1995, (2) to income years of insurance companies, hospital and medical services corporations under Ch. 207 commencing on or after January 1, 1995, or (3) to taxable years of taxpayers under Ch. 229 commencing on or after January 1, 1995, as the case may be; P.A. 97-292 added Subsec. (a)(9) and (10) defining “taxpayer” and “commissioner”, amended Subsec. (b) to transfer from Insurance Commissioner to the Commissioner of Economic and Community Development responsibility for registration of fund managers and add application requirements, Subsec. (c) to add cap for sum of all tax credit granted and provision for application for credit to exceed cap, Subsec. (d) to prohibit investments by related persons, Subsec. (e) to delete requirement of incorporation in this state, Subsec. (i) to allow Commissioner of Revenue Services to recapture credits from any taxpayer who has assigned credits to another taxpayer or from the fund, Subsec. (j) to delete existing language and to provide that tax credit is only available for investments in fund not open to additional investments beyond the amount subscribed at formation of fund, Subsec. (l) to add requirement re reporting of assignments and made technical changes, effective July 8, 1997, and applicable to income years commencing on or after January 1, 1997; P.A. 98-214 amended Subsec. (f) to delete reference to “subsection (d)” of Sec. 38a-905; P.A. 00-170 amended Subsec. (b) to provide that registration of fund managers be accomplished prior to July 1, 2000, and amended Subsec. (j) to restrict the applicability of the tax credit under this section to funds created prior to July 1, 2000, effective May 26, 2000; P.A. 01-139 amended Subsec. (e) to substitute “commissioner” for “Insurance Commissioner”; June Sp. Sess. P.A. 01-6 amended Subsec. (f) to add liquidation and reorganization to provision for treatment of credits in certain bankruptcy or delinquency cases, amended Subsec. (i) to make a technical change and add new Subdiv. (3) re application of recapture provisions and amended Subsec. (j) to provide that no credit shall be allowed for investments made after December 31, 2015, effective July 1, 2001; P.A. 02-24 amended Subsec. (f) to substitute “a bankruptcy” for “bankruptcy”; P.A. 06-159 amended Subsec. (h) to require commissioner, rather than taxpayer, to provide a copy of eligibility certificate and certification, effective June 6, 2006; P.A. 08-82 amended Subsec. (a)(2) to redefine “insurance business” by adding provision re businesses with North American Industry Classification System codes of 524113 to 524298, inclusive, and made a technical change in Subsec. (a)(4), (5) and (7); P.A. 10-75 redefined “new employee” in Subsec. (a)(4) to require person to reside in Connecticut, redesignated existing Subsecs. (b) to (i) as Subsecs. (b)(1) to (b)(8), added new Subsec. (c) re tax credits for investments of eligible capital, redesignated existing Subsec. (j) as Subsec. (d) and amended same by designating existing provision re funds not open to investment as Subdiv. (1), adding Subdiv. (2) re funds under Subsec. (c) not open to investment and establishing deadlines re eligibility certificates, added new Subsec. (e) re maximum credit, redesignated existing Subsecs. (k) to (o) as Subsecs. (f) to (j) and made technical changes, effective July 1, 2010; P.A. 11-104 made technical changes in Subsecs. (b)(4) and (c)(3), effective July 8, 2011; P.A. 11-140 amended Subsec. (g) to allow transfer of credits to a taxpayer's affiliate, effective July 8, 2011; P.A. 15-244 amended Subsec. (f) to substitute “combined unitary tax return” for “combined corporation business tax return” and add references to unitary re combined tax and combined return, effective June 30, 2015, and applicable to income years commencing on or after January 1, 2015, and replaced “insurance reinvestment fund” with “invest CT fund” in Subsecs. (c) and (d), substantially revised Subsec. (c) to establish end date of June 30, 2015, for applications under former provisions and to add provisions re applications for certification as an invest CT fund and for allocations of tax credits submitted on or after September 1, 2015, re requirements for equity investments in and distributions or payments by invest CT funds certified on or after September 1, 2015, re continued certification of invest CT funds with tax credit allocation dates on or after September 1, 2015, re tax credit schedule for investments of eligible capital made on or after September 1, 2015, and re reporting requirements for all invest CT funds, amended Subsec. (e) to increase the maximum amount of tax credits allowed under Subsec. (c) from $200,000,000 to $350,000,000, and made technical and conforming changes, effective July 1, 2015; June Sp. Sess. P.A. 15-5 changed effective date of P.A. 15-244, S. 163, from June 30, 2015, and applicable to income years commencing on or after January 1, 2015, to January 1, 2016, and applicable to income years commencing on or after that date, effective June 30, 2015, and made technical changes in Subsec. (f)(1), effective January 1, 2016, and applicable to income years commencing on or after that date; P.A. 16-146 made technical changes in Subsec. (f)(2), effective June 9, 2016; P.A. 17-15 made technical changes in Subsec. (a)(8); P.A. 17-244 amended Subsec. (g) to designate existing provisions re taxpayer allowed credit under Subsec. (b) as Subdiv. (1), designate existing provisions re taxpayer allowed credit under Subsec. (c) as Subdiv. (2) and amended same by deleting “an affiliate of such taxpayer”, adding provisions allowing taxpayer to sell, assign or otherwise transfer credit, in whole or in part, to one or more taxpayers and restricting which income year credit may be claimed, and amended Subsec. (i) to make conforming and technical changes, effective July 1, 2017; June Sp. Sess. P.A. 21-2 amended Subsec. (d) to redesignate existing provisions as Subdivs. (1) to (4) and make technical and conforming changes, and amended Subsec. (e) to increase maximum amount of tax credits allowed under Subsec. (c) from $350,000,000 to $550,000,000 and make a technical change, effective July 1, 2021; P.A. 22-110 amended Subsec. (h) to delete reference to repealed Sec. 12-217m and make a conforming change.

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Sec. 38a-88b. Applicability of section 38a-88a. (a) The provisions of section 38a-88a of the general statutes, revision of 1958, revised to January 1, 1997, shall apply to any fund established prior to June 1, 1997, or to any fund which is formed on or after June 1, 1997, in connection with a memorandum of understanding executed by and among the fund manager, the investors and either the Commissioner of Revenue Services or the Insurance Commissioner prior to June 1, 1997.

(b) The provisions of section 38a-88a, as amended by section 1 of public act 97-292, shall only apply to any fund established under section 38a-88a of the general statutes, revision of 1958, revised to January 1, 1997, to investments made by such a fund and to credits earned by such a fund if the fund manager of such fund notifies the Commissioner of Economic and Community Development that such fund wishes to be designated as a fund subject to said section 38a-88a, as amended by section 1 of public act 97-292.

(c) Notwithstanding the provisions of subsection (a) of this section, the provisions of subdivision (1) and subparagraph (C) of subdivision (8) of subsection (b) of section 38a-88a and subdivision (1) of subsection (g) of section 38a-88a shall be applicable to all funds.

(P.A. 97-292, S. 3, 4; 97-295, S. 22, 25; P.A. 98-262, S. 14, 22; June Sp. Sess. P.A. 01-6, S. 81, 85; P.A. 02-24, S. 2; P.A. 04-10, S. 4; P.A. 17-244, S. 3.)

History: P.A. 97-292 effective July 8, 1997, and applicable to income years of taxpayers commencing on or after January 1, 1997; P.A. 97-295 amended Subsec. (a) to specify execution of memorandum of understanding by either Commissioner of Revenue Services or Insurance Commissioner rather than by both commissioners, effective July 8, 1997, and applicable to income years commencing on or after January 1, 1998; P.A. 98-262 revised effective date of P.A. 97-295, but without affecting this section; June Sp. Sess. P.A. 01-6 amended Subsec. (c) to add a reference to Sec. 38a-88a(i)(3), effective July 1, 2001; P.A. 02-24 amended Subsec. (c) to delete “as amended by section 1 of public act 97-292”; P.A. 04-10 made a technical change in Subsec. (c); P.A. 17-244 amended Subsec. (c) to replace “subsections (b) and (1) of section 38a-88a and subdivision (3) of subsection (i)” with “subdivision (1) and subparagraph (C) of subdivision (8) of subsection (b) of section 38a-88a and subdivision (1) of subsection (g)”, effective July 1, 2017.

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Sec. 38a-89. Reinsurance agreements affected. Sections 38a-85 to 38a-88, inclusive, shall apply to reinsurance agreements which have had an inception, anniversary or renewal date not less than six months after January 1, 1991, with respect to all cessions under such agreements after such inception, anniversary or renewal date.

(P.A. 90-41, S. 5, 6.)

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PART IIa

MANAGING GENERAL AGENTS AND CONTROLLED INSURERS.
CAPTIVE INSURANCE COMPANIES

Sec. 38a-90. Short title: Managing General Agents Act. Sections 38a-90 to 38a-90h, inclusive, may be cited as the “Managing General Agents Act”.

(P.A. 91-262, S. 10, 19.)

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Sec. 38a-90a. Definitions. As used in sections 38a-90 to 38a-90h, inclusive:

(1) “Actuary” means a person who is a member in good standing of the American Academy of Actuaries.

(2) (A) “Managing general agent” means any person, firm, association or corporation who manages all or part of the insurance business of an insurer, including the management of a separate division, department or underwriting office and acts as an agent for such insurer whether known as a managing general agent, manager or other similar term, who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross direct written premium which is equal to or more than five per cent of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year together with one or more of the following activities related to the business produced: (i) Adjusts or pays claims in excess of an amount determined by the commissioner; or (ii) negotiates reinsurance on behalf of the insurer.

(B) Notwithstanding subparagraph (A) of this subdivision, the following persons shall not be considered as managing general agents for the purposes of sections 38a-90 to 38a-90h, inclusive: (i) Any employee of the insurer; (ii) a United States manager of the United States branch of an alien insurer, as defined in section 38a-1; (iii) an underwriting manager who, pursuant to contract, manages all or part of the insurance operations of the insurer, is under common control with the insurer, subject to the Holding Company Regulatory Act, and whose compensation is not based on the volume of premiums written; and (iv) the attorney-in-fact authorized by and acting for the subscribers of a reciprocal insurer or interinsurance exchange under powers of attorney.

(3) “Underwrite” means the authority to accept or reject risk on behalf of the insurer.

(P.A. 91-262, S. 11, 19; P.A. 93-57, S. 3; 93-239, S. 19; P.A. 94-39, S. 2; P.A. 14-235, S. 1.)

History: P.A. 93-57 redefined “managing general agent” to eliminate the requirement of negotiating and finding ceding reinsurance contracts on behalf of an insurer and certain technical corrections for clarity; P.A. 93-239 redefined “managing general agent” to require only 5% of the policyholder surplus in lieu of 10% and to delete a provision excluding managers of insurers engaging in joint underwriting or joint reinsurance from consideration as managing general agents; P.A. 94-39 redefined “managing general agent” to specifically exclude attorneys-in-fact authorized by and acting for the subscribers of a reciprocal insurer or interinsurance exchange under powers of attorney; P.A. 14-235 redesignated existing Subdivs. (a), (b) and (c) as Subdivs. (1), (2) and (3) and made technical changes.

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Sec. 38a-90b. Licensing of managing general agents. (a) No person, firm, association or corporation shall act in the capacity of a managing general agent with respect to risks located in this state for an insurer licensed in this state unless such person is licensed as a producer and holds an appointment by the insurer in this state.

(b) No person, firm, association or corporation shall act in the capacity of a managing general agent representing an insurer domiciled in this state with respect to risks located outside this state unless such person is licensed as a producer and holds an appointment by the insurer in this state. A nonresident license is sufficient for this purpose.

(d) The commissioner may require the managing general agent to maintain an errors and omissions policy.

(P.A. 91-262, S. 12, 19; P.A. 94-160, S. 2, 24.)

History: P.A. 94-160 replaced references to agents with references to producers, effective January 1, 1996.

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Sec. 38a-90c. Contractual agreement between insurer and managing general agent. Minimum provisions of the contract. No person, firm, association or corporation acting in the capacity of a managing general agent shall place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibilities of each party and where both parties share responsibility for a particular function, specifies the division of such responsibilities, and such contract shall contain the following minimum provisions:

(a) The insurer may terminate the contract for cause upon written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination.

(b) The managing general agent shall render an accounting to the insurer detailing all transactions and remitting all funds due under the contract to the insurer on a monthly basis.

(c) All funds collected for the account of an insurer shall be held by the managing general agent in a fiduciary capacity in a bank which is a member of the Federal Reserve System. This account shall be used for all payments on behalf of the insurer. The managing general agent may retain no more than three months estimated claims payments and allocated loss adjustment expenses.

(d) Separate records of business written by the managing general agent shall be maintained. The insurer shall have access and right to copy all accounts and records related to its business in a form usable by the insurer and the commissioner shall have access to all books, bank accounts and records of the managing general agent in a form usable to the commissioner.

(e) The contract may not be assigned in whole or part by the managing general agent.

(f) Appropriate underwriting guidelines including: (1) The maximum annual premium volume; (2) the basis of the rates to be charged; (3) the types of risks which may be written; (4) maximum limits of liability; (5) applicable exclusions; (6) territorial limitations; (7) policy cancellation provisions; and (8) the maximum policy period. The insurer shall have the right to cancel or nonrenew any policy subject to the applicable laws and regulations.

(g) (1) If the contract permits the managing general agent to settle claims on behalf of the insurer: (A) All claims shall be reported to the company in a timely manner; (B) a copy of the claim file shall be sent to the insurer at its request or as soon as it becomes known that the claim: (i) Has the potential to exceed an amount determined by the commissioner or exceeds the limit set by the company, whichever is less; (ii) involves a coverage dispute; (iii) may exceed the managing general agent claims settlement authority; (iv) is open for more than six months; or (v) is closed by payment of an amount set by the company.

(2) All claim files will be the joint property of the insurer and managing general agent, except that upon an order of liquidation of the insurer such files shall become the sole property of the insurer or its estate and the managing general agent shall have reasonable access and the right to copy the files on a timely basis.

(3) Any settlement authority granted to the managing general agent may be terminated for cause upon the insurer's written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.

(h) Where electronic claims files are in existence, the contract shall address the timely transmission of data.

(i) If the contract provides for a sharing of interim profits by the managing general agent, and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments, or in any other manner, interim profits will not be paid to the managing general agent until one year after they are earned for property insurance and five years after they are earned on casualty insurance and not until the profits have been verified pursuant to section 38a-90d.

(j) The managing general agent shall not: (1) Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules; (2) commit the insurer to participate in insurance or reinsurance syndicates; (3) appoint any producer or agent without ensuring that the producer or agent is lawfully licensed to transact the type of insurance for which such producer or agent is appointed; (4) without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which shall not exceed one per cent of the insurer's policyholder's surplus as of December thirty-first of the last completed calendar year; (5) collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer, without prior approval of the insurer. If prior approval is given, a report shall be promptly forwarded to the insurer; (6) jointly employ an individual who is employed with the insurer; (7) appoint a submanaging general agent; or (8) permit its subproducer or subagent to serve on the insurer's board of directors.

(P.A. 91-262, S. 13, 19; P.A. 93-239, S. 20; P.A. 14-235, S. 12.)

History: P.A. 93-239 amended Subsec. (j) to delete reference to “automatic” facultative agreements and to add a new Subdiv. (8) prohibiting a subproducer as subagent of a managing general agent to serve on an insurer's board of directors; P.A. 14-235 made technical changes in Subsecs. (g), (h) and (j).

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Sec. 38a-90d. Duties of the insurer. (a) The insurer shall have on file an independent financial examination, in a form acceptable to the commissioner, of each managing general agent with which it has done business.

(b) If a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. This shall be in addition to any other required loss reserve certification.

(c) The insurer shall semiannually conduct an on-site review of the underwriting and claims processing operations of the managing general agent.

(d) Binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicates shall rest with an officer of the insurer, who shall not be affiliated with the managing general agent.

(e) Within thirty days of entering into or termination of a contract with a managing general agent, the insurer shall provide written notification of such appointment or termination to the commissioner. Notices of appointment of a managing general agent shall include a statement of duties which the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is authorized to act and any other information the commissioner may require.

(f) An insurer shall review its books and records each quarter to determine if any agent has become, by operation of subdivision (2) of section 38a-90a, a managing general agent. If the insurer determines that an agent has become a managing general agent, the insurer shall promptly notify the agent of such determination and the insurer and agent shall fully comply with the provisions of sections 38a-90 to 38a-90h, inclusive, not later than thirty days after such determination.

(g) An insurer shall not appoint to its board of directors an officer, director, employee or controlling shareholder of its managing general agents. This subsection shall not apply to any relationships governed by the Insurance Holding Company Act or, if applicable, the Broker Controlled Insurer Act.

(P.A. 91-262, S. 14, 19; P.A. 14-235, S. 2.)

History: P.A. 14-235 made technical changes in Subsec. (f).

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Sec. 38a-90e. Acts of managing general agent considered to be acts of insurer. Examination of the managing general agent. The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer.

(P.A. 91-262, S. 15, 19.)

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Sec. 38a-90f. Violations of the Managing General Agents Act. Hearing and notices. Fines. Loss or damage due to noncompliance rehabilitation or liquidation. Civil actions and other relief. (a) If the commissioner finds after reasonable notice and hearing that the managing general agent or any other person has not materially complied with any provision of sections 38a-90 to 38a-90h, inclusive, or any regulation or order adopted thereunder, the commissioner may order: (1) For each separate violation, a penalty in an amount of fifteen thousand dollars, and (2) revocation or suspension of the person's insurance license.

(b) If he finds that because of such material noncompliance the insurer has suffered any loss or damage, the commissioner may maintain a civil action brought by or on behalf of the insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the insurer and its policyholders and creditors or other appropriate relief.

(c) If an order of rehabilitation or liquidation of the insurer has been entered pursuant to section 38a-915 or section 38a-920, and the receiver appointed under that order determines that the managing general agent or any other person has not materially complied with sections 38a-90 to 38a-90h, inclusive, or any regulation or order promulgated thereunder, and the insurer has suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate relief for the benefit of the insurer and its policyholders and creditors.

(d) Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided for in the provisions of this title.

(e) Nothing contained in sections 38a-90 to 38a-90h, inclusive, shall in any manner limit or restrict the rights of policyholders, claimants and auditors.

(P.A. 91-262, S. 16, 19; P.A. 93-57, S. 4; May 25 Sp. Sess. P.A. 94-1, S. 30, 130; P.A. 96-193, S. 2, 36; P.A. 08-178, S. 5.)

History: P.A. 93-57 amended Subsec. (a) to make technical corrections for clarity, inserted new Subsecs. (b) and (c) to address loss or damage due to noncompliance and re provisions governing civil action for recovery of damages or relief when an order of rehabilitation or liquidation has been entered and relettered existing Subsecs. (b) and (c) as (d) and (e); May 25 Sp. Sess. P.A. 94-1 amended Subsecs. (b) and (c) by making technical grammatical changes, effective July 1, 1994; P.A. 96-193 amended Subsec. (a) to substitute “person's insurance” for “agent's”, effective June 3, 1996; P.A. 08-178 amended Subsec. (a) by making technical changes and increasing penalty from $10,000 to $15,000.

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Sec. 38a-90g. Regulations. The Insurance Commissioner may adopt such reasonable regulations as he deems necessary in accordance with chapter 54 to carry out the purposes of sections 38a-90 to 38a-90h, inclusive.

(P.A. 91-262, S. 17, 19.)

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Sec. 38a-90h. Utilization of managing general agent's services. Exceptions. No insurer may continue to utilize the services of a managing general agent on and after January 1, 1992, unless such utilization is in compliance with sections 38a-90 to 38a-90g, inclusive, or unless the commissioner extends the time for such compliance.

(P.A. 91-262, S. 18, 19.)

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Sec. 38a-91. Definitions. As used in sections 38a-91 to 38a-91d, inclusive:

(1) “Accredited state” means a state in which the insurance department or regulatory agency has qualified as meeting the minimum financial regulatory standards promulgated and established from time to time by the National Association of Insurance Commissioners.

(2) “Captive insurer” means an insurance company owned by another organization whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, an insurance organization owned by the insureds whose exclusive purpose is to insure risks of member organizations and group members and their affiliates.

(3) “Control” or “controlled” has the meaning assigned in section 38a-129.

(4) “Controlled insurer” means a licensed insurer which is controlled, directly or indirectly, by a producer.

(5) “Controlling producer” means a producer who, directly or indirectly, controls an insurer.

(6) “Licensed insurer” or “insurer” means any person, firm, association or corporation duly licensed pursuant to section 38a-41 to transact a property casualty insurance business in this state. The terms “licensed insurer” or “insurer” does not include any captive insurer except for a risk retention group, as defined in section 38a-91aa.

(7) “Producer” has the same meaning as “insurance producer” as provided in section 38a-702a.

(P.A. 92-112, S. 8, 35; P.A. 96-193, S. 3, 36; P.A. 01-113, S. 23, 42; P.A. 14-6, S. 8; 14-122, S. 164.)

History: P.A. 96-193 redefined “producer”, effective June 3, 1996; P.A. 01-113 amended definition of “producer” in Subdiv. (7) to make a technical change and substitute “section 38a-702a” for “section 38a-702”, effective September 1, 2002; P.A. 14-6 redefined “licensed insurer” in Subdiv. (6); P.A. 14-122 made technical changes in Subdiv. (7).

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Sec. 38a-91a. Insurers affected. Sections 38a-91 to 38a-91d, inclusive, shall apply to licensed insurers either domiciled in this state or domiciled in a state that is not an accredited state having in effect a substantially similar law. All provisions of sections 38a-129 to 38a-140, inclusive, to the extent they are not superseded by sections 38a-91 to 38a-91d, inclusive, shall continue to apply to all parties within holding company systems subject to said sections 38a-91 to 38a-91d, inclusive.

(P.A. 92-112, S. 9, 35.)

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Sec. 38a-91b. Controlled insurers. Applicability. Minimum provisions. (a)(1) The provisions of this section shall apply if, in any calendar year, the aggregate amount of gross written premium on business placed with a controlled insurer by a controlling producer is equal to or greater than five per cent of the admitted assets of the controlled insurer, as reported in the controlled insurers' quarterly statement filed as of September thirtieth of the prior year.

(2) Notwithstanding subdivision (1) of this subsection, the provisions of this section shall not apply if:

(A) The controlling producer (i) places insurance only with the controlled insurer, or with the controlled insurer and a member or members of the controlled insurer's holding company system, or the controlled insurer's parent, affiliate or subsidiary and receives no compensation based upon the amount of premiums written in connection with such insurance; and (ii) accepts insurance placements only from nonaffiliated subproducers and not directly from insureds; and

(B) The controlled insurer, except for insurance business written through a residual market facility accepts insurance business only from a controlling producer, a producer controlled by the controlled insurer or a producer that is a subsidiary of the controlled insurer.

(b) A controlled insurer shall not accept business from a controlling producer and a controlling producer shall not place business with a controlled insurer unless there is a written contract between the controlling producer and the controlled insurer specifying the responsibilities of each party, which contract has been approved by the board of directors of the insurer and contains the following minimum provisions:

(1) The controlled insurer may terminate the contract for cause, upon written notice to the controlling producer. The controlled insurer shall suspend the authority of the controlling producer to write business during the pendency of any dispute regarding the cause for the termination;

(2) The controlling producer shall render accounts to the controlled insurer detailing all material transactions, including information necessary to support all commissions, charges and other fees received by, or owing to, the controlling producer;

(3) The controlling producer shall remit all funds due under the terms of the contract to the controlled insurer on at least a monthly basis. The due date shall be fixed so that premiums or installments thereof collected shall be remitted no later than ninety days after the effective date of any policy placed with the controlled insurer under this contract;

(4) All funds collected for the controlled insurer's account shall be held by the controlling producer in a fiduciary capacity, in one or more appropriately identified bank accounts in banks that are members of the Federal Reserve System, in accordance with the provisions of the insurance law as applicable. However, funds of a controlling producer not required to be licensed in this state shall be maintained in compliance with the requirements of the controlling producer's domiciliary jurisdiction;

(5) The controlling producer shall maintain separate identifiable records of business written for the controlled insurer;

(6) The contract shall not be assigned in whole or in part by the controlling producer;

(7) The controlled insurer shall provide to the controlling producer its underwriting standards, rules and procedures, manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling producer shall adhere to the standards, rules, procedures, rates and conditions. The standards, rules, procedures, rates and conditions shall be the same as those applicable to comparable business placed with the controlled insurer by a producer other than the controlling producer;

(8) The rates of the commissions, charges and other fees shall be no greater than those applicable to comparable business placed with the controlled insurer by producers other than controlling producers. For purposes of this subdivision and subdivision (7) of this subsection, examples of “comparable business” include the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits and similar quality of business;

(9) If the contract provides the controlling producer, on insurance business placed with the insurer, to be compensated contingent upon the insurer's profits on that business, then such compensation shall not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event shall the commissions be paid until the adequacy of the controlled insurer's reserves on remaining claims has been independently verified pursuant to subdivision (1) of subsection (d) of this section;

(10) The insurer may establish a different limit for each line or subline of business. The controlled insurer shall notify the controlling producer when the applicable limit is approached and shall not accept business from the controlling producer if the limit is reached. The controlling producer shall not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached; and

(11) The controlling producer may negotiate but shall not bind reinsurance on behalf of the controlled insurer on business the controlling producer places with the controlled insurer, except that the controlling producer may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the controlled insurer contains underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules.

(c) Every controlled insurer shall have an audit committee of the board of directors composed of independent directors. The audit committee shall annually meet with management, the insurer's independent certified public accountants and an independent casualty actuary or other independent loss reserve specialist acceptable to the commissioner to review the adequacy of the insurer's loss reserves.

(d) (1) In addition to any other required loss reserve certification, the controlled insurer shall annually, on April first of each year, file with the commissioner an opinion of an independent casualty actuary or such other independent loss reserve specialist acceptable to the commissioner reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year-end including incurred but not reported on business placed by the controlling producer; and

(2) The controlled insurer shall annually report to the commissioner the amount of commissions paid to the controlling producer, the percentage such amount represents of the net premiums written and comparable amounts and percentage paid to noncontrolling producers for placements of the same kinds of insurance.

(P.A. 92-112, S. 10, 35.)

History: (Revisor's note: In codifying public act 92-112 the words “The rates and terms of the controlling producer's commissions, charges or other fees and the purposes for those commissions, charges or fees.”, and the words “A limit on the controlling producer's writings in relation to the controlled insurer's surplus and total writings.”, were deleted editorially by the Revisors from the beginning of Subsecs. (b)(8) and (b)(10), respectively, since they were clearly Subdiv. catchlines, a form not traditionally used in the general statutes. These catchlines were inadvertently included when this legislation was imported from another jurisdiction and substitute House Bill 5189 was being drafted).

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Sec. 38a-91c. Disclosure to insured by controlling producer. Exception. The controlling producer, prior to the effective date of the policy, shall deliver written notice to the prospective insured disclosing the relationship between the controlling producer and the controlled insurer; except, if the business is placed through a subproducer who is not a controlling producer, the controlling producer shall retain in his records a signed commitment from the subproducer that the subproducer is aware of the relationship between the insurer and the controlling producer and that the subproducer has or will notify the insured.

(P.A. 92-112, S. 11, 35.)

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Sec. 38a-91d. Noncompliance: Remedies allowed. (a)(1) If the commissioner believes that the controlling producer or any other person has not materially complied with sections 38a-91 to 38a-91d, inclusive, or any regulation or order promulgated hereunder, after notice and opportunity to be heard, the commissioner may order the controlling producer to cease placing business with the controlled insurer; and

(2) If it was found that because of such material noncompliance the controlled insurer or any policyholder thereof has suffered any loss or damage, the commissioner may maintain a civil action or intervene in an action brought by or on behalf of the insurer or policyholder for recovery of compensatory damages for the benefit of the insurer or policyholder or other appropriate relief.

(b) If an order for liquidation or rehabilitation of the controlled insurer has been entered pursuant to section 38a-920 or 38a-915 and the receiver appointed under that order believes that the controlling producer or any other person has not materially complied with sections 38a-91 to 38a-91d, inclusive, or any regulation or order promulgated hereunder, and the insurer suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer.

(c) Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided for in this title.

(d) Nothing contained in this section is intended to or shall in any manner alter or affect the rights of policyholders, claimants, creditors or other third parties.

(P.A. 92-112, S. 12, 35.)

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Secs. 38a-91e to 38a-91j. Reserved for future use.

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Sec. 38a-91k. Captive insurers: Information to be submitted to commissioner. Each captive insurer that is domiciled in another state and offers, renews or continues insurance in this state shall provide the information described in subdivisions (1) to (3), inclusive, of subsection (a) of section 38a-253 to the Insurance Commissioner in the same manner required for risk retention groups. If a captive insurer does not maintain information in the form prescribed in section 38a-253, the captive insurer may submit the information to the Insurance Commissioner on such form as the commissioner prescribes. As used in this section and section 38a-25, “captive insurer” means an insurance company owned by another organization whose primary purpose is to insure risks of a parent organization or affiliated persons, as defined in section 38a-1, or in the case of groups and associations, an insurance organization owned by the insureds whose primary purpose is to insure risks of member organizations and group members and their affiliates.

(P.A. 05-275, S. 16; P.A. 10-5, S. 6.)

History: P.A. 05-275 effective July 1, 2005; P.A. 10-5 specified that requirements apply to captive insurers domiciled in another state, effective May 5, 2010.

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Secs. 38a-91l to 38a-91z. Reserved for future use.

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Sec. 38a-91aa. Captive insurance companies. Definitions. As used in this section, sections 38a-91bb to 38a-91uu, inclusive, and sections 38a-91ww and 38a-91xx:

(1) “Affiliated company” means any company in the same corporate system as a parent, an industrial insured or a member organization by virtue of common ownership, control, operation or management.

(2) “Agency captive insurance company” means a captive insurance company that:

(A) Is owned or directly or indirectly controlled by one or more insurance agents or insurance producers licensed in accordance with sections 38a-702a to 38a-702r, inclusive;

(B) Only insures against risks covered by insurance policies sold, solicited or negotiated through the insurance agents or insurance producers that own or control such captive insurance company; and

(3) “Alien captive insurance company” means any insurance company formed to write insurance business for its parent and affiliated companies and licensed pursuant to the laws of an alien jurisdiction that imposes statutory or regulatory standards on companies transacting the business of insurance in such jurisdiction that the commissioner deems to be acceptable.

(4) “Association” means any legal association of individuals, corporations, limited liability companies, partnerships, associations or other entities, where the association itself or some or all of the member organizations:

(A) Directly or indirectly own, control or hold with power to vote all of the outstanding voting securities or other voting interests of an association captive insurance company incorporated as a stock insurer;

(B) Have complete voting control over an association captive insurance company incorporated as a mutual corporation or formed as a limited liability company; or

(5) “Association captive insurance company” means any company that insures risks of the member organizations of an association, and includes a company that also insures risks of such member organizations' affiliated companies or of the association.

(6) “Branch business” means any insurance business transacted in this state by a branch captive insurance company.

(7) “Branch captive insurance company” means any alien captive insurance company or foreign captive insurance company licensed by the commissioner to transact the business of insurance in this state through a business unit with a principal place of business in this state.

(8) “Branch operations” means any business operations in this state of a branch captive insurance company.

(9) “Captive insurance company” means any (A) pure captive insurance company, agency captive insurance company, association captive insurance company, industrial insured captive insurance company, risk retention group, sponsored captive insurance company or special purpose financial captive insurance company that is domiciled in this state and formed or licensed under the provisions of this section and sections 38a-91bb to 38a-91tt, inclusive, or (B) branch captive insurance company.

(10) “Ceding insurer” means an insurance company, approved by the commissioner and licensed or otherwise authorized to transact the business of insurance or reinsurance in its state or country of domicile, that cedes risk to a special purpose financial captive insurance company pursuant to a reinsurance contract.

(11) “Commissioner” means the Insurance Commissioner.

(12) “Controlled unaffiliated business” means any person:

(A) Who, (i) in the case of a pure captive insurance company, is not in the corporate system of a parent and the parent's affiliated companies, (ii) in the case of an industrial insured captive insurance company, is not in the corporate system of an industrial insured and the industrial insured's affiliated companies, or (iii) in the case of a sponsored captive insurance company, is not in the corporate system of a participant and the participant's affiliated companies;

(B) Who, (i) in the case of a pure captive insurance company, has an existing contractual relationship with a parent or one of the parent's affiliated companies, (ii) in the case of an industrial insured captive insurance company, has an existing contractual relationship with an industrial insured or one of the industrial insured's affiliated companies, or (iii) in the case of a sponsored captive insurance company, has an existing contractual relationship with a participant or one of the participant's affiliated companies; and

(C) Whose risks are managed by a pure captive insurance company, an industrial insured captive insurance company or a sponsored captive insurance company, as applicable, in accordance with section 38a-91qq.

(13) “Excess workers' compensation insurance” means, in the case of an employer that has insured or self-insured its workers' compensation risks in accordance with applicable state or federal law, insurance in excess of a specified per-incident or aggregate limit established by the commissioner.

(14) “Foreign captive insurance company” means any insurance company formed to write insurance business for its parent and affiliated companies and licensed pursuant to the laws of a foreign jurisdiction that imposes statutory or regulatory standards on companies transacting the business of insurance in such jurisdiction that the commissioner deems to be acceptable.

(15) “Incorporated protected cell” means a protected cell that is established as a corporation or a limited liability company, separate from the sponsored captive insurance company with which it has entered into a participant contract.

(16) “Industrial insured” means an insured:

(A) Who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer;

(B) Whose aggregate annual premiums for insurance on all risks total at least twenty-five thousand dollars; and

(17) “Industrial insured captive insurance company” means any company that insures risks of the industrial insureds that comprise an industrial insured group, and includes a company that also insures risks of such industrial insureds' affiliated companies.

(18) “Industrial insured group” means any group of industrial insureds that collectively:

(A) Directly or indirectly own, control or hold with power to vote all of the outstanding voting securities or other voting interests of an industrial insured captive insurance company incorporated as a stock insurer;

(B) Have complete voting control over an industrial insured captive insurance company incorporated as a mutual corporation or formed as a limited liability company; or

(19) “Insurance securitization” or “securitization” means a transaction or a group of related transactions, which may include capital market offerings, that are effected through related risk transfer instruments and facilitating administrative agreements, in which all or part of the result of such transaction is used to fund a special purpose financial captive insurance company's obligations under a reinsurance contract with a ceding insurer and by which:

(A) A special purpose financial captive insurance company directly or indirectly obtains proceeds through the issuance of securities by such company or any other person; or

(B) A person provides, for the benefit of a special purpose financial captive insurance company, one or more letters of credit or other assets that the commissioner has authorized such company to treat as admitted assets for purposes of its annual report. “Insurance securitization” or “securitization” does not include the issuance of a letter of credit for the benefit of the commissioner to satisfy all or part of a special purpose financial captive insurance company's capital and surplus requirements under section 38a-91dd.

(20) “Member organization” means any individual, corporation, limited liability company, partnership, association or other entity that belongs to an association.

(21) “Mutual corporation” means a corporation organized without stockholders and includes a nonprofit corporation with members.

(22) “Parent” means any individual, corporation, limited liability company, partnership or other entity that directly or indirectly owns, controls or holds with power to vote more than fifty per cent of the outstanding voting:

(A) Securities of a pure captive insurance company organized as a stock insurer; or

(B) Membership interests of a pure captive insurance company organized as a nonprofit corporation or as a limited liability company.

(23) “Participant” means any association, corporation, limited liability company, partnership, trust or other entity, and any affiliated company or controlled unaffiliated business thereof, that is insured by a sponsored captive insurance company pursuant to a participant contract.

(24) “Participant contract” means a contract entered into by a sponsored captive insurance company and a participant by which the sponsored captive insurance company insures the risks of the participant and limits the losses of each such participant to its pro rata share of the assets of one or more protected cells identified in such participant contract.

(25) “Protected cell” means a separate account established by a sponsored captive insurance company, in which assets are maintained for one or more participants in accordance with the terms of one or more participant contracts to fund the liability of the sponsored captive insurance company assumed on behalf of such participants as set forth in such participant contracts.

(26) “Pure captive insurance company” means any company that insures risks of its parent and affiliated companies or controlled unaffiliated business.

(27) “Reinsurance contract” means a contract entered into by a special purpose financial captive insurance company and a ceding insurer by which the special purpose financial captive insurance company agrees to provide reinsurance to the ceding insurer for risks associated with the ceding insurer's insurance or reinsurance business.

(28) “Risk retention group” means a captive insurance company organized under the laws of this state pursuant to the federal Liability Risk Retention Act of 1986, 15 USC 3901 et seq., as amended from time to time, as a stock insurer or mutual corporation, a reciprocal or other limited liability entity.

(29) “Security” has the same meaning as provided in section 36b-3 and includes any form of debt obligation, equity, surplus certificate, surplus note, funding agreement, derivative or other financial instrument that the commissioner designates as a security for purposes of this section and sections 38a-91bb to 38a-91tt, inclusive.

(30) “Special purpose financial captive insurance company” means a company that is licensed by the commissioner in accordance with section 38a-91bb.

(31) “Special purpose financial captive insurance company security” means a security issued by (A) a special purpose financial captive insurance company, or (B) a third party, the proceeds of which are obtained directly or indirectly by a special purpose financial captive insurance company.

(32) “Sponsor” means any association, corporation, limited liability company, partnership, trust or other entity that is approved by the commissioner to organize and operate a sponsored captive insurance company and to provide all or part of the required unimpaired paid-in capital and surplus.

(33) “Sponsored captive insurance company” means a captive insurance company:

(A) In which the minimum required unimpaired paid-in capital and surplus are provided by one or more sponsors;

(B) That insures risks of its participants only through separate participant contracts; and

(C) That funds its liability to each participant through one or more protected cells and segregates the assets of each protected cell from the assets of other protected cells and from the assets of the sponsored captive insurance company's general account.

(34) “Surplus note” means an unsecured subordinated debt obligation possessing characteristics consistent with the National Association of Insurance Commissioners Statement of Statutory Accounting Principles No. 41, as amended from time to time, and as modified or supplemented by the commissioner.

(P.A. 08-127, S. 1; Oct. Sp. Sess. P.A. 11-1, S. 56; P.A. 18-151, S. 3; P.A. 22-118, S. 437.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 redefined “association”, “association captive insurance company”, “captive insurance company”, “controlled unaffiliated business”, “industrial insured captive insurance company”, “industrial insured group” and “parent”, defined “alien captive insurance company”, “branch business”, “branch captive insurance company”, “branch operations”, “ceding insurer”, “incorporated protected cell”, “insurance securitization”, “participant”, “participant contract”, “protected cell”, “reinsurance contract”, “security”, “special purpose financial captive insurance company”, “special purpose financial captive insurance company security”, “sponsor”, “sponsored captive insurance company” and “surplus note”, and made technical changes, effective July 1, 2012; P.A. 18-151 added references to Secs. 38a-91ww and 38a-91xx in introductory language, added new Subdiv. (2) defining “agency captive insurance company”, redesignated existing Subdivs. (2) to (32) as Subdivs. (3) to (33), and amended redesignated Subdiv. (9) to redefine “captive insurance company”, effective July 1, 2018; P.A. 22-118 replaced “section 38a-91aa to 38-91tt” with “this section, sections 38a-91bb to 38a-91uu” in introductory language, redefined “association”, “branch captive insurance company”, “controlled unaffiliated business” and “participant”, added new Subdiv. (14) defining “foreign captive insurance company”, redesignated existing Subdivs. (14) to (33) as Subdivs. (15) to (34), and made a technical change in Subdiv. (9) and redesignated Subdiv. (29), effective July 1, 2022.

See Sec. 38a-591j(b) re use of utilization review license fees to implement provisions of Secs. 38a-91aa to 38a-91tt, inclusive.

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Sec. 38a-91bb. Captive insurance companies. Licenses. Fees. (a) Any captive insurance company, when permitted by its articles of association, charter or other organizational document, may apply to the commissioner for a license to do the business of insurance against any kind of loss, damage or liability properly a subject of insurance, if such insurance is not prohibited by law or disapproved by the commissioner as being contrary to public policy, including life insurance, annuities, health insurance, as defined in section 38a-469, and commercial risk insurance, as defined in section 38a-663, provided:

(1) No pure captive insurance company may insure any risks other than those of its parent and affiliated companies or controlled unaffiliated business;

(2) No association captive insurance company may insure any risks other than those of its association, the member organizations of its association, and the member organizations' affiliated companies;

(3) No industrial insured captive insurance company may insure any risks other than those of (A) the industrial insureds that comprise the industrial insured group, (B) the industrial insureds' affiliated companies, or (C) the industrial insureds' controlled unaffiliated businesses;

(4) No risk retention group may insure any risks other than those of its members and owners;

(5) No captive insurance company may provide personal risk insurance, as defined in section 38a-663, for private passenger motor vehicle or homeowners insurance coverage or any component thereof;

(6) No captive insurance company may accept or cede reinsurance except as provided in section 38a-91kk;

(7) Any captive insurance company may provide excess workers' compensation insurance to its parent and affiliated companies, unless prohibited by the laws of the state having jurisdiction over the transaction or by federal law. Any captive insurance company may reinsure a workers' compensation qualified self-insured plan of its parent and affiliated companies, unless prohibited by federal law;

(8) Any captive insurance company that provides life insurance, annuities or health insurance shall comply with all applicable state and federal laws.

(b) No captive insurance company shall do any insurance business in this state unless:

(1) The captive insurance company first obtains from the commissioner a license authorizing the captive insurance company to do insurance business in this state;

(2) The captive insurance company's board of directors or committee of managers or, in the case of a reciprocal insurer, its subscribers' advisory committee holds at least one meeting each year in this state;

(3) The captive insurance company maintains its principal place of business in this state; and

(4) The captive insurance company appoints a registered agent to accept service of process and to otherwise act on its behalf in this state. Whenever such registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the commissioner shall be an agent of the captive insurance company upon whom any process, notice or demand may be served.

(A) File with the commissioner a certified copy of its organizational documents, a statement under oath of its president and secretary showing its financial condition, and any other statements or documents required by the commissioner; and

(B) Submit to the commissioner for approval a description of the coverages, deductibles, coverage limits and rates and such additional information as the commissioner may require. In the event of any subsequent material change in any item in such description, the captive insurance company shall submit to the commissioner for approval an appropriate revision and shall not offer any additional kinds of insurance until a revision of such description is approved by the commissioner. The captive insurance company shall inform the commissioner of any material change in rates not later than thirty days after the adoption of such change.

(2) Each applicant captive insurance company shall also file with the commissioner evidence of the following:

(A) The amount and liquidity of the company's assets relative to the risks to be assumed;

(B) The adequacy of the expertise, experience and character of the persons who will manage the company;

(D) The adequacy of the loss prevention programs of the company's insureds; and

(E) Such other factors deemed relevant by the commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations.

(3) Each applicant sponsored captive insurance company shall also file with the commissioner:

(A) Materials demonstrating how the applicant will account for the loss and expense experience of each protected cell at a level of detail deemed sufficient by the commissioner, and how such applicant will report such experience to the commissioner;

(B) A statement acknowledging that all financial records of the sponsored captive insurance company, including records pertaining to any protected cells, shall be made available for examination or inspection or by the commissioner or the commissioner's designee;

(D) Evidence that expenses shall be allocated to each protected cell in a fair and equitable manner.

(4) Each applicant special purpose financial captive insurance company shall also:

(A) Include with its plan of operation:

(i) A complete description of all significant transactions, including reinsurance, reinsurance security arrangements, securitizations, related transactions or arrangements, and to the extent not included in the transactions listed in this clause, a complete description of all parties other than the special purpose financial captive insurance company and the ceding insurer that will be involved in the issuance of special purpose financial captive insurance company securities and a description of any pledge, hypothecation or grant of a security interest in any of the special purpose financial captive insurance company's assets and in any stock or limited liability company interest in the special purpose financial captive insurance company;

(ii) The source and form of the special purpose financial captive insurance company's capital and surplus;

(iii) The proposed investment policy of the special purpose financial captive insurance company;

(iv) A description of the underwriting, reporting and claims payment methods by which losses covered by the reinsurance contract will be reported, accounted for and settled;

(v) Pro forma balance sheets and income statements illustrating one or more adverse case scenarios, as determined under criteria required by the commissioner, for the performance of the special purpose financial captive insurance company under all reinsurance contracts; and

(vi) The proposed rate and method for discounting reserves, if the special purpose financial captive insurance company is requesting authority to discount its reserves;

(B) Submit an affidavit of its president, a vice president, its treasurer or its chief financial officer that includes the following statements, that to the best of such person's knowledge and belief after reasonable inquiry:

(i) The proposed organization and operation of the special purpose financial captive insurance company comply with all applicable provisions of this chapter;

(ii) The special purpose financial captive insurance company's investment policy reflects and takes into account the liquidity of assets and the reasonable preservation, administration and management of such assets with respect to the risks associated with the reinsurance contract and the insurance securitization transaction. With respect to a special purpose financial captive insurance company, “management” means the board of directors, managing board or other individual or individuals vested with overall responsibility for the management of the affairs of such company, including, but not limited to, officers or other agents elected or appointed to act on behalf of such company; and

(iii) The reinsurance contract and any arrangement for securing the special purpose financial captive insurance company's obligations under such reinsurance contract, including, but not limited to, any agreements or other documentation to implement such arrangement, comply with the provisions of this chapter; and

(i) Copies of all agreements and documentation described in subparagraph (A) of this subdivision unless otherwise approved by the commissioner, and any other statements or documents required by the commissioner to evaluate the special purpose financial captive insurance company's application for licensure; and

(ii) An opinion of qualified legal counsel, in a form acceptable to the commissioner, that the offer and sale of any special purpose financial captive insurance company securities complies with all applicable registration requirements or applicable exemptions from or exceptions to such requirements of the federal securities laws and that the offer and sale of securities by the special purpose financial captive insurance company itself comply with all registration requirements or applicable exemptions from or exceptions to such requirements of the securities laws of this state. Such opinion shall not be required as part of the application if the special purpose financial captive insurance company includes a specific statement in its plan of operation that such opinions will be provided to the commissioner in advance of the offer or sale of any special purpose financial captive insurance company securities.

(5) A sponsored captive insurance company may apply to be licensed as a special purpose financial captive insurance company. Such company shall be subject to the provisions of sections 38a-91aa to 38a-91tt, inclusive, applicable to a sponsored captive insurance company and to a special purpose financial captive insurance company. In the event of conflict between such provisions applicable to a sponsored captive insurance company and to a special purpose financial captive insurance company, the provisions applicable to a special purpose financial captive insurance company shall control.

(6) Information submitted pursuant to this subsection shall be and shall remain confidential and shall not be made public by the commissioner or an employee or agent of the commissioner without the written consent of the company, except that:

(A) Such information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted such information is a party upon a showing by the party seeking to discover such information that:

(i) The information sought is relevant to and necessary for the furtherance of such action or case;

(ii) The information sought is unavailable from other nonconfidential sources; and

(iii) A subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner, provided such submission requirement shall not apply to a risk retention group; and

(B) The commissioner may, in the commissioner's discretion, disclose such information to a public official having jurisdiction over the regulation of insurance in another state, provided:

(i) Such public official agrees, in writing, to maintain the confidentiality of such information; and

(ii) The laws of the state in which such public official serves require such information to be and remain confidential.

(d) (1) Each captive insurance company shall pay to the commissioner a nonrefundable fee of eight hundred dollars for examining, investigating and processing its application for a license. The commissioner may retain legal, financial and examination services from outside the department for the licensing and financial oversight of a captive insurance company, the reasonable cost of which may be charged against such company. The provisions of subdivisions (2) to (5), inclusive, of subsection (k) of section 38a-14 shall apply to this subdivision.

(2) Each captive insurance company shall pay a license fee for the first year of licensure and a renewal fee for each year thereafter as set forth in section 38a-11.

(e) (1) If the commissioner finds that the documents and statements that a captive insurance company, other than a special purpose financial captive insurance company, has filed comply with the provisions of sections 38a-91aa to 38a-91tt, inclusive, the commissioner may grant a license authorizing the company to do insurance business in this state until April first thereafter. The captive insurance company may apply to renew such license on such forms as the commissioner prescribes.

(2) (A) The commissioner may grant a license authorizing a special purpose financial captive insurance company to do reinsurance business in this state until April first thereafter upon the commissioner's finding that (i) the proposed plan of operation provides for a reasonable and expected successful operation, (ii) the terms of the reinsurance contract and related transactions comply with sections 38a-91aa to 38a-91tt, inclusive, (iii) the proposed plan of operation is not hazardous to any ceding insurer, and (iv) the insurance regulator of the state of domicile of each ceding insurer has notified the commissioner in writing or has otherwise provided assurance satisfactory to the commissioner that such regulator has approved or has not disapproved the transaction, provided the commissioner shall not be precluded from issuing a license to a special purpose financial captive insurance company if such regulator has not responded with respect to all or any part of the transaction.

(B) In conjunction with granting such license, the commissioner may issue an order to the special purpose financial captive insurance company of any additional provisions, terms or conditions regarding the organization, licensing or operation of such company that are not inconsistent with the provisions of this chapter and are deemed appropriate by the commissioner.

(3) The commissioner shall not grant a license to a branch captive insurance company unless the alien captive insurance company or foreign captive insurance company grants the commissioner authority to examine the alien captive insurance company or foreign captive insurance company in the jurisdiction in which the alien captive insurance company or foreign captive insurance company is formed, operates or maintains books and records.

(P.A. 08-127, S. 2; Oct. Sp. Sess. P.A. 11-1, S. 57; P.A. 12-145, S. 2; P.A. 14-6, S. 1; P.A. 22-118, S. 439.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 amended introductory language in Subsec. (a) and Subsec. (a)(2), and added Subsec. (a)(7), re types of insurance that captive insurance companies, association captive insurance companies and industrial insured captive insurance companies may provide, amended Subsec. (c) by adding new Subdiv. (3) re additional filing requirements for sponsored captive insurance companies, Subdiv. (4) re additional filing requirements for special purpose financial captive insurance companies and Subdiv. (5) re requirements applicable to a sponsored captive insurance company applying to be licensed as a special purpose financial captive insurance company and by redesignating existing Subdiv. (3) as Subdiv. (6), made technical and conforming changes in Subsec. (d), amended Subsec. (e) by designating existing provisions as Subdiv. (1), and making a conforming change therein, adding Subdiv. (2) re licensure requirements for a special purpose financial captive insurance company, and adding Subdiv. (3) re licensure requirements for a branch captive insurance company, effective July 1, 2012; P.A. 12-145 made a technical change in Subsec. (a)(5), effective June 15, 2012; P.A. 14-6 amended Subsec. (a)(5) to add “personal risk insurance, as defined in section 38a-663, for”; P.A. 22-118 amended Subsec. (a) by deleting “is not” re disapproval by commissioner, amended Subsec. (e)(3) by adding references to foreign captive insurance company and “, operates or maintains books and records”, and made technical changes in Subsecs. (a), (b), (c)(3)(A), (c)(4)(B) and (c)(6), effective July 1, 2022.

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Sec. 38a-91cc. Same or deceptively similar name prohibited. No captive insurance company shall adopt a name that is the same, deceptively similar or likely to be confused with or mistaken for any other existing business name registered in this state.

(P.A. 08-127, S. 3.)

History: P.A. 08-127 effective January 1, 2009.

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Sec. 38a-91dd. Capital and surplus requirements. (a)(1) Except as provided in subdivision (3) of this subsection, the commissioner shall not issue a license to a captive insurance company or allow the company to retain such license unless the company has and maintains unimpaired paid-in capital and surplus of:

(A) In the case of a pure captive insurance company, not less than the greater of:

(i) Fifty thousand dollars; or

(ii) An amount that the commissioner determines is necessary for the pure captive insurance company to meet such pure captive insurance company's policy obligations;

(B) In the case of an association captive insurance company, not less than the greater of:

(i) Two hundred fifty thousand dollars; or

(ii) An amount that the commissioner determines is necessary for the association captive insurance company to meet such association captive insurance company's policy obligations;

(i) Two hundred fifty thousand dollars; or

(ii) An amount that the commissioner determines is necessary for the industrial insured captive insurance company to meet such industrial insured captive insurance company's policy obligations;

(D) In the case of a risk retention group, not less than one million dollars;

(E) In the case of a sponsored captive insurance company, not less than the greater of:

(i) Seventy-five thousand dollars; or

(ii) An amount that the commissioner determines is necessary for the sponsored captive insurance company to meet such sponsored captive insurance company's policy obligations;

(F) In the case of a special purpose financial captive insurance company, not less than the greater of:

(i) Two hundred fifty thousand dollars; or

(ii) An amount that the commissioner determines is necessary for the special purpose financial captive insurance company to meet such special purpose financial captive insurance company's policy obligations;

(G) In the case of a sponsored captive insurance company licensed as a special purpose financial captive insurance company, not less than the greater of:

(i) Two hundred fifty thousand dollars; or

(ii) An amount that the commissioner determines is necessary for such captive insurance company to meet such captive insurance company's policy obligations; and

(H) In the case of an agency captive insurance company, not less than the greater of:

(i) Two hundred fifty thousand dollars; or

(ii) An amount that the commissioner determines is necessary for the agency captive insurance company to meet such agency captive insurance company's policy obligations.

(2) (A) The commissioner shall not issue a license to a branch captive insurance company or allow the branch captive insurance company to retain such license unless the branch captive insurance company has and maintains, as security for the payment of liabilities attributable to the branch operations:

(i) Not less than the greater of:

(I) Fifty thousand dollars; or

(II) An amount that the commissioner determines is necessary to secure the payment of liabilities attributable to the branch captive insurance company's operations; and

(ii) Reserves on such insurance policies or such reinsurance contracts as may be issued or assumed by the branch captive insurance company through its branch operations, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses and unearned premiums with regard to business written through the branch operations. The commissioner may permit a branch captive insurance company to credit against any such reserves any assets belonging to:

(I) The branch captive insurance company that are held in trust for, or otherwise segregated or controlled by, a ceding insurer, that secure the branch captive insurance company's reinsurance obligations to the ceding insurer; or

(II) A reinsurer that are held in trust for, or otherwise under the control of, the branch captive insurance company, that secure the reinsurer's reinsurance obligations to the branch captive insurance company.

(B) The amounts required under subparagraph (A) of this subdivision may be held, with the prior approval of the commissioner, in the form of:

(i) A trust formed under a trust agreement and funded by assets acceptable to the commissioner;

(ii) An irrevocable letter of credit issued or confirmed by a bank approved by the commissioner;

(iii) With respect to the amount required under subparagraph (A)(i) of this subdivision only, cash on deposit with the commissioner; or

(iv) Any combination of the forms described in subparagraphs (B)(i) to (B)(iii), inclusive, of this subdivision.

(3) The commissioner may exempt a branch captive insurance company from the provisions of subdivisions (1) and (2) of this subsection if the branch captive insurance company is a foreign captive insurance company and the commissioner, in the commissioner's discretion, determines that the branch captive insurance company is financially stable.

(b) Notwithstanding any other provision of this section, the commissioner shall have the discretion to allow a captive insurance company, other than a captive insurance company organized as a risk retention group, to maintain less than the required unimpaired paid-in capital and surplus set forth in subsection (a) of this section. The commissioner shall consider the type, volume and nature of the insurance or reinsurance business transacted by such a captive insurance company in establishing the amount of unimpaired paid-in capital and surplus the company is required to maintain.

(c) Except as specified in subdivision (2) of subsection (a) of this section, capital and surplus may be in the form of cash or an irrevocable letter of credit issued by a bank approved by the commissioner.

(d) The commissioner may adopt regulations, in accordance with chapter 54, to establish additional capital and surplus requirements based upon the type, volume and nature of insurance business transacted.

(P.A. 08-127, S. 4; Oct. Sp. Sess. P.A. 11-1, S. 58; P.A. 17-198, S. 2; P.A. 18-151, S. 4; P.A. 22-118, S. 440.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 redesignated existing Subsec. (a) as Subsec. (a)(1), amended Subsec. (a)(1)(B) to change association captive insurance companies' capital and surplus requirements from $750,000 to $500,000, added Subsec. (a)(1)(E) to (a)(1)(G) re capital and surplus requirements for sponsored captive insurance companies, special purpose financial captive insurance companies and sponsored captive insurance companies licensed as special purpose financial captive insurance companies, added Subsec. (a)(2) re security and reserve requirements for branch captive insurance companies, amended Subsec. (c) to delete requirement that a bank issuing an irrevocable letter of credit be chartered by the state or a member of the Federal Reserve System, and made conforming and technical changes, effective July 1, 2012; P.A. 17-198 amended Subsec. (a)(1)(E) to replace $500,000 with $225,000, added new Subsec. (c) re insurance commissioner's discretion to allow captive insurance company to maintain unimpaired paid-in capital and surplus in amounts less than the amounts required under Subsec. (a), and redesignated existing Subsec. (c) as Subsec. (d), effective July 1, 2017; P.A. 18-151 amended Subsec. (a)(1) by adding Subpara. (H) re agency captive insurance company and made a conforming change, effective July 1, 2018; P.A. 22-118 substantially revised Subsec. (a) re requirements for minimum amounts of unimpaired paid-in capital and surplus and security for payment of liabilities attributable to branch operations, deleted former Subsec. (b) allowing commissioner to adopt regulations re additional capital and surplus requirements and added same as new Subsec. (d), and redesignated existing Subsecs. (c) and (d) as Subsecs. (b) and (c), effective July 1, 2022.

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Sec. 38a-91ee. Payment of dividends and other distributions. (a) No captive insurance company may pay a dividend out of, or other distribution with respect to, capital or surplus without the prior approval of the Insurance Commissioner. Approval of an ongoing plan for the payment of dividends or other distributions shall be conditioned on the retention, at the time of each payment, of capital or surplus in excess of amounts specified by, or determined in accordance with formulas approved by, the commissioner.

(b) No special purpose financial captive insurance company may declare or pay a dividend or distribution if such dividend or distribution would jeopardize the ability of such company or any other person to fulfill such company's or other person's respective obligations under such company's securitization agreements, reinsurance contract or any related transaction.

(P.A. 08-127, S. 5; Oct. Sp. Sess. P.A. 11-1, S. 59.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 designated existing provisions as Subsec. (a) and added Subsec. (b) re dividend declaration or distribution by a special purpose financial captive insurance company, effective July 1, 2012.

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Sec. 38a-91ff. Incorporation and formation. Transfer of domicile. (a) A pure captive insurance company may be incorporated as a stock insurer with its capital divided into shares and held by the stockholders, as a nonprofit corporation with one or more members or as a manager-managed limited liability company.

(b) An association captive insurance company, an industrial insured captive insurance company or a risk retention group may be:

(1) Incorporated as a stock insurer with its capital divided into shares and held by the stockholders;

(2) Incorporated as a mutual corporation without capital stock, the governing body of which is elected by its insureds;

(3) Organized as a reciprocal insurer; or

(4) Organized as a manager-managed limited liability company.

(c) (1) A sponsored captive insurance company shall be incorporated as a stock insurer with its capital divided into shares held by the stockholders, as a mutual corporation, as a nonprofit corporation with one or more members or as a manager-managed limited liability company.

(2) One or more sponsors may apply to the commissioner to form a sponsored captive insurance company. In evaluating the qualifications of a proposed sponsor, the commissioner shall consider the type and structure of the proposed sponsor entity, its experience in financial operations, financial stability and strength, business reputation and such other facts deemed relevant by the commissioner.

(3) (A) Associations, corporations, limited liability companies, partnerships, trusts and other business entities may be participants in a sponsored captive insurance company. No risk retention group shall be a sponsor or a participant of a sponsored captive insurance company.

(B) A sponsor may be a participant in a sponsored captive insurance company.

(D) A participant shall insure only its own risks through a sponsored captive insurance company.

(d) (1) A special purpose financial captive insurance company may be incorporated as a stock insurer with its capital divided into shares and held by its stockholders or as a manager-managed limited liability company.

(2) A special purpose financial captive insurance company's organizational documents shall limit the special purpose financial captive insurance company's authority to transact the business of insurance or reinsurance to those activities that the special purpose financial captive insurance company conducts to accomplish its purposes described in sections 38a-91aa to 38a-91tt, inclusive. For purposes of this subdivision and section 38a-91bb, in the case of a special purpose financial captive insurance company formed (A) as a stock insurer, “organizational document” means such company's articles of incorporation and bylaws, and (B) as a limited liability company, “organizational document” means such company's articles of organization and operating agreement.

(3) A special purpose financial captive insurance company may reinsure the risks of a ceding insurer only. A special purpose financial captive insurance company may purchase, with the prior approval of the commissioner, reinsurance to cede the risks assumed under a reinsurance contract.

(4) A captive insurance company that is engaged in, or will be engaged in, an insurance securitization on or after July 1, 2012, shall be deemed to be a special purpose financial captive insurance company. The commissioner may require such captive insurance company to take any action that the commissioner determines is reasonably necessary to bring such company into compliance as a special purpose financial captive insurance company. The commissioner may issue an order as described in subparagraph (B) of subdivision (2) of subsection (e) of section 38a-91bb.

(e) No branch captive insurance company shall do any insurance business in this state unless it maintains a principal place of business for its branch operations in this state.

(f) A captive insurance company incorporated or organized in this state shall have not less than three incorporators or three organizers of whom at least one shall be a resident of this state.

(g) In the case of a captive insurance company:

(1) Formed as a corporation, before the articles of incorporation are transmitted to the Secretary of the State, the incorporators shall petition the Insurance Commissioner to issue a certificate setting forth the commissioner's finding that the establishment and maintenance of the proposed corporation will promote the general good of the state. In arriving at such a finding the commissioner shall consider:

(A) The character, reputation, financial standing and purposes of the incorporators;

(B) The character, reputation, financial responsibility, insurance experience and business qualifications of the officers and directors; and

(2) Formed as a reciprocal insurer, the organizers shall petition the commissioner to issue a certificate setting forth the commissioner's finding that the establishment and maintenance of the proposed association will promote the general good of the state. In arriving at such a finding the commissioner shall consider the items set forth in subdivision (1) of this subsection.

(3) Formed as a limited liability company, before the articles of organization are transmitted to the Secretary of the State, the organizers shall petition the commissioner to issue a certificate setting forth the commissioner's finding that the establishment and maintenance of the proposed company will promote the general good of the state. In arriving at such a finding, the commissioner shall consider the items set forth in subdivision (1) of this subsection.

(4) The articles of incorporation and certificate set forth in subdivisions (1) to (3), inclusive, of this subsection shall be transmitted to the Secretary of the State along with any fees required by the Secretary of the State, who shall record both the articles of incorporation and the certificate.

(h) In the case of a captive insurance company licensed as a branch captive insurance company, the alien captive insurance company or foreign captive insurance company shall petition the commissioner to issue a certificate setting forth the commissioner's finding that, after considering the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors of the alien captive insurance company or foreign captive insurance company, the licensing and maintenance of the branch operations will promote the general good of the state. The alien captive insurance company or foreign captive insurance company may register to do business in this state after the commissioner's certificate is issued.

(i) The capital stock of a captive insurance company incorporated as a stock insurer may be authorized with no par value.

(j) In the case of a captive insurance company:

(1) Formed as a corporation, (A) at least one of the members of the board of directors shall be a resident of this state, and (B) the articles of incorporation or bylaws of such company may authorize a quorum of its board of directors to consist of no fewer than one-third of the fixed or prescribed number of directors;

(2) Formed as a reciprocal insurer, (A) at least one of the members of the subscribers' advisory committee shall be a resident of this state, and (B) the subscribers' agreement or other organizing document of such company may authorize a quorum of its subscribers' advisory committee to consist of no fewer than one-third of the number of its members;

(3) Formed as a limited liability company, at least one of the managers shall be a resident of this state.

(k) Other than captive insurance companies formed as limited liability companies or as nonprofit corporations, captive insurance companies formed as corporations under the provisions of sections 38a-91aa to 38a-91tt, inclusive, shall have the privileges and be subject to the provisions of title 33 as well as the applicable provisions in sections 38a-91aa to 38a-91tt, inclusive. In the event of conflict between the provisions of title 33 and sections 38a-91aa to 38a-91tt, inclusive, the provisions of sections 38a-91aa to 38a-91tt, inclusive, shall control.

(l) Captive insurance companies formed under the provisions of sections 38a-91aa to 38a-91tt, inclusive:

(1) As limited liability companies shall have the privileges and be subject to the provisions of chapter 613 and applicable provisions in sections 38a-91aa to 38a-91tt, inclusive. In the event of a conflict between the provisions of chapter 613 and sections 38a-91aa to 38a-91tt, inclusive, the provisions of sections 38a-91aa to 38a-91tt, inclusive, shall control;

(2) As nonprofit corporations shall have the privileges and be subject to the applicable provisions of title 33 and applicable provisions in sections 38a-91aa to 38a-91tt, inclusive. In the event of conflict between the provisions of title 33 and sections 38a-91aa to 38a-91tt, inclusive, the provisions of sections 38a-91aa to 38a-91tt, inclusive, shall control; or

(3) As reciprocal insurers shall have the privileges and be subject to the provisions of sections 38a-91aa to 38a-91tt, inclusive. In the event of conflict between the provisions of the sections specified in section 38a-91oo and the provisions of sections 38a-91aa to 38a-91tt, inclusive, the provisions of sections 38a-91aa to 38a-91tt, inclusive, shall control.

(m) In the case of captive insurance companies formed as limited liability companies, reciprocal insurers or mutual corporations, any proxy appointed by a member, subscriber or policyholder, as applicable, shall be valid if such proxy is appointed and transmitted in accordance with the provisions of section 33-706.

(n) The provisions of this chapter pertaining to mergers, consolidations, conversions and transfers of domicile shall apply in determining the procedures to be followed by captive insurance companies in carrying out any of the transactions described in this chapter.

(o) Any pure captive insurance company, association captive insurance company, industrial insured captive insurance company, risk retention group, sponsored captive insurance company or special purposes financial captive insurance company that is organized pursuant to the laws of another state may become a domestic captive insurance company of the same type by complying with the requirements of sections 38a-91bb to 38a-91tt, inclusive, relating to the organization and licensing of such type of company and designating its principal place of business at a location in this state.

(P.A. 08-127, S. 6; P.A. 10-5, S. 5; Oct. Sp. Sess. P.A. 11-1, S. 60; P.A. 14-6, S. 2–4; P.A. 22-118, S. 441.)

History: P.A. 08-127 effective January 1, 2009; P.A. 10-5 amended Subsec. (d) to delete former Subdiv. (1)(B) re transmittal of articles of incorporation, certificate and organization fee to Secretary of the State, make technical changes and add Subdiv. (4) re transmittal of articles of incorporation, certificate and fees to Secretary of the State, effective May 5, 2010; Oct. Sp. Sess. P.A. 11-1 redesignated existing Subsecs. (c) to (i) as Subsecs. (f), (g), (i), (j), (k), (l) and (n), added new Subsec. (c) re formation of a sponsored captive insurance company, added new Subsec. (d) re formation of a special purpose financial captive insurance company, added new Subsec. (e) re establishment of a branch captive insurance company, added new Subsec. (h) re issuance of a certificate to an alien captive insurance company, amended redesignated Subsec. (j) by adding Subdivs. (1)(B) and (2)(B) re quorum, amended redesignated Subsec. (l) by adding Subdiv. (3) re reciprocal insurers, added new Subsec. (m) re proxy for captive insurance companies formed as limited liability companies, reciprocal insurers or mutual corporations, deleted former Subsecs. (j), (k) and (l) re reciprocal insurers and quorum, and made conforming and technical changes, effective July 1, 2012 (Revisor's note: In Subsecs. (e) and (h), references to “branch captive” were changed editorially by the Revisors to “branch captive insurance company” for accuracy); P.A. 14-6 amended Subsec. (e) to delete provision re restriction on type of insurance or reinsurance branch captive insurance company may write and to make a technical change, amended Subsec. (n) to add reference to transfers of domicile and added Subsec. (o) re requirements for captive insurance company organized pursuant to laws of another state to become domestic captive insurance company of the same type; P.A. 22-118 amended Subsec. (h) to add references to foreign captive insurance company, effective July 1, 2022.

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Sec. 38a-91gg. Annual reports. (a) Captive insurance companies shall not be required to make any annual report except as provided in sections 38a-91aa to 38a-91tt, inclusive.

(b) (1) (A) Except as provided in subparagraph (B) of this subdivision, prior to March first of each year and, in the case of pure captive insurance companies and industrial insured captive insurance companies, prior to March fifteenth of each year, each captive insurance company shall file with the commissioner a report of the captive insurance company's financial condition verified by oath of two executive officers of the captive insurance company. The commissioner shall establish the form and content of the annual report to be filed by special purpose captive insurance companies.

(B) Each branch captive insurance company shall file with the commissioner a copy of all reports and statements required to be filed under the laws of the jurisdiction in which the alien captive insurance company or foreign captive insurance company is formed. Such reports and statements shall be verified by oath of two executive officers of the branch captive insurance company and filed with the commissioner on the same day that such reports and statements must be filed in the domiciliary jurisdiction of the alien captive insurance company or foreign captive insurance company. If the commissioner is satisfied that the annual report filed by the alien captive insurance company or foreign captive insurance company in the domiciliary jurisdiction of the alien captive insurance company or foreign captive insurance company provides adequate information concerning the financial condition of the alien captive insurance company or foreign captive insurance company, the commissioner may waive the requirement for completion of the annual report required under subparagraph (A) of this subdivision. If the commissioner is not satisfied with such reports and statements, or if the branch captive insurance company is not required to file such reports and statements in the domiciliary jurisdiction of the alien captive insurance company or foreign captive insurance company, the branch captive insurance company shall file a report, at a time and in a form and manner prescribed by the commissioner, that provides the commissioner with adequate information concerning the financial condition of the alien captive insurance company or foreign captive insurance company.

(2) (A) Each captive insurance company other than a special purpose financial captive insurance company shall report using generally accepted accounting principles, unless the commissioner requires, approves or accepts the use of statutory accounting principles or other comprehensive basis of accounting, with any appropriate or necessary modifications or adaptations required or approved or accepted by the commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the commissioner. Except as otherwise provided, each association captive insurance company and each risk retention group shall file its report in the form required by sections 38a-53 and 38a-53a. The commissioner may adopt regulations, in accordance with chapter 54, to establish the manner in which pure captive insurance companies and industrial insured captive insurance companies shall report. The provisions of subsection (b) of section 38a-69a shall apply to each report filed pursuant to this section.

(B) Each special purpose financial captive insurance company shall report using statutory accounting principles, unless the commissioner requires, approves or accepts the use of generally accepted accounting principles or other comprehensive basis of accounting, with any appropriate or necessary modifications or adaptations required or approved or accepted by the commissioner and as supplemented by additional information required by the commissioner.

(c) (1) Any pure captive insurance company or industrial insured captive insurance company may make written application to the commissioner for approval to file the required report at the end of its fiscal year. If the commissioner grants approval for such alternative reporting date:

(A) The annual report shall be due not later than seventy-five days after the end of its fiscal year; and

(B) In order to provide sufficient detail to support the premium tax return, the pure captive insurance company or industrial insured captive insurance company shall file prior to March fifteenth of each year for each calendar year-end such information as the commissioner may prescribe, verified by oath of two of its executive officers.

(2) Any branch captive insurance company may make written application to the commissioner for approval to file the required reports and statements at the end of its fiscal year. If the commissioner grants approval for such alternative reporting date, the reports and statements shall be due not later than sixty days after the end of its fiscal year.

(3) Any special purpose financial captive insurance company may make written application to the commissioner for approval to file the required report at the end of its fiscal year. If the commissioner grants approval for such alternative reporting date, the commissioner shall establish the content of any additional filing required from such company.

(P.A. 08-127, S. 7; Oct. Sp. Sess. P.A. 11-1, S. 61; P.A. 22-118, S. 442.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 made a technical change in Subsec. (a), amended Subsec. (b) to change due date for a pure captive insurance company's or industrial insured captive insurance company's annual report from March 1 to March 15 and to add requirements for annual reports by branch captive insurance companies and special purpose financial captive insurance companies, amended Subsec. (c) by designating existing provisions as Subdiv. (1) and amending same to change alternative reporting due date for a pure captive insurance company's or industrial insured captive insurance company's annual report from 60 days to not later than 75 days after the end of company's fiscal year and due date of additional information required by commissioner from March 1 to March 15, and by adding Subdivs. (2) and (3) re allowing a branch captive insurance company and a special purpose financial captive insurance company to apply for approval of an alternative reporting date, effective July 1, 2012; P.A. 22-118 substantially revised Subsec. (b)(1) re reporting requirements, effective July 1, 2022.

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Sec. 38a-91hh. Examinations of captive insurance companies. Costs. Confidentiality of financial examination workpapers and reports. (a)(1) Except as provided in subdivision (3) of this subsection, the commissioner or the commissioner's designee shall, whenever the commissioner determines it to be prudent but not less frequently than once every five years, inspect and examine each captive insurance company's affairs to ascertain the captive insurance company's financial condition, the captive insurance company's ability to fulfill its obligations and whether the captive insurance company has complied with the provisions of sections 38a-91aa to 38a-91tt, inclusive, and any other applicable provisions of this title.

(2) The examination of a branch captive insurance company pursuant to this section shall be of branch business and branch operations only, as long as the branch captive insurance company provides annually to the commissioner a certificate of compliance or its equivalent, issued by or filed with the licensing authority of the jurisdiction in which the branch captive insurance company is formed, and demonstrates to the commissioner's satisfaction that such branch captive insurance company is operating in sound financial condition in accordance with all applicable laws and regulations of such jurisdiction.

(3) The commissioner may waive the requirement that the commissioner or the commissioner's designee inspect and examine a captive insurance company's affairs pursuant to this subsection if the captive insurance company is a pure captive insurance company or a branch captive insurance company of the pure captive insurance company.

(b) In scheduling and determining the nature, scope and frequency of such examinations, the commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and such other criteria as set forth in the examiners' handbook adopted by the National Association of Insurance Commissioners and in effect at the time the commissioner exercises discretion under this section.

(c) (1) To carry out examinations under this section, the commissioner may appoint as examiners one or more competent persons, not officers of or affiliated with or interested in any insurance company, other than as a policyholder. The commissioner may engage the services of attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists to assist in conducting the examinations under this section as examiners, the cost of which shall be borne by the company which is the subject of the examination. Notwithstanding the provisions of this subdivision, no domestic captive insurance company subject to examination under this section shall pay, as costs associated with the examination, the salaries, fringe benefits, traveling and maintenance expenses of examining personnel of the Insurance Department engaged in such examination if such domestic company is otherwise liable to assessment levied under section 38a-47, except that such company shall pay the traveling and maintenance expenses of examining personnel of the department when such company is examined outside the state.

(2) In conducting the examination, the commissioner, the commissioner's actuary or any examiner authorized by the commissioner may examine, under oath, the officers and agents of such a company and all persons deemed to have material information regarding the company's property or business. Each such company, its officers and agents shall produce the books and papers, in its or their possession, relating to its business or affairs, and any other person may be required to produce any book or paper, in his custody, deemed to be relevant to such examination for the inspection of the commissioner, the commissioner's actuary or examiners, when required. The officers and agents of the company shall facilitate the examination and aid the examiners in making the same so far as it is in their power to do so. The refusal of any company by its officers, directors, employees or agents to submit to examination or to comply with any reasonable written request of the examiners shall be grounds for suspension of, or revocation of or nonrenewal of any license or authority held by the company to engage in an insurance or other business subject to the commissioner's jurisdiction. Any such proceedings for suspension, revocation or nonrenewal of any license or authority shall be conducted pursuant to section 38a-91ii.

(3) In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the examiners' handbook adopted by the National Association of Insurance Commissioners. The commissioner may also adopt such other guidelines or procedures as the commissioner may deem appropriate.

(d) (1) Nothing contained in this section shall be construed to limit the commissioner's authority to terminate or suspend any examination in order to pursue legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

(2) Nothing contained in this section shall be construed to limit the commissioner's authority in such legal or regulatory action to use and, if appropriate, to make public any final or preliminary examination report, any examiner or company workpapers or other documents, or any other information discovered or developed during the course of any examination.

(3) Not later than sixty days after completion of the examination, the examiner in charge shall file, under oath, with the Insurance Department a verified written report of examination. Upon receipt of the verified report, the Insurance Department shall transmit the report to the company examined, together with a notice which shall afford the company examined a reasonable opportunity, not to exceed thirty days, to make a written submission or rebuttal with respect to any matters contained in the examination report. Not later than thirty days after the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's workpapers and enter an order: (A) Adopting the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, regulation or prior order of the commissioner, the commissioner may order the company to take any action the commissioner considers necessary and appropriate to cure such violation; or (B) rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation or information, and refiling pursuant to subparagraph (A) of this subdivision; or (C) calling for an investigatory hearing with no less than twenty days notice to the company for purposes of obtaining additional documentation, data, information and testimony.

(e) (1) All orders entered pursuant to subdivision (3) of subsection (d) of this section shall be accompanied by findings and conclusions resulting from the commissioner's consideration and review of the examination report, relevant examiner workpapers and any written submissions or rebuttals. The findings and conclusions, which form the basis of any such order of the commissioner, shall be subject to review as provided in section 38a-19.

(2) Any investigatory hearing conducted under subparagraph (C) of subdivision (3) of subsection (d) of this section by the commissioner or authorized representative shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies or disputed issues apparent (A) upon the filed examination report, (B) raised by or as a result of the commissioner's review of relevant workpapers, or (C) by the written submission or rebuttal of the company. Not later than twenty days after conclusions of any such hearing, the commissioner shall enter an order pursuant to subparagraph (A) of subdivision (3) of subsection (d) of this section. The commissioner shall not appoint an examiner as an authorized representative to conduct the hearing. The hearing shall proceed expeditiously with discovery by the company limited to the examiner's workpapers which tend to substantiate any assertions set forth in any written submission or rebuttal. The commissioner or the commissioner's authorized representative may issue subpoenas for the attendance of any witnesses or the production of any documents deemed relevant to the investigation whether under the control of the department, the company or other persons. The documents produced shall be included in the record and testimony taken by the commissioner or the commissioner's authorized representative shall be under oath and preserved for the record. Nothing contained in this section shall require the department to disclose any information or records which would indicate or show the existence or content of any investigation or activity of a criminal justice agency. The hearing shall proceed with the commissioner or the commissioner's authorized representative posing questions to the persons subpoenaed. Thereafter the company and the Insurance Department may present testimony relevant to the investigation. Cross-examination shall be conducted only by the commissioner or the commissioner's authorized representative. The company and the Insurance Department shall be permitted to make closing statements and may be represented by counsel of their choice.

(f) The commissioner may, if the commissioner deems it in the public interest, publish any such report or the result of any such examination contained in such report in one or more newspapers of the state.

(g) Nothing contained in this section shall prevent or be construed as prohibiting the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating to such report to (1) insurance regulatory officials of this or any other state or country, (2) law enforcement officials of this or any other state, or (3) any agency of this or any other state or of the federal government at any time, provided such agency or office receiving the report or matters relating to such report agrees, in writing, that such documents shall be confidential.

(h) All workpapers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the commissioner or any other person in the course of an examination made under this section shall (1) be confidential, (2) not be subject to subpoena, and (3) not be made public by the commissioner or any other person, except to the extent provided in subsection (g) of this section. Access to such information may be granted by the commissioner to the National Association of Insurance Commissioners, as long as it agrees, in writing, that such information shall be confidential.

(i) (1) The commissioner may engage the services of, from time to time, on an individual basis, qualified actuaries, certified public accountants or other similar individuals who are independently practicing their professions, even though such persons may, from time to time, be similarly employed or retained by persons subject to examination under this section.

(2) No cause of action shall arise nor shall any liability be imposed against the commissioner, the commissioner's authorized representatives or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out the provisions of this section.

(3) No cause of action shall arise, nor shall any liability be imposed, against any person for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative examiner pursuant to an examination made under this section, if such act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.

(4) This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision (2) of this subsection.

(5) A person identified in subdivision (2) of this subsection shall be entitled to an award of attorney's fees and costs if he is the prevailing party in a civil action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of this section and the party bringing the action was not substantially justified in doing so. For purposes of this section, a proceeding is “substantially justified” if it had a reasonable basis in law or fact at the time that it was initiated.

(P.A. 08-127, S. 8; P.A. 09-74, S. 11, 12; Oct. Sp. Sess. P.A. 11-1, S. 62; P.A. 14-235, S. 41; P.A. 22-118, S. 443.)

History: P.A. 08-127 effective January 1, 2009; P.A. 09-74 made technical changes in Subsecs. (c)(2), (g), (h) and (i)(1), effective May 27, 2009; Oct. Sp. Sess. P.A. 11-1 redesignated existing Subsec. (a) as Subsec. (a)(1) and amended same to change the time period for commissioner to conduct an examination from 5 to 3 years and add provision for extending such period to 5 years, added Subsec. (a)(2) re examination of a branch captive insurance company, and made technical changes in Subsecs. (c)(1), (g) and (h), effective July 1, 2012; P.A. 14-235 made a technical change in Subsec. (i)(5); P.A. 22-118 substantially revised Subsec. (a) re inspection and examination of captive insurance companies' affairs and made technical changes, effective July 1, 2022.

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Sec. 38a-91ii. Suspension, revocation or refusal to renew license. Amendment or modification of a special purpose financial captive insurance company's license. (a)(1) The commissioner may, at any time, for cause, suspend, revoke or refuse to renew any license of a captive insurance company, or in lieu of or in addition to suspension or revocation of such license, the commissioner, after reasonable notice to and hearing of any holder of such license, may impose a fine not to exceed ten thousand dollars. Such hearings may be held by the commissioner or any person designated by the commissioner. For purposes of this subsection, cause for such administrative action shall include, but not be limited to, the following reasons: (A) Insolvency or impairment of capital or surplus; (B) failure to meet the requirements of section 38a-91dd; (C) refusal or failure to file an annual report, as required by section 38a-91gg, or any other report or statement required by law or by lawful order of the commissioner; (D) failure to comply with the provisions of its own charter, bylaws or other organizational document; (E) failure to submit to or pay the cost of examination or any legal obligation relative thereto; (F) use of methods that, although not otherwise specifically prohibited by law, nevertheless render its operation detrimental or its condition unsound with respect to the public or to its policyholders; or (G) failure otherwise to comply with the laws of this state.

(2) Any captive insurance company aggrieved by the action of the commissioner in suspending, revoking or refusing to renew a license or in imposing a fine may appeal therefrom, in accordance with the provisions of section 4-183, except venue for such appeal shall be in the judicial district of New Britain. Appeals under this section shall be privileged in respect to the order of trial assignment.

(b) (1) (A) The commissioner shall notify a special purpose financial captive insurance company not less than thirty days before suspending, revoking or refusing to renew its license. Such notice shall state the basis for such suspension, revocation or refusal to renew and the date of the hearing; and

(B) No prior notice or hearing shall be required if the grounds for suspension, revocation or refusal to renew of a special purpose financial captive insurance company's license relate primarily to the financial condition or soundness of such company or to a deficiency in its assets.

(2) The commissioner may amend or modify the license of a special purpose financial captive insurance company only if:

(A) The special purpose financial captive insurance company consents to such amendment or modification; or

(B) The commissioner makes a showing of clear and convincing evidence demonstrating that such amendment or modification is necessary to avoid irreparable harm to the special purpose financial captive insurance company or to the ceding insurer.

(P.A. 08-127, S. 9; Oct. Sp. Sess. P.A. 11-1, S. 63; P.A. 22-118, S. 444.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 redesignated existing Subsec. (a) as Subsec. (a)(1) and amended same to add Subparas. (A) to (G) re causes for administrative action, redesignated existing Subsec. (b) as Subsec. (a)(2), and added new Subsec. (b) re time period for notification to, and amendment or modification of the license of, a special purpose financial captive insurance company, effective July 1, 2012; P.A. 22-118 replaced “submit” with “file” in Subsec. (a)(1)(C), effective July 1, 2022.

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Sec. 38a-91jj. Applicability of state investment laws. Certain loans and investments required to be approved by commissioner. Loans of minimum capital and surplus funds prohibited. (a) Association captive insurance companies and risk retention groups shall comply with the investment requirements in this chapter, as applicable. Notwithstanding any other provision of sections 38a-91aa to 38a-91tt, inclusive, the commissioner may approve the use of alternative reliable methods of valuation and rating.

(b) No pure captive insurance company or industrial insured captive insurance company shall be subject to any restrictions on allowable investments, except that the Insurance Commissioner may prohibit or limit any investment that threatens the solvency or liquidity of any such company.

(c) No pure captive insurance company may make a loan to or an investment in its parent company or affiliates without prior written approval of the commissioner, and any such loan or investment shall be evidenced by documentation approved by the commissioner. Loans of minimum capital and surplus funds required in section 38a-91dd are prohibited.

(P.A. 08-127, S. 10; Oct. Sp. Sess. P.A. 11-1, S. 64.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 made a technical change in Subsec. (a), effective July 1, 2012.

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Sec. 38a-91kk. Reinsurance. (a) Any captive insurance company may assume reinsurance from any other insurer.

(b) A captive insurance company may only take credit for the reinsurance of a risk or portion of risk ceded to reinsurers that comply with the provisions of sections 38a-85 to 38a-88, inclusive, unless the commissioner has given prior written approval allowing the captive insurance company to take credit for the reinsurance of a risk or portion of risk ceded to reinsurers that do not comply with the provisions of said sections.

(c) For purposes of sections 38a-91aa to 38a-91tt, inclusive, insurance by a captive insurance company of any workers' compensation qualified self-insured plan of its parent and affiliates shall be deemed to be reinsurance.

(P.A. 08-127, S. 11; Oct. Sp. Sess. P.A. 11-1, S. 65; P.A. 14-6, S. 5; 14-235, S. 13; P.A. 22-118, S. 445.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 made a technical change in Subsec. (c), effective July 1, 2012; P.A. 14-6 amended Subsec. (b) to change “section 38a-85 or 38a-86” to “sections 38a-85 to 38a-88, inclusive,” add provision re commissioner to give prior written approval re credit for reinsurance ceded to reinsurers that do not comply with provisions of said sections, and make technical changes; P.A. 14-235 made a technical change in Subsec. (b); P.A. 22-118 amended Subsec. (a) to delete reference to risks that company is authorized to write directly, effective July 1, 2022.

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Sec. 38a-91ll. Rating organization. No captive insurance company shall be required to join a rating organization.

(P.A. 08-127, S. 12.)

History: P.A. 08-127 effective January 1, 2009.

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Sec. 38a-91mm. Guaranty association and insolvency fund exclusion. No captive insurance company may join or contribute financially to any plan, pool, association or guaranty or insolvency fund in this state, nor shall any such captive insurance company, or any insured or affiliate thereof, receive any benefit from any such plan, pool, association or guaranty or insolvency fund for claims arising out of the operations of such captive insurance company.

(P.A. 08-127, S. 13.)

History: P.A. 08-127 effective January 1, 2009.

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Sec. 38a-91nn. Direct premium receipts tax and assumed reinsurance premium receipts tax. Applicability of tax statutes. (a) Each captive insurance company shall pay to the Commissioner of Revenue Services, on or before March first of each year, a tax at the rate of (1) thirty-eight hundredths of one per cent on the first twenty million dollars, (2) two hundred eighty-five thousandths of one per cent on the next twenty million dollars, (3) nineteen hundredths of one per cent on the next twenty million dollars, and (4) seventy-two thousandths of one per cent on each dollar thereafter, on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive insurance company during the year ending December thirty-first next preceding, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums which shall include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders, except that no tax shall be due or payable as to considerations received for annuity contracts.

(b) Each captive insurance company shall pay to the Commissioner of Revenue Services, on or before March first of each year, a tax at the rate of (1) two hundred fourteen thousandths of one per cent on the first twenty million dollars, (2) one hundred forty-three thousandths of one per cent on the next twenty million dollars, (3) forty-eight thousandths of one per cent on the next twenty million dollars, and (4) twenty-four thousandths of one per cent on each dollar thereafter, on assumed reinsurance premiums collected or contracted for on policies or contracts of insurance written by the captive insurance company during the year ending December thirty-first next preceding, provided no tax under this subsection shall apply to premiums for risks or portions of risks that are subject to taxation on a direct basis pursuant to subsection (a) of this section. No tax under this subsection shall be payable in connection with the receipt of assets in exchange for the assumption by a captive insurance company of loss reserves and other liabilities of another insurer under common ownership and control, if such transaction is part of a plan to discontinue the operations of such other insurer and if the intent of the parties to such transaction is to renew or maintain such business with the captive insurance company.

(c) (1) The annual minimum aggregate tax to be paid by a captive insurance company, other than a sponsored captive insurance company, calculated under subsection (a) of this section shall be seven thousand five hundred dollars, and the annual maximum aggregate tax calculated under subsections (a) and (b) of this section shall be two hundred thousand dollars. In the case of a branch captive insurance company, the annual aggregate tax to be paid by such company shall apply only to the branch business of such company.

(2) In the case of a sponsored captive insurance company, the annual minimum aggregate tax to be paid by a sponsored captive insurance company shall be seven thousand five hundred dollars and shall apply to such company as a whole and not to each protected cell. The annual maximum tax to be paid by a sponsored captive insurance company shall be the aggregate tax liability, calculated under subsection (a) of this section, of each protected cell.

(d) The provisions of sections 12-204, 12-204d, 12-204g and 12-205 to 12-208, inclusive, shall apply to the provisions of sections 38a-91aa to 38a-91tt, inclusive, in the same manner and with the same force and effect as if the language of said sections 12-204, 12-204d, 12-204g and 12-205 to 12-208, inclusive, had been incorporated in full into this section and had expressly referred to the tax due under this section, except to the extent that any such language is inconsistent with a provision of said sections 38a-91aa to 38a-91tt, inclusive.

(e) (1) Except as specified in subsection (c) of this section and subdivision (2) of this subsection, two or more captive insurance companies under common ownership and control shall be taxed as though they were a single captive insurance company.

(2) Special purpose financial captive insurance companies shall not be consolidated with other captive insurance companies that are not special purpose financial captive insurance companies for purposes of calculating the tax due under this section.

(f) For the purposes of this section, (1) “common ownership and control” means ownership and control of two or more captive insurance companies by the same person or group of persons, and (2) “ownership and control” means:

(A) In the case of stock insurers, the direct or indirect ownership of eighty per cent or more of the outstanding voting stock of the insurer;

(B) In the case of mutual or nonprofit corporations, the direct or indirect ownership of eighty per cent or more of the surplus and the voting power of the corporation;

(C) In the case of limited liability companies, the direct or indirect ownership of eighty per cent or more of the membership interests in the company; and

(D) In the case of sponsored captive insurance companies, a protected cell shall be treated as a separate captive insurance company owned and controlled by the protected cell's participants.

(g) (1) The tax provided for in this section shall constitute all taxes collectible under the laws of this state from any captive insurance company, and no other occupation tax or other taxes shall be levied or collected from any captive insurance company by the state or any county, city or municipality within this state, except sales and use taxes and ad valorem taxes on real and personal property used in the production of income.

(2) The tax provided for in this section shall be calculated on an annual basis, notwithstanding policies or contracts of insurance or contracts of reinsurance issued on a multiyear basis. In the case of multiyear policies or contracts, the premium shall be prorated for purposes of determining the tax under this section.

(3) A captive insurance company may claim a nonrefundable tax credit of seven thousand five hundred dollars against the aggregate tax imposed under this section for the first calendar year on or after January 1, 2012, in which the company has liability under this section. The Commissioner of Revenue Services shall prescribe the form and manner in which such tax credit may be claimed.

(h) (1) All fees and assessments relating to captive insurance companies received by the Insurance Department shall be deposited in the Insurance Fund established pursuant to section 38a-52a. The Comptroller shall transfer annually to said fund eleven per cent of the tax collected pursuant to this section.

(2) The Comptroller may transfer from the Insurance Department's available appropriation, with the approval of the Secretary of the Office of Policy and Management, an amount equivalent to not more than two per cent of the tax collected pursuant to this section, to the Department of Economic and Community Development for reasonable expenses incurred to promote the captive insurance industry in this state. The Department of Economic and Community Development may also utilize the transferred moneys to collaborate with other entities to promote the captive insurance industry in this state.

(3) No payment for the maintenance of staff or associated expenses, including contractual services as necessary, shall be disbursed until the commissioner receives proper documentation regarding services rendered and expenses incurred. The commissioner shall establish the form and manner of such documentation.

(P.A. 08-127, S. 14; P.A. 09-74, S. 13; Oct. Sp. Sess. P.A. 11-1, S. 66; June 12 Sp. Sess. P.A. 12-1, S. 215; P.A. 13-232, S. 15.)

History: P.A. 08-127 effective January 1, 2009; P.A. 09-74 made technical changes in Subsecs. (a) and (b), effective May 27, 2009; Oct. Sp. Sess. P.A. 11-1 amended Subsec. (a) to change date of payment of direct premium receipts tax from the month of February to on or before March first, added new Subsec. (b) re assumed reinsurance premium receipts tax, redesignated existing Subsec. (b) as Subsec. (c)(1), added provision therein re applicability of annual aggregate tax to a branch captive insurance company, added Subsec. (c)(2) re applicability of annual aggregate tax to a sponsored captive insurance company, deleted former Subsec. (c) re penalty for failure to file return or pay tax, added new Subsec. (d) re applicability of tax statutes, redesignated existing Subsec. (d) as Subsec. (e)(1), added Subsec. (e)(2) re consolidation of special purpose financial captive insurance companies, redesignated existing Subsec. (e) as Subsec. (f) and amended same to redefine “common ownership and control” and define “ownership and control”, redesignated existing Subsecs. (f) and (g) as Subsec. (g)(1) and (2), amended Subsec. (g)(1) to replace “taxes on real and personal property” with “sales and use taxes and ad valorem taxes on real and personal property”, added Subsec. (g)(3) re tax credit, added Subsec. (h) re establishment of captive insurance regulatory and supervision account, and made conforming and technical changes, effective July 1, 2012, and applicable to calendar years commencing on or after January 1, 2012; June 12 Sp. Sess. P.A. 12-1 amended Subsec. (h) to delete former Subdiv. (1) re captive insurance regulatory and supervision account and former Subdiv. (5) re balance in account, redesignate existing Subdivs. (2) to (4) as Subdivs. (1) to (3), replace provision re deposits in account with provision re deposits in Insurance Fund in redesignated Subdiv. (1) and make conforming changes, effective July 1, 2012, and applicable to calendar years commencing on or after January 1, 2012; P.A. 13-232 amended Subsec. (b) to replace provision re tax due in the month of March of each year with provision re tax due date of March first of each year, effective July 1, 2013.

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Sec. 38a-91oo. Applicability of insurance statutes. (a) Unless otherwise provided in sections 38a-91aa to 38a-91tt, inclusive, no provision of this title shall apply to captive insurance companies, unless expressly included therein, except for the following: (1) Sections 38a-8, 38a-16, 38a-17, 38a-54 to 38a-59, inclusive, 38a-69a, 38a-102h and 38a-250 to 38a-266, inclusive, and chapter 704c; and (2) subsection (d) of section 38a-72 and sections 38a-73 and 38a-129 to 38a-140, inclusive, which shall apply only to captive insurance companies formed as risk retention groups.

(b) (1) The commissioner may require, with notice, any of the following to comply with the provisions of sections 38a-129 to 38a-140, inclusive:

(A) A pure captive insurance company, when (i) the assets of a subsidiary of such company are greater than ten per cent of the assets of the ultimate parent company, or (ii) the pure captive insurance company is owned by an insurance holding company system, as defined in section 38a-129; or

(B) An industrial insured captive insurance company or an association captive insurance company, when (i) any individual member's ownership of such company is greater than ten per cent, or (ii) such company is owned by an insurance holding company system, as defined in section 38a-129.

(2) The commissioner may remove the compliance requirement imposed on a company pursuant to subdivision (1) of this subsection if such company demonstrates to the commissioner that the condition that triggered the imposition of the compliance requirement no longer exists and that no other triggering condition is present.

(P.A. 08-127, S. 15; Oct. Sp. Sess. P.A. 11-1, S. 67; June 12 Sp. Sess. P.A. 12-1, S. 216; P.A. 14-6, S. 6.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 added Secs. 38a-8, 38a-73 and 38a-129 to 38a-140 as applicable to captive insurance companies and changed “38a-903 to 38a-961, inclusive, and 38a-962 to 38a-962j, inclusive” to “chapter 704c”, effective July 1, 2012; June 12 Sp. Sess. P.A. 12-1 designated existing exceptions as Subdiv. (1) and deleted reference to Sec. 38a-73 therein, and added Subdiv. (2) re applicability of Sec. 38a-73 to captive insurance companies formed as risk retention groups, effective July 1, 2012; P.A. 14-6 designated existing provisions as Subsec. (a) and amended same to make technical changes, delete “38a-57, inclusive,” and “38a-129 to 38a-140, inclusive,” and add “38a-102h” in Subdiv. (1) and add “subsection (d) of section 38a-72” and “38a-129 to 38a-140, inclusive” in Subdiv. (2), and added Subsec. (b) re circumstances under which commissioner may require pure captive insurance company, industrial insured captive insurance company or association captive insurance company to comply with Secs. 38a-129 to 38a-140.

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Sec. 38a-91pp. Conversions and mergers. Approval by commissioner. (a) An association captive insurance company, risk retention group or industrial insured captive insurance company formed as a stock insurer or mutual corporation may be converted to or merged with and into a reciprocal insurer in accordance with a plan for such conversion or merger and the provisions of this section.

(b) Any plan for such conversion or merger shall provide a fair and equitable plan for purchasing, retiring or otherwise extinguishing the interests of the stockholders and policyholders of a stock insurer, and the members and policyholders of a mutual corporation, including a fair and equitable provision for the rights and remedies of dissenting stockholders, members or policyholders.

(1) Such conversion shall be accomplished under such reasonable plan and procedure as may be approved by the commissioner, except that the Insurance Commissioner shall not approve any such plan of conversion unless such plan:

(A) Satisfies the provisions of subsection (b) of this section;

(B) Provides for a hearing, of which notice is given or to be given to the captive insurance company, its directors, officers and policyholders, and in the case of a stock insurer, its stockholders, and in the case of a mutual corporation, its members, all of which persons shall be entitled to attend and appear at such hearing, except that if notice of a hearing is given and no director, officer, policyholder, member or stockholder requests a hearing, the commissioner may cancel such hearing;

(C) Provides a fair and equitable plan for the conversion of stockholder, member or policyholder interests into subscriber interests in the resulting reciprocal insurer, substantially proportionate to the corresponding interests in the stock insurer or mutual corporation, except that such plan shall not preclude the resulting reciprocal insurer from applying underwriting criteria that could affect ongoing ownership interests; and

(D) Is approved:

(i) In the case of a stock insurer, by a majority of the shares entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a quorum is present; and

(ii) In the case of a mutual corporation, by a majority of the voting interests of policyholders represented in person or by proxy at a duly called regular or special meeting thereof at which a quorum is present;

(2) The commissioner shall approve such plan of conversion if the commissioner finds that the conversion will promote the general good of the state in conformity with those standards set forth in subdivision (2) of subsection (g) of section 38a-91ff;

(3) If the commissioner approves the plan, the commissioner shall amend the converting insurer's certificate of authority to reflect conversion to a reciprocal insurer and issue such amended certificate of authority to the company's attorney-in-fact;

(4) The conversion shall be effective upon the issuance of an amended certificate of authority of a reciprocal insurer by the commissioner; and

(5) Upon the effective date of such conversion the corporate existence of the converting insurer shall cease and the resulting reciprocal insurer shall notify the Secretary of the State of such conversion.

(d) A merger authorized under subsection (a) of this section shall be accomplished substantially in accordance with the procedures set forth in this chapter, except that, solely for purposes of such merger:

(1) The plan of merger shall satisfy the provisions of subsection (b) of this section;

(2) The subscribers' advisory committee of a reciprocal insurer shall be equivalent to the board of directors of a stock insurer or mutual corporation;

(3) The subscribers of a reciprocal insurer shall be the equivalent of the policyholders of a mutual corporation;

(4) If a subscribers' advisory committee does not have a president or secretary, the officers of such committee having substantially equivalent duties shall be deemed the president or secretary of such committee;

(5) The commissioner shall approve the articles of merger if the commissioner finds that the merger will promote the general good of the state in conformity with those standards set forth in subdivision (2) of subsection (g) of section 38a-91ff. If the commissioner approves the articles of merger, the commissioner shall endorse the commissioner's approval thereon and the surviving insurer shall present the articles of merger to the Secretary of the State at the Secretary of the State's office;

(6) Notwithstanding section 38a-91dd, the commissioner may permit the formation, without surplus, of a captive insurance company organized as a reciprocal insurer, into which an existing captive insurance company may be merged for the purpose of facilitating a transaction under this section, except that there shall be no more than one authorized insurance company surviving such merger; and

(7) An alien insurer may be a party to a merger authorized under subsection (a) of this section, except that the requirements for a merger between a domestic and a foreign insurer under this chapter shall apply to a merger between a domestic and an alien insurer under this subsection. Such alien insurer shall be treated as a foreign insurer under this chapter and such other jurisdictions shall be the equivalent of a state for purposes of this chapter.

(e) The commissioner may permit the formation of a captive insurance company that is established for the sole purpose of merging or consolidating with, or assuming existing insurance or reinsurance business from, an existing captive insurance company or, subject to such conditions as the commissioner may impose that are not inconsistent with this chapter, any existing captive insurance company organized in any other jurisdiction. Upon request of such newly formed captive insurance company, the commissioner may waive or modify the requirements of subparagraph (B) of subdivision (1) of subsection (c) of section 38a-91bb, and subdivision (2) of subsection (c) of section 38a-91bb.

(f) A conversion or merger under this section shall have the effects of conversion or merger set forth in this chapter to the extent such effects are not inconsistent with the provisions of sections 38a-91aa to 38a-91tt, inclusive.

(P.A. 08-127, S. 16; Oct. Sp. Sess. P.A. 11-1, S. 68.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 made technical changes in Subsecs. (a) to (d), added new Subsec. (e) re formation of a captive insurance company established for sole purpose of merging with or assuming existing insurance business from an existing captive insurance company, and redesignated existing Subsec. (e) as Subsec. (f) and made a technical change therein, effective July 1, 2012.

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Sec. 38a-91qq. Regulations. The commissioner may adopt regulations, in accordance with chapter 54, as are necessary to carry out the provisions of sections 38a-91aa to 38a-91uu, inclusive, and sections 38a-91ww and 38a-91xx and to establish standards to ensure that a parent or affiliated company is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by a pure captive insurance company, an industrial insured captive insurance company or a sponsored captive insurance company, except that until such regulations are approved, the commissioner may approve the coverage of such risks by a pure captive insurance company, an industrial insured captive insurance company or a sponsored captive insurance company.

(P.A. 08-127, S. 17; Oct. Sp. Sess. P.A. 11-1, S. 69; P.A. 22-118, S. 446.)

History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 added authority for commissioner to adopt regulations to carry out the provisions of Secs. 38a-91aa to 38a-91tt and made a technical change, effective July 1, 2012; P.A. 22-118 replaced reference to Sec. 38a-91tt with reference to Sec. 38a-91uu, added reference to Secs. 38a-91ww and 38a-91xx and to industrial insured captive insurance company and sponsored captive insurance company, and made a technical change, effective July 1, 2022.

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Sec. 38a-91rr. Establishment of protected cells and incorporated protected cells by a sponsored captive insurance company. Extent of obligations. Recourse. (a) Each sponsored captive insurance company may establish and maintain one or more protected cells, subject to the following conditions:

(1) The stockholders of a sponsored captive insurance company shall be limited to its participants and sponsors, except that a sponsored captive insurance company may issue nonvoting securities to other persons on terms approved by the commissioner;

(2) Each sponsored captive insurance company shall account separately on the books and records of such company for each protected cell to reflect the financial condition and results of operations of such protected cell, net income or loss, dividends or other distributions to participants and such other factors as may be provided in the participant contract or required by the commissioner;

(3) No liabilities arising out of any other insurance business the sponsored captive insurance company may conduct shall be chargeable against the assets of a protected cell;

(4) No sponsored captive insurance company shall make any sale, exchange or other transfer of assets, dividend or distribution between or among any of its protected cells without the consent of such protected cells;

(5) No protected cell shall make any sale, exchange or other transfer of assets, dividend or distribution to a sponsor or participant without the commissioner's approval. The commissioner shall not approve such sale, exchange or other transfer if it would result in insolvency or impairment with respect to a protected cell;

(6) (A) Except as otherwise specified, each sponsored captive insurance company shall attribute assets and liabilities to the protected cells and the general account in accordance with the plan of operation approved by the commissioner, and shall not attribute any other assets or liabilities between its general account and any protected cell or between any protected cells. For purposes of this subdivision, “general account” means all assets and liabilities of a sponsored captive insurance company that are not attributable to a protected cell.

(B) Each sponsored captive insurance company shall attribute all insurance obligations, assets and liabilities relating to a reinsurance contract entered into with respect to a protected cell to such protected cell. The performance under such reinsurance contract and any tax benefits, losses, refunds or credits allocated pursuant to a tax allocation agreement to which the sponsored captive insurance company is a party, including any payments made by or due to be made to the sponsored captive insurance company pursuant to the terms of such agreement, shall reflect such obligations, assets and liabilities relating to such reinsurance contract;

(7) Each sponsored captive insurance company shall file annually with the commissioner such financial reports as the commissioner shall require, including, but not limited to, accounting statements detailing the financial experience of each protected cell;

(8) Each sponsored captive insurance company shall notify the commissioner in writing not later than ten business days after any protected cell becomes insolvent or otherwise unable to meet its claim or expense obligations;

(9) No participant contract shall take effect without the commissioner's prior written approval. The addition of each new protected cell or the withdrawal of any participant or termination of any existing protected cell shall constitute a change in the sponsored captive insurance company's plan of operation and shall require the commissioner's prior written approval;

(10) If required by the commissioner, the business written by a sponsored captive insurance company with respect to each protected cell shall be (A) fronted by an insurance company licensed under the laws of any state, (B) reinsured by a reinsurer authorized or approved by this state, or (C) secured by a trust fund in the United States for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to the commissioner. The commissioner may require the sponsored captive insurance company to increase the funding of any security arrangement established under this subdivision. If the form of security is a letter of credit, the letter of credit shall be issued or confirmed by a bank approved by the commissioner. A trust maintained pursuant to this subdivision shall be established in a form and upon such terms approved by the commissioner.

(b) Each sponsored captive insurance company may combine the assets of two or more protected cells for purposes of investment and such combination shall not be construed as defeating the segregation of such assets for accounting or other purposes. Each sponsored captive insurance company shall comply with all applicable investment requirements under this chapter, except that the commissioner shall waive compliance with such requirements for sponsored captive insurance companies to the extent that credit for reinsurance ceded to reinsurers is allowed pursuant to section 38a-91kk. The commissioner may approve the use of alternative reliable methods of valuation and rating for purposes of this subsection.

(c) Each sponsored captive insurance company, including a sponsored captive insurance company licensed as a special purpose financial captive insurance company, may establish and maintain one or more protected cells as a separate corporation formed under chapter 601 or a limited liability company formed under chapter 613. This section shall not be construed to limit any rights or protections applicable to protected cells not established as corporations or limited liability companies.

(d) (1) Each sponsored captive insurance company may establish and maintain a protected cell as an incorporated protected cell.

(2) The articles of incorporation or articles of organization of an incorporated protected cell shall refer to the sponsored captive insurance company for which it is a protected cell and shall state that the protected cell is incorporated or organized for the limited purposes authorized by the sponsored captive insurance company's license. Such company shall attach to and file with the articles of incorporation or articles of organization a copy of the commissioner's prior written approval, as required by subdivision (9) of subsection (a) of this section, to add the incorporated protected cell.

(e) Notwithstanding the provisions of chapter 704c:

(1) If the commissioner determines in the event of an insolvency of a sponsored captive insurance company that one or more protected cells remain solvent, the commissioner may separate such cells from such company and may, on application of a sponsor, allow for the conversion of such cells into one or more new or existing sponsored captive insurance companies with a sponsor or sponsors, or one or more other captive insurance companies, pursuant to such plan or plans of operation as the commissioner deems acceptable;

(2) Upon the issuance by a court of any order of conservation, rehabilitation or liquidation of a sponsored captive insurance company, the receiver shall manage the assets and liabilities of such company in accordance with the provisions of this section;

(3) The assets of a protected cell shall not be used to pay any expenses or claims other than those attributable to such protected cell;

(4) A sponsored captive insurance company's capital and surplus shall be available at all times to pay any expenses of or claims against such company;

(5) In connection with the conservation, rehabilitation or liquidation of a sponsored captive insurance company, the assets and liabilities of each protected cell shall at all times be kept separate from, and shall not be commingled with, the assets and liabilities of any other protected cell or the sponsored captive insurance company;

(6) Unless the sponsor consents and the commissioner has granted prior written approval, the assets of a sponsored captive insurance company's general account shall not be used to pay any expense or claim attributable solely to one or more protected cells of the sponsored captive insurance company. If the assets of a sponsored captive insurance company's general account are used to pay expenses or claims attributable solely to one or more of the company's protected cells, the sponsor shall not be required to contribute additional capital and surplus to the company's general account. Notwithstanding any provision of this subdivision, the sponsor shall satisfy the minimum capital and surplus requirements applicable to such sponsor in order to maintain its license; and

(7) A sponsored captive insurance company's capital and surplus shall at all times be available to pay any expense of, or claim against, the sponsored captive insurance company.

(f) Consistent with the provisions of this section, a creditor of a sponsored captive insurance company shall have recourse against any asset attributable to a protected cell if it is a creditor of the protected cell. A creditor of a protected cell shall not have any recourse against any asset attributable to another protected cell or in the sponsored captive insurance company's general account.

(g) When a sponsored captive insurance company has an obligation to a creditor arising from a transaction, or otherwise imposed, with respect to a particular protected cell, the obligation shall:

(1) Extend only to the assets attributable to the protected cell, and the creditor shall be entitled to recourse only against the assets attributable to such protected cell; and

(2) Not extend to any asset of another protected cell or in the sponsored captive insurance company's general account, and the creditor shall not be entitled to recourse against any asset attributable to another protected cell or in the company's general account.

(h) When an obligation of a sponsored captive insurance company relates solely to such company's general account, a creditor shall, with respect to such obligation, be entitled to recourse only against the assets in such account.

(i) The establishment of one or more protected cells alone, without more, shall not, by itself, constitute (1) a fraudulent conveyance, (2) evidence of intent by a sponsored captive insurance company to defraud creditors, or (3) the conduct of business by a sponsored captive insurance company for any other fraudulent purpose.

(Oct. Sp. Sess. P.A. 11-1, S. 70; P.A. 17-198, S. 3; P.A. 18-68, S. 2.)

History: Oct. Sp. Sess. P.A. 11-1 effective July 1, 2012 (Revisor's note: In Subsec. (a)(11), a reference to “sponsored captive” was changed editorially by the Revisors to “sponsored captive insurance company” for accuracy); P.A. 17-198 amended Subsec. (a) by deleting former Subdiv. (7) re separation of assets and liabilities of protected cell and redesignating existing Subdivs. (8) to (11) as Subdivs. (7) to (10), amended Subsec. (e) by replacing “supervision” with “conservation” in Subdiv. (2), and adding Subdivs. (5) to (7) re commingling of assets of sponsored captive insurance company, use of company's general account and availability of company's capital and surplus to pay claims and expenses, respectively, added Subsec. (f) re creditor recourse, added Subsec. (g) re obligation to creditor of protected cell, added Subsec. (h) re obligation to creditor of company's general account, added Subsec. (i) re establishment of protected cell, and made technical and conforming changes, effective July 1, 2017; P.A. 18-68 amended Subsec. (e)(6) by substituting “shall” for “must” re satisfaction of minimum capital and surplus requirements.

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Sec. 38a-91ss. Additional requirements for a special purpose financial captive insurance company. (a) Not later than thirty days after the closing on the transactions for an insurance securitization, a special purpose financial captive insurance company shall submit to the commissioner a copy of a complete set of executed documentation of such securitization. Any documentation submitted pursuant to this subsection shall be kept confidential in accordance with the provisions of subdivision (6) of subsection (c) of section 38a-91bb.

(b) Any change in the special purpose financial captive insurance company's plan of operation shall require prior approval from the commissioner.

(c) Any transaction or series of transactions shall require prior approval from the commissioner if such transaction or series of transactions (1) are undertaken to dissolve a special purpose financial captive insurance company, or (2) result in the termination of all or any part of a special purpose financial captive insurance company's business, except that no prior approval from the commissioner shall be required for any such transaction or series of transactions if such transaction or series of transactions are done in accordance with a document or agreement described in the special purpose financial captive insurance company's plan of operation and if the commissioner is notified in advance of such transaction or series of transactions.

(d) A special purpose financial captive insurance company shall notify the commissioner in advance of any change in the legal ownership of any special purpose financial captive insurance company security.

(e) A special purpose financial captive insurance company may:

(1) With the prior approval of the commissioner, account for the proceeds of a surplus note issued by such company as surplus; and

(2) Submit for the prior approval of the commissioner periodic written requests for authorization to make payments of interest on and repayments of principal of surplus notes and other debt obligations issued by such company. The commissioner shall not approve such payment if the commissioner determines that such payment would jeopardize the ability of the special purpose financial captive insurance company or any other person to fulfill their respective obligations pursuant to the special purpose financial captive insurance company securitization agreements, the reinsurance contract or any related transaction. In lieu of approval of such periodic written requests, the commissioner may approve a formula or plan, which shall be included in the special purpose financial captive insurance company's plan of operation, for payment of interest, principal or both with respect to such surplus notes and debt obligations.

(f) No special purpose financial captive insurance company security shall be subject to regulation as an insurance or reinsurance contract. No investor in such a security or a holder of such a security shall be considered to be transacting the business of insurance in this state solely by reason of having an interest in the security. No underwriter's placement or selling agents and their partners, commissioners, officers, members, managers, employees, agents, representatives and advisors involved in an insurance securitization by a special purpose financial captive insurance company shall be considered to be insurance producers or brokers or to be conducting business as an insurance or reinsurance company or as an insurance agency, brokerage, intermediary, advisory or consulting business solely by virtue of their underwriting activities in connection with such securitization.

(g) (1) A special purpose financial captive insurance company shall reinsure only the risks of a ceding insurer, pursuant to a reinsurance contract. A special purpose financial captive insurance company shall not issue a contract of insurance or a contract for assumption of risk or indemnification of loss other than such reinsurance contract.

(2) Unless approved otherwise in advance by the commissioner, a special purpose financial captive insurance company shall not assume or retain exposure to insurance or reinsurance losses for its own account that are not funded by:

(A) Proceeds from a special purpose financial captive insurance company securitization or letters of credit or other assets described in subdivision (19) of section 38a-91aa;

(B) Premium and other amounts payable by the ceding insurer to the special purpose financial captive insurance company pursuant to the reinsurance contract; and

(3) The reinsurance contract shall contain all provisions reasonably required or approved by the commissioner, which requirements shall take into account the laws applicable to the ceding insurer regarding the ceding insurer taking credit for the reinsurance provided under such reinsurance contract.

(4) A special purpose financial captive insurance company may, with the prior approval of the commissioner, cede risks assumed through a reinsurance contract to one or more reinsurers through the purchase of reinsurance.

(5) A special purpose financial captive insurance company may enter into contracts and conduct other commercial activities related or incidental to and necessary to fulfill the purposes of the reinsurance contract, the insurance securitization, this section and section 38a-91tt, provided such contracts and activities are included in the special purpose financial captive insurance company's plan of operation or are approved in advance by the commissioner. Such contracts and activities may include, but are not limited to: (A) Entering into reinsurance contracts; (B) issuing special purpose financial captive insurance company securities; (C) complying with the terms of such contracts or securities; (D) entering into trust, guaranteed investment contract, swap or other derivative, tax, administration, reimbursement, or fiscal agent transactions; (E) complying with trust indenture, reinsurance or retrocession; and (F) other agreements necessary or incidental to effect an insurance securitization.

(6) Unless approved otherwise in advance by the commissioner, a reinsurance contract shall not contain any provision for payment by the special purpose financial captive insurance company in discharge of its obligations under the reinsurance contract to any person other than the ceding insurer or any receiver of the ceding insurer.

(7) A special purpose financial captive insurance company shall notify the commissioner immediately of any action by a ceding insurer or any other person to foreclose on or otherwise take possession of collateral provided by the special purpose financial captive insurance company to secure any obligation of the special purpose financial captive insurance company.

(h) The assets of a special purpose financial captive insurance company shall be preserved and administered by or on behalf of the special purpose financial captive insurance company to satisfy the liabilities and obligations of the special purpose financial captive insurance company incident to the reinsurance contract, the insurance securitization and other related agreements.

(i) In the special purpose financial captive insurance company securitization, the security offering memorandum or other document issued to prospective investors regarding the offer and sale of a surplus note or other security shall include a disclosure that all or part of the proceeds of such insurance securitization will be used to fund the special purpose financial captive insurance company's obligations to the ceding insurer.

(j) A special purpose financial captive insurance company shall not be subject to any restriction on investments other than the following:

(1) A special purpose financial captive insurance company shall not make a loan to any person other than as permitted under its plan of operation or as otherwise approved in advance by the commissioner; and

(2) The commissioner may prohibit or limit any investment that threatens the solvency or liquidity of the special purpose financial captive insurance company unless the investment is otherwise approved in its plan of operation or in an order issued to the special purpose financial captive insurance company pursuant to subparagraph (B) of subdivision (2) of subsection (e) of section 38a-91bb.

(k) (1) Unless approved otherwise in advance by the commissioner, a special purpose financial captive insurance company shall (A) maintain its books, records, documents, accounts, vouchers and agreements in this state, and (B) preserve and keep available in this state such books, records, documents, accounts, vouchers and agreements for examination and inspection until such time as the commissioner approves the destruction or other disposition of such books, records, documents, accounts, vouchers and agreements. If the commissioner approves the keeping of the items listed in this subdivision outside this state, the special purpose financial captive insurance company shall maintain in this state a complete and true copy of each such original. Such copies may be photographs, reproductions on file or electronically stored and reproduced.

(2) A special purpose financial captive insurance company shall make its books, records, documents, accounts, vouchers and agreements available for inspection by the commissioner at any time. A special purpose financial captive insurance company shall keep its books and records in such manner that its financial condition, affairs and operations can be readily ascertained and so that the commissioner may readily verify its financial statements and determine its compliance with sections 38a-91aa to 38a-91tt, inclusive.

(l) Upon the issuance by a court of any order of conservation, rehabilitation or liquidation of a special purpose financial captive insurance company or one or more of the special purpose financial captive insurance company's protected cells, the receiver shall manage the assets and liabilities of the special purpose financial captive insurance company pursuant to the provisions of this section and section 38a-91tt.

(m) Notwithstanding any provision in the contracts or other documentation governing the special purpose financial captive insurance company securitization, amounts recoverable by the receiver of a special purpose financial captive insurance company under a reinsurance contract shall not be reduced or diminished as a result of the entry of an order of conservation, rehabilitation or liquidation with respect to a ceding insurer.

(n) Notwithstanding the provisions of chapter 704c:

(1) An application, a petition, a temporary restraining order or an injunction issued pursuant to chapter 704c with respect to a ceding insurer shall not prohibit (A) a special purpose financial captive insurance company from transacting business with the ceding insurer, including making any payment with respect to a special purpose financial captive insurance company security, or (B) any action or proceeding against a special purpose financial captive insurance company or its assets;

(2) The commencement of a summary proceeding or the issuance of any order by the court with respect to a special purpose financial captive insurance company shall not prohibit such company from making payments or taking any action required to make such payments, provided such payments (A) are made pursuant to a special purpose financial captive insurance company security or reinsurance contract, and (B) are consistent with the special purpose financial captive insurance company's plan of operation and any order issued to the special purpose financial captive insurance company pursuant to subparagraph (B) of subdivision (2) of subsection (e) of section 38a-91bb;

(3) A receiver of a ceding insurer shall not void a nonfraudulent transfer by a ceding insurer to a special purpose financial captive insurance company of money or other property made pursuant to a reinsurance contract; and

(4) A receiver of a special purpose financial captive insurance company shall not void a nonfraudulent transfer by the special purpose financial captive insurance company of money or other property:

(A) Made to a ceding insurer pursuant to a reinsurance contract or made to or for the benefit of any holder of a special purpose financial captive insurance company security with respect to the special purpose financial captive insurance company security; and

(B) Made consistent with the special purpose financial captive insurance company's plan of operation and any order issued to the special purpose financial captive insurance company pursuant to subparagraph (B) of subdivision (2) of subsection (e) of section 38a-91bb.

(o) Except for the fulfillment of the obligations under a reinsurance contract, the assets of a special purpose financial captive insurance company, including assets held in trust, on a funds-withheld basis or in any other arrangement to secure the special purpose financial captive insurance company's obligations under a reinsurance contract, shall not be consolidated with or included in the estate of a ceding insurer in any delinquency proceeding against the ceding insurer for any purpose.

(Oct. Sp. Sess. P.A. 11-1, S. 71; P.A. 18-151, S. 5; P.A. 22-118, S. 447.)

History: Oct. Sp. Sess. P.A. 11-1 effective July 1, 2012; P.A. 18-151 amended Subsec. (g)(2)(A) by replacing reference to Sec. 38a-91aa(17) with reference to Sec. 38a-91aa(18), effective July 1, 2018; P.A. 22-118 amended Subsec. (g)(2)(A) by replacing reference to Sec. 38a-91aa(18) with reference to Sec. 38a-91aa(19), effective July 1, 2022.

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Sec. 38a-91tt. Additional requirements for a sponsored captive insurance company licensed as a special purpose financial captive insurance company. (a) The provisions of this section shall apply to a sponsored captive insurance company licensed as a special purpose financial captive insurance company. For purposes of this section, (1) “general account” means all assets and liabilities of a sponsored captive insurance company licensed as a special purpose financial captive insurance company not attributable to a protected cell, and (2) “special purpose financial captive insurance company” means a sponsored captive insurance company licensed as a special purpose financial captive insurance company.

(b) Unless approved otherwise in advance by the commissioner, a participant in a special purpose financial captive insurance company shall be a ceding insurer. Any change in a participant shall require the commissioner's prior approval.

(c) (1) A special purpose financial captive insurance company, on behalf of a protected cell, shall be entitled to assert the same claims and defenses in actions in law or equity as if the protected cell were a corporation established under chapter 601, including, but not limited to, claims and defenses in actions at law or equity alleging alter ego, corporate veil piercing, offset, substantive consolidation, equitable subordination or recoupment.

(2) In connection with the conservation, rehabilitation or liquidation of a special purpose financial captive insurance company or one or more of its protected cells, such company shall keep the assets and liabilities of a protected cell separate at all times from, and shall not commingle with, those of other protected cells and of the special purpose financial captive insurance company. The assets of one protected cell shall not be used to satisfy the obligations or liabilities of another protected cell or of the special purpose financial captive insurance company based on legal or equitable claims or defenses, including, but not limited to, alter ego, piercing the corporate veil, offset, substantive consolidation, equitable subordination or recoupment, unless such claims or defenses would apply to such protected cell if it were a special purpose financial captive insurance company without separate cells.

(d) (1) Notwithstanding subdivision (1) of subsection (a) of section 38a-91rr, a special purpose financial captive insurance company may issue securities of any person approved in advance by the commissioner.

(2) (A) Any security issued by a special purpose financial captive insurance company with respect to a protected cell and any other contract or obligation of the special purpose financial captive insurance company with respect to a protected cell shall include the designation of such protected cell and shall include the following statement, or such other statement as may be required by the commissioner:

(i) In the case of a security: “The holder of this security shall have no right or recourse against the special purpose financial captive insurance company and its assets other than against assets properly attributable to the designated protected cell and the special purpose financial captive insurance company's general account, to the extent permitted by Connecticut law.”; or

(ii) In the case of a contract or obligation: “The counter party to this contract or obligation shall have no right or recourse against the special purpose financial captive insurance company and its assets other than against assets properly attributable to the designated protected cell and the special purpose financial captive insurance company's general account, to the extent permitted by Connecticut law.”.

(B) The failure to include such disclosure, in whole or part, in such security, contract or obligation with respect to a protected cell shall not serve as the sole basis for a creditor, ceding insurer or any other person to have recourse against the general account of the special purpose financial captive insurance company in excess of the limitations provided under subsection (i) of this section, or against the assets of any other protected cell.

(e) In addition to the provisions of subsections (c) and (d) of section 38a-91rr, a special purpose financial captive insurance company shall be subject to the following with respect to its protected cells:

(1) A special purpose financial captive insurance company shall establish a protected cell only for the purpose of insuring or reinsuring risks of one or more reinsurance contracts with a ceding insurer or two or more affiliated ceding insurers, with the intent of facilitating an insurance securitization. A separate protected cell shall be established with respect to each separate securitization transaction; and

(2) No special purpose financial captive insurance company shall make a sale, an exchange or another transfer of assets between or among any of its protected cells without the prior approval of the commissioner.

(f) (1) Each special purpose financial captive insurance company shall attribute assets and liabilities to the protected cells and the general account in accordance with the plan of operation approved by the commissioner, and shall not attribute any other assets or liabilities between its general account and any protected cell or between any protected cells.

(2) Each special purpose financial captive insurance company shall attribute all insurance obligations, assets and liabilities relating to a reinsurance contract entered into with respect to a protected cell and the related insurance securitization transaction, including any securities issued by such company as part of the insurance securitization, to such protected cell. The rights, benefits, obligations and liabilities of any securities attributable to such protected cell and the performance under such reinsurance contract and the related securitization transaction, and any tax benefits, losses, refunds or credits allocated pursuant to a tax allocation agreement to which the special purpose financial captive insurance company is a party, including any payments made by or due to be made to the special purpose financial captive insurance company pursuant to the terms of such agreement, shall reflect such obligations, assets and liabilities relating to such reinsurance contract and the insurance securitization transaction that are attributed to such protected cell.

(g) (1) Except as otherwise specified in this section, the terms and conditions set forth in chapter 704c pertaining to administrative supervision of insurers and the conservation, rehabilitation, receiverships and liquidation of insurers shall apply to a special purpose financial captive insurance company or any of such company's protected cells independently and shall not cause or otherwise effect a conservation, rehabilitation, receivership or liquidation of the special purpose financial captive insurance company or another protected cell that is not otherwise insolvent.

(2) For purposes of applying the provisions of chapter 704c to a special purpose financial captive insurance company, “insolvency” or “insolvent” means the special purpose financial captive insurance company (A) is unable to pay its obligations when they are due, unless those obligations are the subject of a bona fide dispute, or (B) has failed to meet all criteria and conditions for solvency of the special purpose financial captive insurance company established by the commissioner. In the case of a sponsored captive insurance company licensed as a special purpose financial captive insurance company, the definition of “insolvency” and “insolvent” shall be applied separately to each protected cell and to the special purpose financial captive insurance company's general account.

(h) (1) The commissioner may file in the Superior Court of this state, without causing or otherwise effecting the conservation or rehabilitation of an otherwise solvent protected cell of a special purpose financial captive insurance company and subject to the provisions of subparagraph (E) of subdivision (1) of subsection (k) of this section, a petition to authorize the commissioner to conserve, rehabilitate or liquidate a special purpose financial captive insurance company on one or more of the following grounds:

(A) Embezzlement, wrongful sequestration, dissipation or diversion of the special purpose financial captive insurance company's assets intended to be used to pay amounts owed to the ceding insurer or the holders of special purpose financial captive insurance company securities;

(B) The special purpose financial captive insurance company is insolvent; or

(C) The holders of a majority in outstanding principal amount of each class of special purpose financial captive insurance company securities attributable to each particular protected cell request or consent to conservation, rehabilitation or liquidation.

(2) The commissioner may file in the Superior Court of this state, without causing or otherwise effecting a conservation, rehabilitation, receivership or liquidation of the special purpose financial captive insurance company generally or another of its protected cells, a petition to authorize the commissioner to conserve, rehabilitate or liquidate one or more of a special purpose financial captive insurance company's protected cells, independently, on one or more of the following grounds:

(A) Embezzlement, wrongful sequestration, dissipation or diversion of the special purpose financial captive insurance company's assets attributable to the affected protected cell or cells intended to be used to pay amounts owed to the ceding insurer or the holders of special purpose financial captive insurance company securities of the affected protected cell or cells;

(B) The affected protected cell is insolvent; or

(C) The holders of a majority in outstanding principal amount of each class of special purpose financial captive insurance company securities attributable to that particular protected cell request or consent to conservation, rehabilitation or liquidation.

(3) Except where consent is given as described in subparagraph (C) of subdivision (1) of this subsection and subparagraph (C) of subdivision (2) of this subsection, the court may not grant relief as provided under subdivision (1) or (2) of this subsection unless, after notice and a hearing, the commissioner, who shall have the burden of proof, establishes by clear and convincing evidence that relief must be granted. The court's order may be made in respect of one or more protected cells by name, rather than the special purpose financial captive insurance company generally.

(i) (1) Upon the issuance by a court of any order of conservation, rehabilitation, or liquidation of a special purpose financial captive insurance company or one or more of the special purpose financial captive insurance company's protected cells, the receiver shall manage the assets and liabilities of the special purpose financial captive insurance company or the applicable protected cell in accordance with the provisions of this section and section 38a-91ss.

(2) The assets attributable to one protected cell shall not be applied to the liabilities attributable to another protected cell unless an asset or liability is attributable to more than one protected cell, in which case the receiver shall deal with the asset or liability in accordance with the terms of any relevant governing instrument or contract. Recourse to the special purpose financial captive insurance company's general account in connection with the conservation, rehabilitation or liquidation of a protected cell shall be limited to the greater of the amount of assets in the general account as of the date such proceeding is commenced or the required minimum capital for the general account as of the date such proceeding is commenced. The assets attributable to one protected cell shall not be set off against the liabilities attributable to another protected cell, and assets attributable to the special purpose financial captive insurance company's general account shall not be set off against the liabilities attributable to any protected cell except to the extent provided in this subdivision.

(3) Relief shall not be granted nor shall any order be issued based on equitable theories of recovery, including substantive consolidation, equitable subordination or recoupment, to attach or seize the assets of any solvent protected cell for the benefit of another protected cell or special purpose financial captive insurance company or to pierce the corporate veil of any protected cell, in connection with the conservation, rehabilitation or liquidation of a special purpose financial captive insurance company or one or more protected cells, unless such equitable theories, attachment, seizure or corporate veil piercing would apply to such cell if it were a special purpose financial captive insurance company without separate cells.

(j) Notwithstanding any provision in the contracts or other documentation governing the special purpose financial captive insurance company insurance securitization, amounts recoverable by the receiver of a special purpose financial captive insurance company shall not be reduced or diminished as a result of the entry of an order of conservation, rehabilitation or liquidation with respect to the ceding insurer.

(k) (1) Notwithstanding the provisions of chapter 704c:

(A) An application, a petition, a temporary restraining order or an injunction issued pursuant to the provisions of chapter 704c with respect to a ceding insurer shall not prohibit (i) a special purpose financial captive insurance company from transacting business with the ceding insurer, including making any payment pursuant to a special purpose financial captive insurance company security with respect to a protected cell, or (ii) any action or proceeding against a special purpose financial captive insurance company or its assets;

(B) The commencement of a summary proceeding or other interim proceeding commenced before a formal delinquency proceeding or the issuance of any order by the court with respect to a special purpose financial captive insurance company shall not prohibit such company from making payments or taking any action required to make such payments pursuant to a special purpose financial captive insurance company security with respect to a protected cell or a special purpose financial captive insurance company contract;

(C) A receiver of a ceding insurer shall not void a nonfraudulent transfer by a ceding insurer to a special purpose financial captive insurance company of money or other property made pursuant to a reinsurance contract;

(D) A receiver of a special purpose financial captive insurance company shall not void (i) a nonfraudulent transfer by the special purpose financial captive insurance company of money or other property made to a ceding insurer pursuant to a reinsurance contract or made to or for the benefit of any holder of a special purpose financial captive insurance company security with respect to a protected cell, or (ii) a special purpose financial captive insurance company security;

(E) (i) In the event of an insolvency of a special purpose financial captive insurance company where one or more protected cells remain solvent, the commissioner shall separate such cells from such company and shall, on application of a sponsor, allow for the conversion of such cells into one or more special purpose financial captive insurance companies. The commissioner shall issue such orders as the commissioner deems necessary to protect the solvency of the remaining solvent protected cells.

(ii) In the event of an insolvency of a protected cell, the special purpose financial captive insurance company's assets shall be accounted for and managed in accordance with subsection (i) of this section and other applicable laws of this state.

(2) The provisions of subdivision (1) of this subsection shall not prohibit the commissioner from taking any action permitted under chapter 704c with respect only to the conservation or rehabilitation of a special purpose financial captive insurance company with protected cell or cells, provided the commissioner has sufficient grounds to seek to declare such company insolvent. In such case, with respect to the solvent protected cell or cells, the commissioner shall not prohibit such company from making payments or taking any action required to make such payments pursuant to a special purpose financial captive insurance company security, reinsurance contract or insurance securitization transaction that are attributable to such cell or cells.

(l) Except for the fulfillment of the obligations under a special purpose financial captive insurance company contract, the assets of a special purpose financial captive insurance company, including assets held in trust, shall not be consolidated with or included in the estate of a ceding insurer in any delinquency proceeding against the ceding insurer for any purpose.

(Oct. Sp. Sess. P.A. 11-1, S. 72.)

History: Oct. Sp. Sess. P.A. 11-1 effective July 1, 2012.

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Sec. 38a-91uu. Dormant captive insurance company. Certificate of dormancy. Capital and surplus. (a) For the purposes of this section, unless the context otherwise requires:

(1) “Dormant captive insurance company” means a pure captive insurance company, a sponsored captive insurance company or an industrial insured captive insurance company, each as defined in section 38a-91aa, that has:

(A) Ceased transacting insurance business; and

(B) No liabilities associated with any insurance business that occurred, or insurance policy that was issued, prior to, on or after the filing of its application for a certificate of dormancy under subsection (b) of this section; and

(2) “Insurance business” means the business of insurance, as defined in section 38a-905.

(b) A dormant captive insurance company that is domiciled in this state may apply to the Insurance Commissioner for a certificate of dormancy. The certificate of dormancy shall be subject to renewal once every five years, and shall be forfeited if the dormant captive insurance company commences transacting insurance business or fails to timely renew such certificate.

(1) Possess and maintain unimpaired, paid-in capital and surplus of not less than fifteen thousand dollars, provided such dormant captive insurance company shall not be required to add capital upon entering dormancy if such dormant captive insurance company was never capitalized;

(2) Not later than March fifteenth, annually, submit to the commissioner a report on the financial condition of such company, verified by oath of two executive officers of such company, in such form as the commissioner prescribes; and

(3) Pay the license renewal fee specified in section 38a-11 for a captive insurance company.

(P.A. 17-198, S. 1; P.A. 22-118, S. 448.)

History: P.A. 17-198 effective July 1, 2017; P.A. 22-118 amended Subsec. (b) by replacing “two years” with “five years” and amended Subsec. (c) by replacing $25,000 with $15,000 and adding proviso re addition of capital if dormant captive insurance company was never capitalized in Subdiv. (1), and replacing “March 15, 2018” with “March fifteenth” in Subdiv. (2), effective July 1, 2022.

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Sec. 38a-91vv. Establishment of captive insurance company to provide assistance to owners of residential buildings with concrete foundations that have deteriorated due to presence of pyrrhotite. Reports. Public hearings. Applications for assistance decisions. Termination. (a) A captive insurance company shall be established by the incorporators described in this subsection, as a not-for-profit entity, in accordance with the provisions of sections 38a-91aa to 38a-91tt, inclusive, for the public purpose of providing assistance to owners of residential buildings with concrete foundations that have deteriorated due to the presence of pyrrhotite, where such assistance ensures that any such foundation will be repaired or replaced and where such assistance is intended to provide any such owner with a structurally sound concrete foundation by arranging and approving a financial package that achieves full repair or replacement of such foundation with the lowest possible amount of borrowed funds. There shall be five incorporators of such captive insurance company, who shall be appointed in the following manner: One by the Governor, one by the speaker, one by the minority leader of the House of Representatives, one by the president pro tempore and one by the Republican president pro tempore of the Senate. The incorporators, in their discretion, may appoint other individuals to form an organizing committee. The speaker, the minority leader of the House of Representatives, the president pro tempore and the Republican president pro tempore of the Senate shall each appoint a member of the General Assembly as a nonvoting, ex-officio member of the organizing committee. Thirty days after October 31, 2017, if no appointments have been made by the speaker and minority leader of the House of Representatives or by the president pro tempore and Republican president pro tempore of the Senate, the Governor shall make such appointments in order to fulfill the obligations of this section.

(b) In addition to any other requirements imposed by law applicable to captive insurance companies, the captive insurance company established pursuant to this section shall:

(1) Upon request of the joint standing committees of the General Assembly having cognizance of matters relating to planning and development, public safety and housing, or the Governor, make recommendations regarding the expansion of eligibility for financial assistance pursuant to this section and modifications to improve the efficiency and operation of the captive insurance company in order to serve its public purpose;

(2) Establish a board of directors who shall serve in a volunteer capacity. The membership of the board of directors shall include, but need not be limited to, a real estate agent or broker, two owners of residential buildings who have concrete foundations that have deteriorated due to the presence of pyrrhotite, a chief executive or such chief executive's designee of a municipality in which residential buildings with concrete foundations that have deteriorated due to the presence of pyrrhotite are located, an individual with professional investment experience and currently registered as an investment adviser pursuant to title 36b, the executive directors of the Capitol Region Council of Governments and the Northeastern Connecticut Council of Governments or such executive directors' designees and representatives from the insurance and banking industries, who shall not have professional relationships with any bank or insurance company that has a financial interest in residential buildings subject to the provisions of this section and sections 7-374b, 8-441, 8-442, 8-443, 8-444, subparagraph (B) of subdivision (20) of subsection (a) of section 12-701 and section 29-265f. The speaker, the minority leader of the House of Representatives, the president pro tempore of the Senate and the Senate Republican president pro tempore shall each appoint a member of the General Assembly as a nonvoting, ex-officio member of the board of directors. The Governor shall appoint two members to the board of directors, one of whom shall be appointed as a nonvoting member and considered an ex-officio member under the bylaws adopted by the captive insurance company. It shall not constitute a conflict of interest for a member of the board of directors, who is the owner of a residential building which has a concrete foundation that has deteriorated due to the presence of pyrrhotite, or the spouse or dependent child of such member, to apply for or receive assistance from the captive insurance company established under this section, to repair or replace such concrete foundation, provided such member shall abstain from deliberation, action or vote by the board of directors in specific respect to such member's application or the application of such spouse or dependent child;

(3) Develop eligibility requirements and underwriting guidelines for financial assistance for repair or replacement of concrete foundations. Such requirements and guidelines shall, not later than fifteen days prior to their adoption, amendment or modification, be published on a public Internet web site maintained by the captive insurance company;

(4) Provide financial assistance to such owners of residential buildings for the repair or replacement of concrete foundations that have deteriorated due to the presence of pyrrhotite, including, but not limited to, financial reimbursement to owners who have had such repair or replacement performed prior to October 31, 2017;

(5) Assist such owners of residential buildings to obtain additional financing necessary to fully fund the repair or replacement of concrete foundations that have deteriorated due to the presence of pyrrhotite;

(6) Approve contractors or other vendors for eligibility to perform foundation repairs or replacements on behalf of claimants;

(7) Disburse such financial assistance to approved contractors or other vendors on behalf of claimants;

(8) Ensure that the financial assistance is used solely for costs of repairing and replacing concrete foundations that have deteriorated due to the presence of pyrrhotite;

(9) Require the disclosure of the amount of all financial compensation received by an owner of such a residential building, if any, arising out of a claim for coverage under the property coverage provisions of the personal risk insurance policy, including, but not limited to, a homeowners policy, for foundation deterioration due to the presence of pyrrhotite and ensure that such amount is considered when determining the amount of financial assistance offered to such owner;

(10) When appropriate, apply for, qualify for and receive any federal funds made available under any federal act, for assistance to owners of residential buildings having concrete foundations that have deteriorated due to the presence of pyrrhotite. To the extent permissible under federal law, all such federal funds shall be deposited into the Crumbling Foundations Assistance Fund established pursuant to section 8-441; and

(11) Enter into agreements, as necessary, with the Connecticut Housing Finance Authority and any participating lender, as defined in section 8-442, to develop and implement additional loan programs or financial products to assist such owners to repair or replace concrete foundations that have deteriorated due to the presence of pyrrhotite, while employing terms and conditions that are preferable to the open market.

(c) Except as provided in subsection (d) of this section, such captive insurance company shall not be considered a state agency for purposes of any provision of the general statutes, and shall not be considered to perform a governmental function for purposes of chapter 14. Such captive insurance company may, subject to the provisions of this section, do all things necessary and desirable in its discretion to accomplish its purposes, including hiring employees and contracting for administrative or operational services, and entering into agreements with the Connecticut Housing Finance Authority created pursuant to section 8-244 and any participating lender, as defined in section 8-442, to develop and implement additional loan programs or financial products that will assist owners of residential buildings to repair or replace concrete foundations that have deteriorated due to the presence of pyrrhotite on terms and conditions that are preferable to the open market. Not more than ten per cent of all moneys allocated or made available to the captive insurance company in any calendar year shall be used for administrative or operational costs.

(d) Employees and agents of the captive insurance company shall not be deemed state employees, except that employees and directors shall be subject to the provisions of sections 1-84, 1-84a, 1-84b, 1-85 and 1-86. Any agent, consultant or contractor of the captive insurance company shall be subject to the provisions of sections 1-86e and 1-101nn. The Office of State Ethics shall have the authority to enforce the provisions of this subsection.

(e) Notwithstanding sections 38a-11 and 38a-91bb, the captive insurance company shall not be required to pay a license fee for the first year of licensure or a renewal fee for any year thereafter, as set forth in said sections.

(f) In addition to any report required to be filed by not-for-profit entities generally under regulations of the Internal Revenue Service, the captive insurance company shall submit quarterly reports to the joint standing committees of the General Assembly having cognizance of matters relating to insurance, finance, planning and development, housing and public safety on its operation and financial condition. Such quarterly reports shall include, but need not be limited to, information concerning: (1) Moneys allocated or made available to it pursuant to this section, (2) total financial assistance and financial assistance, by town, provided to owners of such residential buildings pursuant to this section, (3) administrative and operational expenditures, (4) the total number and number, by town, of applications for assistance received during the quarter and to date, (5) the total number and number, by town, of applications for assistance granted during the quarter and to date, (6) the average time to process applications, and (7) the total number and number, by town, of applications pending and amount of such claims.

(g) The joint standing committees of the General Assembly having cognizance of matters relating to insurance, finance, planning and development, housing and public safety shall, not less than annually, hold a joint public hearing on the operation and financial condition of the captive insurance company.

(h) A decision on an application for assistance pursuant to this section shall be made in writing and provided to the owner and shall include the information relied upon and the basis for such decision, including the relevant eligibility and underwriting criteria. An owner of such a residential building may request a review of any decision by the captive insurance company relating to such owner not later than thirty days after the decision. A final determination on such a request for review shall be made in writing and provided to the owner not later than thirty days after receipt of the owner's request, unless an extension is agreed to by the owner. The final determination shall be subject to approval by the board of directors. There shall be no right to appeal such final determination.

(i) The captive insurance company shall continue until its existence is terminated by law. Upon the termination of the existence of the company, all its right and properties shall pass to and be vested in the state of Connecticut.

(June Sp. Sess. P.A. 17-2, S. 336; P.A. 18-179, S. 2, 3; P.A. 19-192, S. 1; P.A. 21-120, S. 2, 3; June Sp. Sess. P.A. 21-2, S. 58.)

History: June Sp. Sess. P.A. 17-2 effective October 31, 2017; P.A. 18-179 amended Subsec. (b)(2) by adding provision re no conflict of interest for board member who is owner of residential building with foundation that has deteriorated due to pyrrhotite to apply for or receive assistance from captive insurance company if certain conditions are met and amended Subsec. (c) by adding provision re captive insurance company not to be considered state agency and not to be considered to perform a governmental function, effective June 13, 2018; P.A. 19-192 amended Subsec. (b) by substituting “board of directors” for “board” and substituting “Northeastern Connecticut Council of Governments” for “Eastern Region Council of Governments” in Subdiv. (2), substituting “fifteen days” for “thirty days” in Subdiv. (3), deleting former Subdiv. (4) re development of single unified application for financial assistance, redesignating existing Subdivs. (5) to (12) as Subdivs. (4) to (11), substituting “owners” for “homeowners” in redesignated Subdiv. (4), substituting “personal risk insurance policy, including, but not limited to, a homeowners policy,” for “homeowners policy” in redesignated Subdiv. (9) and deleting “and residential condominium units” in redesignated Subdiv. (10), and amended Subsec. (h) by substituting “owner” for “homeowner” and “owner's” for “homeowner's”, effective July 1, 2019; P.A. 21-120 amended Subsec. (b)(2) by adding provision requiring Governor to appoint 2 members to board of directors, including 1 nonvoting, ex-officio member and amended Subsec. (i) by removing provision terminating existence of captive insurance company on June 30, 2022, effective July 1, 2021; June Sp. Sess. P.A. 21-2 amended Subsec. (b)(2) by replacing “a nonvoting, ex-officio member” with “a nonvoting member and considered an ex-officio member under the bylaws adopted by the captive insurance company”, effective July 1, 2021.

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Sec. 38a-91ww. Agency captive insurance companies. Corporate form. An agency captive insurance company may be incorporated as (1) a stock insurer with its capital divided into shares and held by the stockholders, (2) a nonprofit corporation with one or more members, or (3) a manager-managed limited liability company.

(P.A. 18-151, S. 1.)

History: P.A. 18-151 effective July 1, 2018.

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Sec. 38a-91xx. Agency captive insurance companies. Authority to do business. (a) No agency captive insurance company may transact insurance business in this state unless:

(1) Each agent or producer that owns or controls the agency captive insurance company is, and remains, licensed in good standing in this state under sections 38a-702a to 38a-702r, inclusive, and in all other states in which the insurance agent or insurance producer is licensed;

(2) The agency captive insurance company (A) insures only against the risks of commercial policies that are placed by or through agents or producers described in subdivision (1) of this subsection, (B) does not insure against risks of any health insurance policy or plan, and (C) submits to the Insurance Commissioner, in a manner specified by the commissioner, the form of commercial policies described in subparagraph (A) of this subdivision if the commissioner, in the commissioner's discretion, requires that the agency captive insurance company submit such policies to the commissioner;

(3) The agency captive insurance company discloses, in writing and in a form and manner prescribed by the Insurance Commissioner, to each policy holder under a policy described in subparagraph (A) of subdivision (2) of this subsection any limitations, rights and obligations that such agency captive insurance company holds, or is subject to, as a result of its affiliation with an insurance agent or insurance producer described in subdivision (1) of this subsection; and

(4) All risks insured by the agency captive insurance company are, if required by the Insurance Commissioner, (A) fronted by an insurance company authorized by any state for the type of insurance that the agency captive insurance company insures, (B) reinsured by a reinsurance company authorized or approved to conduct reinsurance business in this state, or (C) secured by a trust established in the United States for the benefit of policy holders and claimants, or funded by an irrevocable letter of credit or other arrangement approved by the commissioner.

(b) The Insurance Commissioner may require an agency captive insurance company to increase the funding of any security arrangement described in subdivision (4) of subsection (a) of this section. If the form of security arrangement is a letter of credit, the letter of credit shall be issued or confirmed by a bank approved by the commissioner. A trust or letter of credit described in subdivision (4) of subsection (a) of this section shall be established in a form and upon terms approved by the commissioner.

(P.A. 18-151, S. 2.)

History: P.A. 18-151 effective July 1, 2018.

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PART IIb

FINANCIAL GUARANTY INSURANCE ACT

Sec. 38a-92. Financial Guaranty Insurance Act, generally. (a) Sections 38a-92 to 38a-92n, inclusive, shall apply to financial guaranty insurance corporations engaged in financial guaranty insurance transactions in this state.

(b) Except as otherwise expressly provided in sections 38a-92 to 38a-92n, inclusive, and except where the context otherwise requires, all provisions of this title applicable to insurance and insurance companies generally shall apply to financial guaranty insurance corporations engaged in financial guaranty insurance transactions in this state.

(P.A. 93-136, S. 1.)

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Sec. 38a-92a. Definitions. As used in sections 38a-41, 38a-72 and 38a-92 to 38a-92n, inclusive:

(1) (A) “Financial guaranty insurance” means a surety bond, an insurance policy or, when issued by an insurer, an indemnity contract and any guaranty similar to the foregoing types, under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee or indemnitee as a result of any of the following events: Failure of any obligor on any debt instrument or other monetary obligation, including common or preferred stock guaranteed under a surety bond, insurance policy or indemnity contract, to pay when due principal, interest, premium, dividend, purchase price of or on the instrument or obligation or other monetary payment when due when the failure is the result of a financial default or insolvency, regardless of whether the obligation is incurred directly or as guarantor by or on behalf of another obligor that has also defaulted, or any other failure to make payment, provided the payment obligation or risk which is insured is investment grade; changes in the levels of interest rates, whether short or long-term or the differential in interest rates between various markets or products; changes in the rate of exchange of currency; changes in the value of financial or commodity indices or price levels in general; or other events as determined by the commissioner.

(B) “Financial guaranty insurance” shall not include:

(i) Insurance of any loss resulting from any event described in subparagraph (A) of this subdivision if the loss is payable only upon the occurrence of any of the following, as specified in a surety bond, insurance policy or indemnity contract: A fortuitous physical event; a failure of or deficiency in the operation of equipment; or an inability to extract or recover a natural resource;

(ii) Surety insurance, defined as insurance: Guaranteeing the fidelity of persons holding positions of public or private trusts; indemnifying financial institutions against loss of moneys, securities, negotiable instruments and other tangible items of personal property caused by larceny, misplacement, destruction or other stated perils; insuring against loss caused by forgery of signatures on, or alterations of specified documents, instruments and papers; becoming surety on or guaranteeing the performance of a bond which shall not exceed a period greater than five years, that guarantees the payment of a premium, deductible, or self-insured retention to an insurer issuing a workers' compensation or liability policy; guaranteeing the performance of contracts for services, including a bid, payment or performance bond where the bond is guaranteeing the execution of any contract other than a contract of indebtedness or other monetary obligation; and guaranteeing or otherwise becoming surety for the performance of any lawful contract, not specifically provided for in this subdivision, except any insurance contract which constitutes either mortgage guaranty insurance or financial guaranty insurance, as defined in subparagraph (A) of this subdivision;

(iii) Credit unemployment insurance, defined as insurance on a debtor in connection with a specific loan or other credit transaction, to provide payments to a creditor in the event of unemployment of the debtor for the installments or other periodic payments becoming due while a debtor is unemployed;

(iv) Credit insurance indemnifying a manufacturer, merchant or educational institution which extends credit against loss or damage resulting from nonpayment of debts owed to such entity for goods or services provided in the normal course of business;

(v) Guaranteed investment contracts issued by a life insurance company which provides that the life insurer will make specified payments in exchange for specific premiums or contributions;

(vi) Mortgage guaranty insurance, defined as insurance against financial loss by reason of the nonpayment of principal, interest and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust or other instrument constituting a first lien or charge on residential real estate consisting of less than five units;

(vii) Indemnity contracts or similar guaranties, to the extent that they are not otherwise limited or proscribed by sections 38a-92 to 38a-92n, inclusive, in which a life insurer does any of the following: Guarantees its obligations or indebtedness or the obligations or indebtedness of a subsidiary, as defined in section 38a-1, other than a financial guaranty insurance corporation, provided: To the extent that any such obligations or indebtedness are backed by specific assets, those assets shall be at all times owned by the life insurer or the subsidiary, and in the case of the guaranty of the obligations or indebtedness of the subsidiary that are not backed by specific assets of the life insurer, the guaranty terminates once the subsidiary ceases to be a subsidiary; guarantees obligations or indebtedness, including the obligation to substitute assets where appropriate, with respect to specific assets acquired by a life insurer in the course of normal investment activities and not for the purpose of resale with credit enhancement or guarantees obligations or indebtedness acquired by a subsidiary, provided the assets acquired pursuant to this subparagraph have been either acquired by a special purpose entity, whose sole purpose is to acquire specific assets of the life insurer or the subsidiary and issue securities or participation certificates backed by the assets, or sold to an independent third party, or guarantees obligations or indebtedness of an employee or agent of the life insurer;

(viii) Any cramdown bond or mortgage repurchase bond, as those phrases are used by nationally recognized rating agencies in respect to mortgage-backed securities;

(ix) Residual value insurance, defined as insurance issued in connection with a lease or contract which sets forth a specific termination value at the end of the term of the lease or contract for the property covered by the lease or contract and which insures against loss of economic value, other than loss due to physical damage, of tangible personal property, real property and improvements thereto;

(x) Any letter of credit or similar transaction effected by a bank, trust company or savings association;

(xi) Accumulation fund arrangements of any life insurance contract or annuity contract made pursuant to section 38a-460, or any funding agreements made pursuant to section 38a-459; or

(xii) Any other form of insurance covering risks that the commissioner determines to be substantially similar to any of the foregoing.

(2) “Asset-backed securities” means securities of an issuer provided (A) the issuer of the securities is a special purpose corporation, trust or other entity, or provided the securities constitute an insurable risk, or the issuer is a bank, trust company or other financial institution, deposits in which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of Federal Deposit Insurance Corporation or any successors thereto; and (B) the securities are related to a pool of assets so that the pool of assets has been conveyed, pledged or otherwise transferred to or is otherwise owned or acquired by the issuer, the pool of assets backs the securities issued and no asset in the pool has a value exceeding twenty per cent of the aggregate value of the pool.

(3) “Average annual debt service” means the amount of insured unpaid principal and interest on an obligation multiplied by the number of the insured obligations, assuming that each obligation represents a one-thousand-dollar par value, divided by the amount equal to the aggregate life of all of those obligations. This definition, expressed as a formula in regard to bonds, is as follows:

$Average annual debt service is equal to Start fraction Total debt service times Number of bonds Over Bond years End fraction. Total debt service is equal to insured unpaid principal plus interest. Number of bonds is equal to Start fraction Total insured principal Over $1,000 End fraction. Bond years is equal to Number of bonds times Term in years.$

(4) “Collateral” means any of the following:

(A) Cash;

(B) The scheduled cash flow from obligations which are not callable, where the underlying obligations cannot be prepaid in whole or in part by the original borrowers and the principal of which are directly payable or guaranteed by the United States government or an agency or instrumentality thereof, or in the case of obligations denominated in the currency of a foreign country directly payable or guaranteed by the government or central bank of that country, scheduled to be received on or prior to the date of scheduled debt service on the insured obligation, provided in the case of an insured obligation denominated in a foreign currency, collateral satisfying the foregoing requirements shall be denominated in the same currency as the insured obligation and shall be issued by the respective foreign government or central bank thereof or any agency or instrumentality thereof;

(C) The market value of investment grade obligations, other than obligations evidencing an interest in the project or projects financed with the proceeds of the insured obligations, in an amount not to exceed the principal of and interest on the insured obligation;

(D) The face amount of a letter of credit that meets all of the following criteria: (i) Is irrevocable, (ii) provides for payment under the letter of credit in all instances in which payment under a financial guaranty policy is required, (iii) is issued, presentable and payable either: At an office of the letter of credit issuer in the United States or at an office of the letter of credit issuer located in the jurisdiction in which the trustee or paying agency for the insured obligation is located, (iv) contains a statement that identifies the beneficiary as: The financial guaranty insurance corporation, its collateral agency or any successor by operation of law, including any liquidator, rehabilitator, receiver or conservator, or the trustee of the paying agent for the insured obligation, (v) contains a statement to the effect that the obligation of the letter of credit issuer under the letter of credit is an individual obligation of that issuer and is in no way contingent upon reimbursement with respect thereto, (vi) contains an issue date and an expiration date, (vii) either: Has a term at least as long as the shorter of the terms of the insured obligation or the term of the financial guaranty insurance policy, or indicates the letter of credit shall not expire without thirty days prior written notice to the beneficiary and allows for drawing under the letter of credit in the event that, prior to expiration, the letter of credit is not renewed or extended or a substitute letter of credit or alternate collateral meeting the requirements of this subdivision is not provided, (viii) if the letter of credit is governed by the 1983 revision of the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce (Publication 400), or any successor revision approved by the commissioner, it shall contain a provision for an extension of time of not less than thirty days after resumption of business to draw against the letter of credit in the event that one or more of the occurrences described in Article nineteen of Publication 400 occurs, (ix) is issued or confirmed by a bank, trust company or savings association and is organized and existing under the laws of the United States or any state thereof or, in the case of a banking organization organized under the laws of a foreign country, has a branch or agency office licensed under the laws of the United States or any state thereof and is domiciled in a member country of the Organization of Economic Cooperation and Development having a sovereign rating in one of the top two generic lettered rating classifications by a securities rating agency acceptable to the commissioner, has, or is the principal operating subsidiary of a bank holding company that has a long-term debt rating of at least investment grade, and is not a parent, subsidiary or affiliate of the trustee or paying agent, if any, with respect to the insured obligation if that trustee or paying agent is the named beneficiary of the letter of credit. Collateral meeting the requirements of this subdivision shall be deposited with or held by the financial guaranty insurance corporation, held by a trustee or agent for the benefit of the financial guaranty insurance corporation in trust or to perfect a security interest or held in trust pursuant to a bond indenture or other trust arrangement by a trustee for the benefit of holders of the insured obligations which may be used for the payment of debt service, other insured payments, collateral agent fees and trustee fees or reimbursement of the financial guaranty insurance corporation on any obligation insured by the corporation. Any such trustee or agent shall be a bank, savings association, depository institution or other entity acceptable to the commissioner, the deposits of which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or any successors thereto, or, in the case of banking organizations organized under the laws of a foreign country, has a branch or agency office licensed under the laws of the United States or any state thereof and is domiciled in a member country of the Organization of Economic Cooperation and Development having a sovereign rating in one of the top two generic lettered rating classifications by a securities rating agency acceptable to the commissioner, has, or is the principal operating subsidiary of a bank holding company that has a long-term debt rating of at least investment grade and in each case that has a net worth of at least twenty-five million dollars. Any such trustee or agent may also be an approved or qualified servicer or originator of the kind of assets which comprise the collateral, including without limitation, a servicer qualified under a federal or state insurance or guaranty program to service loans or mortgage loans, if the servicer or originator maintains in force at all times errors and omissions insurance applicable to the trust or agency activities.

(5) “Commercial real estate” means income-producing real property other than residential property consisting of less than five units.

(6) “Contingency reserve” means an additional liability reserve established to protect policyholders against the effects of adverse economic cycles or other unforeseen circumstances.

(7) “Excess spread” means, in connection with any insured issue of asset-backed securities, the excess of (A) the cash flow on the underlying assets available to make debt service payments on the insured securities over (B) the debt service requirements on the insured securities, provided such excess is held in the same manner as collateral is required to be held.

(8) “Financial guaranty insurance corporation” means an insurer transacting financial guaranty insurance, except as otherwise provided in sections 38a-92 to 38a-92n, inclusive, and does not include an insurer whose only financial guaranty insurance activity in this state is to reinsure financial guaranty insurance policies in accordance with subparagraph (B) of subdivision (2) of subsection (a) of section 38a-92m.

(9) “Governmental unit” means a state, territory or possession of the United States of America, the District of Columbia, the country of Canada, a province of Canada, the United Kingdom, a public authority of the United Kingdom, any other sovereign which the commissioner shall designate or approve for purposes of sections 38a-92 to 38a-92n, inclusive, a municipality or a political subdivision of any of the foregoing or any public agency or instrumentality thereof.

(10) “Guaranties of consumer debt organizations” means insurance policies indemnifying regulated financial institutions against loss or damage resulting from nonpayment of debts owed to them for extensions of credit to individuals for nonbusiness purposes provided in the normal course of their business. Policies providing that coverage shall contain a provision that all liability terminates upon sale or transfer of the underlying obligation to any transferee that is not an insured of the financial guaranty insurance corporation under a similar policy.

(11) “Industrial development bond” means any security or other instrument under which a payment obligation is created, issued by or on behalf of a governmental unit to finance a project serving a private industrial, commercial or manufacturing purpose and not guaranteed by a governmental unit.

(12) “Insurable risk” means that the obligation on an uninsured basis has been determined to be not less than investment grade. With respect to asset-backed securities, as defined in subsection (2) of this section, the determination shall be based solely on the pool of assets pledged in support of the insured obligation or securing the financial guaranty insurance corporation, without consideration of the creditworthiness of the issuer.

(13) “Investment grade” means either that: (A) The obligation is rated in one of the top four generic lettered rating classifications by a securities rating agency acceptable to the commissioner; (B) the obligation, without regard to financial guaranty insurance, has been identified in writing by that rating agency as an insurable risk deemed to be of investment grade quality; or (C) the obligation has been determined to be investment grade as indicated by a category one or two rating, by the Securities Valuation Office of the National Association of Insurance Commissioners or any successor thereto.

(14) “Municipal bonds” means municipal obligation bonds and special revenue bonds.

(15) “Municipal obligation bond” means any security or other instrument, including a state lease but not a lease of any other governmental unit, under which a payment obligation is created, issued by or on behalf of a governmental unit to finance a project or undertaking serving a substantial public purpose and which is one or more of the following: (A) Payable from tax revenues, but not tax allocations, within the jurisdiction of the governmental unit; (B) payable or guaranteed by the United States of America or any agency, department or instrumentality thereof, or by a state housing agency; (C) payable from rates or charges, but not tolls, levied or collected in respect to a nonnuclear utility project or public transportation facility but shall not include an airport facility or public higher education facility; or (D) with respect to lease obligations, payable from past, present or future appropriations.

(16) “Reinsurance” means cessions qualifying for credit under section 38a-92m.

(17) “Security” or “secured” means any of the following: (A) A deposit at least equal to the full amount of the outstanding principal of the insured obligation; (B) collateral, as defined in subsection (4) of this section, at least equal to the full amount of the outstanding principal of the insured obligation or which has a market value or scheduled cash flow which is equal to or greater than the scheduled debt service on the insured obligation; or (C) other property, provided the financial guaranty insurance corporation or the trustee has possession of evidence of the right, title or authority to claim or foreclose thereon or otherwise dispose of the property for value, the scheduled cash flow from which, or market value thereof, is at least equal to the scheduled debt service on the insured obligation.

(18) “Special revenue bond” means any security or other instrument under which a payment obligation is created, issued by or on behalf of a governmental unit to finance a project or undertaking serving a substantial public purpose and not payable in full from the sources enumerated in subsection (15) of this section, or securities which are substantially similar to the foregoing and issued by a nonprofit corporation.

(19) “Total net liability” of a financial guaranty insurance corporation means the aggregate amount of insured unpaid principal, interest and other monetary payments, if any, of guaranteed obligations insured or assumed, less reinsurance and less collateral.

(20) “Utility first mortgage obligation” means an obligation of an insurer secured by a first priority mortgage on property owned or leased by an investor-owned or cooperative-owned utility company.

(P.A. 93-136, S. 2; P.A. 94-39, S. 9; May 25 Sp. Sess. P.A. 94-1, S. 31–33, 130; P.A. 97-108, S. 3; P.A. 98-25.)

History: P.A. 94-39 redefined “credit insurance”; May 25 Sp. Sess. P.A. 94-1 amended Subdivs. (1)(A), (4)(D) and (15) by making technical changes, effective July 1, 1994; P.A. 97-108 amended Subdiv. (1)(B) to insert (xi) re accumulation fund arrangements, changed former (xi) to (xii) and made technical changes; P.A. 98-25 amended Subdiv. (1)(B)(ii) re surety insurance to include becoming surety on or guaranteeing the performance of certain bonds to an insurer issuing a workers' compensation or liability policy, and substituted “this subdivision” for “this subsection”.

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Sec. 38a-92b. Licensing of financial guaranty insurance corporations. Reinsurance. (a) Each financial guaranty insurance corporation may transact financial guaranty insurance business in this state if licensed to do so by the commissioner.

(b) A financial guaranty insurance corporation may only reinsure those lines of insurance which it is licensed to write direct business for in this state.

(P.A. 93-136, S. 3.)

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Sec. 38a-92c. Contingency reserves. (a) Each licensed financial guaranty insurance corporation shall establish and maintain a contingency reserve calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

(b) A financial guaranty insurance corporation may invest the contingency reserve in tax and loss bonds or similar securities purchased pursuant to Section 832 (e) of the Internal Revenue Code or any successor provision, only to the extent of the tax savings resulting from the deduction for federal income tax purposes of a sum equal to the annual contributions to the contingency reserve. The contingency reserve shall otherwise be invested only in classes of securities or types of investments permitted by this title.

(P.A. 93-136, S. 4; P.A. 00-30, S. 6, 14.)

History: P.A. 00-30 amended Subsec. (a) to substitute “calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions” for “computed in accordance with this section”, deleted Subsecs. (b) to (f), inclusive, and redesignated Subsec. (g) as (b), effective January 1, 2001.

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Sec. 38a-92d. Reserves against unpaid losses and loss expense. (a) Each financial guaranty insurance corporation shall establish and maintain reserves against unpaid losses and loss expense. Such reserves shall be calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

(b) Except as otherwise permitted by the commissioner, no deduction shall be made for anticipated salvage in computing case basis loss reserves, unless that salvage is held by or under the control of the financial guaranty insurance corporation and would qualify as an admitted asset under this title or unless that salvage constitutes or is secured by a letter of credit which is approved by the commissioner or complies with the criteria set forth in subdivision (4) of section 38a-92a.

(c) If the insured principal and interest on a defaulted issue of obligations due and payable during any three years following the date of default exceed ten per cent of the financial guaranty insurance corporation's capital, surplus and contingency reserves, its reserves so established shall be supported by a report from an independent actuarial firm or other source acceptable to the commissioner.

(P.A. 93-136, S. 5; P.A. 00-30, S. 7, 14; P.A. 05-29, S. 6.)

History: P.A. 00-30 amended Subsec. (a) to delete reference to the case basis method or other method prescribed by the commissioner and to substitute the requirement that “reserves be calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions”, effective January 1, 2001; P.A. 05-29 made a technical change in Subsec. (b).

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Sec. 38a-92e. Unearned premium reserve. Each licensed financial guaranty insurance corporation shall establish and maintain an unearned premium reserve calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

(P.A. 93-136, S. 6; P.A. 00-30, S. 8, 14.)

History: P.A. 00-30 added requirement that unearned premium reserve be “calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions”, and deleted prior method for calculating unearned premium reserve, effective January 1, 2001.

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Sec. 38a-92f. Disclosures in prospectus or other offering document. Each licensed financial guaranty insurance corporation shall adopt procedures reasonably calculated to ensure, to the extent it is commercially feasible for the financial guaranty insurance corporation to do so, that any prospectus or other offering document which discloses that a policy of financial guaranty insurance has been issued also discloses that in the event the financial guaranty corporation were to become insolvent, any claims arising under the policies of financial guarantee insurance are excluded from coverage by the Connecticut Insurance Guaranty Association.

(P.A. 93-136, S. 7.)

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Sec. 38a-92g. Financial guaranty insurance transactions. Exceptions. (a) Except as otherwise provided in section 38a-92l or 38a-92m, inclusive, financial guaranty insurance may be transacted in this state only by an insurer licensed to transact financial guaranty insurance.

(b) The following guaranties are permissible: Financial guaranty insurance shall be written only to insure timely payment of contractual obligations, including principal and interest, purchase obligations, dividends or any other payment obligation such as: (1) Municipal obligation bonds; (2) special revenue bonds; (3) industrial development bonds; (4) corporate obligations; (5) partnership obligations; (6) asset-backed securities, trust certificates and trust obligations other than mortgage-backed securities secured by mortgages on real property which are insurable by a mortgage guaranty insurer, unless: (A) The mortgage loans with loan-to-value ratios in excess of eighty per cent are insured by mortgage guaranty insurers licensed in this state or mortgage guaranty insurers licensed under the laws of any other state if that insurer has a claims paying rating of investment grade from a securities rating agency acceptable to the commissioner, or (B) additional mortgage loans with principal balances, collateral with a market value or excess spread reasonably projected to be an amount at least equal to the coverage that would otherwise be provided by those mortgage guaranty insurers in accordance with subparagraph (A) of this subdivision are pledged as additional support for the asset-backed securities; (7) installment purchase agreements executed as a condition of sale; (8) consumer debt obligations; (9) utility first mortgage obligations; and (10) any other debt instrument or monetary obligation that the commissioner determines to be substantially similar.

(P.A. 93-136, S. 8.)

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Sec. 38a-92h. Copies of relevant materials. Each licensed financial guaranty insurance corporation shall keep copies of all relevant materials prepared by the insurer or used in the initial underwriting or ongoing monitoring of insured risk, all relevant documents pertaining to changes in the credit risk or performance of the insured on the obligation and all materials pertaining to the examination of the condition of collateral, assets or other security and any other materials requested by the commissioner. All those materials shall be maintained for the entire period during which the insurance is in force and shall be available for examination upon request by the commissioner or by any rating agency approved by the commissioner.

(P.A. 93-136, S. 9.)

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Sec. 38a-92i. Net liability. Kinds of obligations. (a) At least ninety-five per cent of a financial guaranty insurance corporation's outstanding total net liability on the kinds of obligations enumerated in subdivisions (1) to (3), inclusive, of subsection (b) of section 38a-92g shall be investment grade.

(b) The financial guaranty insurance corporation shall at all times maintain capital, surplus and contingency reserve in the aggregate no less than the sum of the following:

(1) 0.3333 per cent of the total net liability under guaranties of municipal bonds and utility first mortgage obligations;

(2) 0.6666 per cent of the total net liability under guaranties of investment grade asset-backed securities;

(3) 1.0 per cent of the total net liability under guaranties secured by collateral or having a term of seven years or less of: (A) Investment grade industrial development bonds, and (B) other investment grade obligations;

(4) 1.5 per cent of the total net liability under guaranties of other investment grade obligations;

(5) 2.0 per cent of the total net liability under guaranties of: (A) Noninvestment grade consumer debt obligations, and (B) noninvestment grade asset-backed securities;

(6) 3.0 per cent of the total net liability under guaranties of noninvestment grade obligations secured by first mortgages on commercial real estate and having loan-to-value ratios of eighty per cent or less;

(7) 5.0 per cent of the total net liability under guaranties of other noninvestment grade obligations;

(8) If the amount of collateral required by subdivision (3) of this subsection is no longer maintained, that proportion of the obligation insured which is not so collateralized shall be subject to the aggregate limits specified in subdivision (4) of this subsection; and

(9) Additional surplus determined by the commissioner to be adequate to support the writing of surety insurance if the financial guaranty insurance corporation has been licensed to transact surety insurance.

(P.A. 93-136, S. 10.)

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Sec. 38a-92j. Limiting of exposure to loss on any one risk. A financial guaranty insurance corporation licensed to transact financial guaranty insurance in this state shall limit its exposure to loss on any one risk, net of collateral and reinsurance, as follows:

(1) For municipal obligation bonds and special revenue bonds: (A) The insured average annual debt service with respect to any one entity and backed by a single revenue source may not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve, and (B) the insured unpaid principal issued by a single entity and backed by a single revenue source may not exceed seventy-five per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

(2) For each issue of asset-backed securities issued by a single entity the lesser of: (A) Insured average annual debt, or (B) the amount which is determined by dividing the insured unpaid principal, reduced by the extent to which the unpaid principal of the supporting assets and a reasonable projection of any excess spread exceeds the insured unpaid principal, by nine, shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve; provided no asset in the pool supporting the asset-backed securities exceeds the single risk limits described in subdivision (5) of this section if directly guaranteed, and provided further, if the issuer of such insured asset-backed securities is a special purpose corporation, trust or other entity and that issuer has indebtedness outstanding with respect to any other pool of assets, either such other indebtedness shall be entitled to the benefits of a financial guaranty policy of the same financial guaranty insurance corporation, or such other indebtedness shall (i) be fully subordinated to the insured obligation with respect to, or be nonrecourse with respect to the pool of assets that supports the insured obligation, (ii) be nonrecourse to the issuer other than with respect to the asset pool securing such other indebtedness and proceeds in excess of the proceeds necessary to pay the insured obligation, and (iii) not constitute a claim against the issuer to the extent that the asset pool securing such other indebtedness or excess proceeds are insufficient to pay such other indebtedness, and provided, if the issuer of the insured asset-backed security is in the business of issuing asset-backed securities for the purpose of acquiring pools of assets and each such pool is originated by a different entity, the single risk limits of this section shall apply with respect to each such pool that is sold to, conveyed or otherwise pledged to the issuer, rather than to the insured asset-backed security.

(3) For obligations issued by a single entity and secured by commercial real estate and not meeting the definition of asset-backed securities, the insured unpaid principal, less fifty per cent of the appraised value of the underlying real estate, shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

(4) For utility first mortgage obligations, the insured average annual debt service shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

(5) For all other financial guaranties, the insured unpaid principal for any one entity and backed by a single revenue source may not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

(6) When calculating the single risk limits provided by this section, the financial guaranty insurance corporation shall add to the insured exposure any investments of the financial guaranty insurance corporation in obligations issued by the same entity and payable solely from the same revenue source as the insured obligation except for obligations of a governmental unit of the United States government rated in one of the top two generic lettered rating classifications by a rating agency acceptable to the commissioner.

(7) A financial guaranty insurance corporation shall not be deemed in violation of any limitation prescribed by this section with respect to any financial guaranty insurance outstanding prior to October 1, 1993, if the financial guaranty insurance corporation was in compliance with the applicable single risk limit in effect in the state at the time that the financial guaranty insurance policy was issued. If the financial guaranty insurance corporation was not in compliance it shall comply with the limitations prescribed by this section not later than July 1, 1994.

(P.A. 93-136, S. 11.)

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Sec. 38a-92k. Exceeding of limitations by licensed financial insurance corporations. Notification of commissioner. Hearing. (a) If a licensed financial insurance corporation at any time exceeds any limitation prescribed by section 38a-92i or 38a-92j the corporation shall immediately notify the commissioner in writing. Upon receipt of the written notification, or if the commissioner has reason to believe that any such limitation has been exceeded, he may issue an order to show cause why the financial guaranty insurance corporation should not cease transacting any new financial guaranty insurance business. If the commissioner issues such an order, the commissioner shall serve notice of the hearing with the order to the financial guaranty insurance corporation stating the time and place and the conduct, condition or grounds upon which the commissioner has made the order. The hearing shall occur not less than twenty nor more than thirty days after notice is served. At the hearing, the burden to show cause why the financial guaranty insurance corporation should not cease transacting new financial guaranty insurance business shall be borne solely by the financial guaranty insurance corporation.

(b) If the commissioner does not issue an order upon receiving written notice pursuant to subsection (a) of this section, the financial guaranty insurance corporation shall, within thirty days after any limitation is breached, submit a written plan to the commissioner detailing the steps that it will take or has taken to reduce its exposure to loss to no more than the amounts allowed in sections 38a-92i and 38a-92j. If, after review of the written plan, the commissioner determines that the corporation has not presented reasonable steps to reduce its exposure to loss to not more than the amounts allowable, the commissioner may issue an order to show cause following the same procedures as prescribed in subsection (a) of this section.

(c) If, after notice and hearing pursuant to subsection (a) or (b) of this section, the commissioner determines that the financial guaranty insurance corporation has exceeded any limitation prescribed by section 38a-92i or 38a-92j, the commissioner may order the corporation to cease transacting any new financial guaranty insurance business until its exposure to loss no longer exceeds these limitations.

(d) The provisions of this section shall not limit the authority of the commissioner under any other provision of this title.

(P.A. 93-136, S. 12.)

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Sec. 38a-92l. Other licensed insurers transacting financial guaranty insurance to be subject to provisions of this part. On and after October 1, 1993, any insurer transacting financial guaranty insurance in this state which is not licensed to transact financial guaranty insurance but which is otherwise licensed by the commissioner to transact insurance in this state, shall be subject to all of the provisions of sections 38a-92 to 38a-92n, inclusive, and:

(1) May continue to write financial guaranties of the type authorized by subsection (b) of section 38a-92g as follows: (A) For a period not to exceed five years from October 1, 1993, provided, by July 1, 1994, application shall be made to the commissioner to license a financial guaranty insurance corporation, controlled by or under common control with that insurer, which financial guaranty insurance corporation, once licensed, shall immediately assume all of the financial guaranty insurance in force on the books of the insurer which was written on or after October 1, 1993; or (B) in the case of an insurer transacting only financial guaranty insurance prior to October 1, 1993, which would comply with all of the requirements for licensing as a financial guaranty insurance corporation under sections 38a-92 to 38a-92n, inclusive, and which makes application not later than July 1, 1994, to become licensed to transact financial guaranty insurance business, such insurer may continue to write financial guaranty insurance until such time as the commissioner issues or denies the license application or the application is otherwise terminated;

(2) Shall, if it does not make application for a license to transact financial guaranty insurance pursuant to subsection (1) of this section, cease writing any new financial guaranty insurance not later than July 1, 1994. An insurer subject to this subsection may do one or more of the following: (A) Reinsure its net in force business with a licensed financial guaranty insurance corporation; (B) subject to the prior approval of its domiciliary commissioner and the commissioner of this state, reinsure all or part of its net in force business in accordance with the requirements of subdivision (2) of subsection (a) of section 38a-92m, except that subparagraph (B)(v) of said subdivision (2) shall not be applicable. The assuming insurer shall maintain reserves for the reinsured business in the manner applicable to the ceding insurer under sections 38a-92 to 38a-92n, inclusive; or (C) thereafter continue the risks then in force, and with thirty days prior written notice to its domiciliary commissioner, write new financial guaranty policies, provided the writing of the policies is reasonably prudent to mitigate either the amount of or possibility of loss in connection with business written prior to October 1, 1993. However, an insurer shall receive the prior approval of its domiciliary commissioner and the commissioner of this state before writing any new financial guaranty insurance policies that would have the effect of increasing its risk of loss;

(3) Shall, for all guaranties in force prior to October 1, 1993, including those that fall under the definition of financial guaranty insurance contained in subdivision (1) of section 38a-92a, be subject to the contingency reserve, reserves for loss and loss adjustment expenses and unearned premium reserve requirements applicable for municipal bond insurance policies which were in effect prior to July 1, 1989, or October 1, 1993, as appropriate. To the extent that the insurer's contingency reserves maintained as of October 1, 1993, are less than those required under subdivision (1) of subsection (b) of section 38a-92c, the insurer shall have until July 1, 1994, to bring its reserves into compliance, except that a part of the reserve may be released proportional to the reduction in net total liabilities resulting from reinsurance provided the reinsurer shall, on the effective date of the reinsurance, establish a reserve in an amount equal to the amount released and in addition, a part of the reserve may be released with the approval of the commissioner upon demonstration that the amount carried is excessive in relation to the corporation's outstanding obligations;

(4) Shall be subject to the reserve requirements applicable to financial guaranty insurance corporations, for business transacted on or after October 1, 1993.

(P.A. 93-136, S. 13.)

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Sec. 38a-92m. Credit for reinsurance as an asset or as a reduction from liability, when. (a) For financial guaranty insurance that takes effect on or after October 1, 1993, an insurer licensed under sections 38a-92 to 38a-92n, inclusive, to transact financial guaranty insurance shall receive credit for reinsurance as an asset or as a reduction from liability only if:

(1) The reinsurance is subject to an agreement which provides for its stated term and with respect to any such reinsured financial guaranty insurance in force, the reinsurance agreement may only be terminated or amended if one or more of the following applies: (A) At the option of the reinsurer or the ceding insurer if the liability of the reinsurer with respect to policies in force as of the date of termination shall continue until the expiration or cancellation of each such policy; (B) at the option or with the consent of the ceding insurer, if the reinsurance agreement provides for a cutoff of the reinsurer's liability with respect to the reinsurance in force as of the date of termination; or (C) at the discretion of the commissioner acting as rehabilitator, liquidator or receiver of the ceding insurer or reinsurer; and

(2) The reinsurance is ceded to one or more of the following:

(A) An insurer licensed under sections 38a-92 to 38a-92n, inclusive, to transact financial guaranty insurance, provided if the insurer is an affiliate of the ceding insurance, (i) the value of the ceding insurer's ownership interest may not exceed the greater of (I) thirty-five per cent of the ceding insurer's capital and surplus or (II) fifty per cent of the excess of the ceding insurer's admitted assets over its liabilities and capital and (ii) the insurer providing the reinsurance is rated at the time of cession and thereafter in one of the two top generic rating classifications by a securities rating agency acceptable to the commissioner;

(B) An insurer licensed in this state to transact surety insurance or reinsurance but not financial guaranty insurance pursuant to sections 38a-92 to 38a-92n, inclusive, accredited as a reinsurer in this state as provided in subdivision (1) of subsection (c) of section 38a-85 or certified as a reinsurer in this state as provided in section 38a-85a, if the insurer or reinsurer meets all of the following criteria: (i) Has and maintains combined capital and surplus of at least fifty million dollars; (ii) establishes and maintains the reserves required in section 38a-92c, except that if the reinsurance agreement is nonproportional, the contribution to the contingency reserve shall be equal to fifty per cent of the quarterly written insurance premium; (iii) complies with the provisions of subsection (b) of section 38a-92i, except that its maximum aggregate assumed total net liability shall be one-half that permitted for a financial guaranty insurance corporation. For the purpose of determining compliance, the reinsurer, unless at the time of cession and thereafter it is rated in one of the two top generic rating classifications by a securities rating agency acceptable to the commissioner, shall be limited to using ten per cent of its capital and surplus in making this calculation; (iv) complies with the provisions of section 38a-92j; and (v) assumes, together with all other reinsurers subject to this subparagraph, less than fifty per cent of the ceding insurer's total liability after deducting any reinsurance ceded to any insurers pursuant to subparagraph (A) of this subdivision;

(C) An insurer not licensed in this state but that is licensed in, or in the case of a United States branch of an alien insurer, is entered through, a state that employs standards regarding credit for reinsurance applicable to financial guaranty insurance corporations that are substantially similar to those in this state and the assuming insurer or United States branch of the alien insurer: (i) Otherwise complies with the provisions of subparagraphs (B)(i) and (B)(ii) of this subdivision; (ii) submits to the authority of this state to examine its books and records; and (iii) meets the requirements of subsection (i) of section 38a-85;

(D) An insurer not licensed in this state and transacting only financial guaranty insurance as is or would be permitted by sections 38a-92 to 38a-92n, inclusive, and such other lines of insurance as is or would be permitted under section 38a-41, and that otherwise complies with the provisions of subparagraphs (B)(i) and (B)(ii) of this subdivision, in an amount not exceeding the liabilities carried by the ceding financial guaranty insurance corporation for amounts withheld under a reinsurance agreement for such reinsurer, including funds held in trust for the ceding insurer, or amounts deposited by such reinsurer as security for the payment of obligations under the agreement if such funds or deposits are held subject to withdrawal by and under the control of the ceding insurer, or in the case of a trust, held in a qualified United States financial institution, as defined in section 38a-87; or

(E) An insurer not licensed in this state and not transacting only financial guaranty insurance as is or would be permitted by sections 38a-92 to 38a-92n, inclusive, and such other lines of insurance as is or would be permitted under section 38a-41, and that otherwise complies with the provisions of subparagraphs (B)(i), (B)(iii) and (B)(v) of this subdivision, in an amount not exceeding the liabilities carried by the ceding financial guaranty insurance corporation for amounts withheld under a reinsurance agreement for such reinsurer, including funds held in trust for the ceding insurer, or amounts deposited by such reinsurer as security for the payment of obligations under the agreement if such funds or deposits are held subject to withdrawal by and under the control of the ceding insurer, or in the case of a trust, held in a qualified United States financial institution, as defined in section 38a-87.

(b) In determining whether the financial guaranty insurance corporation meets the limitations imposed by section 38a-92j, in addition to credit for other types of qualifying reinsurance, the financial guaranty insurance corporation's aggregate risk may be reduced to the extent of the limit for aggregate reinsurance but in no event in an amount greater than the amount of the aggregate risk that will become due during the unexpired term of such reinsurance agreement in excess of the financial guaranty insurance corporation's retention pursuant to such reinsurance agreement.

(P.A. 93-136, S. 14; P.A. 00-30, S. 9, 14; P.A. 08-147, S. 2; P.A. 12-139, S. 5; P.A. 21-157, S. 8.)

History: P.A. 00-30 amended Subsec. (a)(2)(B) to substitute “written” for “earned” re insurance premium, effective January 1, 2001; P.A. 08-147 made a technical change in Subsec. (a)(2)(B); P.A. 12-139 amended Subsec. (a)(2) to add provision re insurer certified as reinsurer in this state in Subpara. (B) and make technical changes; P.A. 21-157 amended Subsec. (a)(2)(C) by substituting reference to Sec. 38a-85(i) for reference to Sec. 38a-85(h).

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Sec. 38a-92n. Filing of policy forms and amendments with commissioner. (a) Each licensed financial guaranty insurance corporation shall file all policy forms and any amendments thereto with the commissioner prior to the issuance of a financial guaranty insurance policy. Immediately upon filing, the financial guaranty insurance corporation may utilize any such policy form or amendment, unless and until the commissioner disapproves of the policy forms or amendments filed. Filings that otherwise comply with this section and that the commissioner does not disapprove within thirty days of filing shall be deemed approved.

(b) Each policy shall provide that there shall be no acceleration of payments due under the policy with respect to guaranteed obligations except at the option of the financial guaranty insurance corporation. For purposes of this subsection, “acceleration of payments” means any acceleration of a payment by reason of a payment default or insolvency of the obligor whose obligation is guaranteed or insured.

(c) Each policy shall contain a statement that in the event the insurer becomes insolvent, any claims arising under the policy of financial guaranty insurance are excluded from coverage by the Connecticut Insurance Guaranty Association.

(d) The commissioner may prescribe additional minimum policy provisions determined by the commissioner to be necessary or appropriate to protect policyholders, claimants, obligees or indemnitees.

(P.A. 93-136, S. 15; P.A. 14-122, S. 165.)

History: P.A. 14-122 made a technical change in Subsec. (b).

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Sec. 38a-93. Reserved for future use.

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PART III

INVESTMENTS

(1949 Rev., S. 6167, 6168, 6170–6172, 6174; 1951, S. 2832d, 2833d; 1961, P.A. 92; 1963, P.A. 168, S. 1; 1971, P.A. 460; P.A. 81-111, S. 6; P.A. 90-243, S. 61; P.A. 92-60, S. 28.)

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Sec. 38a-102. Investments. Derivative financial transactions. Regulations. (a) Except as otherwise limited or prohibited by sections 38a-102 to 38a-102h, inclusive, or by regulation adopted by the Insurance Commissioner pursuant hereto, a domestic insurance company may make or acquire such investments as are prudent in respect of the business of said insurance company and diversification considerations.

(b) Eligibility of an investment shall be determined at the time of its making or acquisition. Any instrument, including any extension or modification thereof, or collateral taken by a domestic insurer as a result of adverse financial circumstances affecting an investment shall not be considered a new investment for purposes of sections 38a-102 to 38a-102h, inclusive.

(c) Any investment limitation based on the amount of an insurance company's admitted assets or capital and surplus shall relate to such assets or capital and surplus as shown by the insurance company's annual statement as of December thirty-first next preceding the date of acquisition.

(d) In the case of a domestic life insurance company, the investment limitations set forth in section 38a-102c shall apply to a separate account only to the extent that reserves for guarantees with respect to (1) benefits guaranteed as to dollar amount and duration or (2) funds guaranteed as to principal amount or stated rate of interest are held in a separate account in accordance with subdivision (3) of subsection (a) of section 38a-433.

(e) Any limitation or prohibition appearing in sections 38a-102 to 38a-102h, inclusive, shall apply only with respect to the section in which it appears and shall not constitute a general prohibition applicable to any other section unless specifically stated. The qualification or disqualification of an investment under one section shall not prevent its qualification in whole or in part under another section and an investment authorized by more than one section may be held under whichever authorizing section the company first elects.

(f) (1) A domestic insurance company doing business in this state may enter into derivative financial transactions, including swaps, options, forwards, futures, caps, floors and collars or similar instruments or combinations thereof, in accordance with subsection (a) of this section. Any such company shall include with its audited financial report a statement by the independent certified public accountant conducting such audit that describes such accountant's assessment of the internal controls of such company relative to such transactions.

(2) If the independent certified public accountant determines the internal controls relative to such derivative financial transactions to be deficient, such company shall include with the statement set forth in subdivision (1) of this subsection such accountant's report of such deficiencies and a description of remedial actions taken or proposed to be taken to correct such deficiencies, if such actions are not already described in the accountant's assessment.

(g) The provisions of sections 38a-102 to 38a-102h, inclusive, shall not apply in whole or in part to any activity which the Insurance Commissioner shall exempt therefrom as consistent with the purpose of preserving the financial integrity of insurance companies for their policyholders. The Insurance Commissioner may adopt such regulations, in accordance with chapter 54, as the commissioner deems necessary to carry out the purposes of sections 38a-102 to 38a-102h, inclusive.

(P.A. 91-262, S. 1, 19; P.A. 09-48, S. 1; P.A. 10-5, S. 7.)

History: P.A. 09-48 made a technical change in Subsec. (d), added new Subsec. (f) re filing and internal controls requirements for derivative financial transactions and redesignated existing Subsec. (f) as Subsec. (g) and made technical changes therein, effective May 20, 2009; P.A. 10-5 amended Subsec. (d) to change “subsection (a)(iii)” to “subdivision (3) of subsection (a)” re reference to Sec. 38a-433, effective May 5, 2010.

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Sec. 38a-102a. Nonadmitted investment assets. Divestiture order, notice and hearing. (a) Investments made in excess of the limits prescribed in sections 38a-102 to 38a-102h, inclusive, shall be considered nonadmitted assets of an insurance company only to the extent of such excess and then only to the extent all such excess investments in the aggregate exceed fifty per cent of the amount by which capital and surplus exceeds the minimum requirements for such company.

(b) Whenever a domestic insurer, as defined in section 38a-1, holds nonadmitted investment assets exceeding fifty per cent of the amount by which capital and surplus exceeds the minimum requirements for such company or whenever the investments in any category exceed twice the limitations imposed thereon, the Insurance Commissioner may, after reasonable notice to and hearing of such company, direct the orderly divestiture of any or all of such excess. In addition to such an order, the Insurance Commissioner may require the chief investment officer, or in the absence of any such designee, the chief executive officer, of such company to affix to each financial statement required to be filed with the commissioner, a certification that any such order has been complied with or containing the details and explanation of any noncompliance.

(P.A. 91-262, S. 2, 19.)

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Sec. 38a-102b. Definitions. For the purposes of sections 38a-102 to 38a-102h, inclusive:

(1) “Cap” means an option contract wherein the seller, in return for a premium, agrees to limit the purchaser's risk associated with an increase in a reference rate or index.

(2) “Collar” means a contract that combines a cap and a floor.

(3) “Exempted country” means a foreign jurisdiction rated in one of the two highest rating categories by an independent, nationally recognized United States rating agency.

(4) “Floor” means an option contract wherein the seller, in return for a premium, agrees to limit the purchaser's risk associated with a decline in a reference rate or index.

(5) “Foreign obligations and investments” with respect to any single country means the obligations of the government of such country and political subdivisions, agencies and instrumentalities thereof together with obligations of and investments in entities created under the laws of that country, or a political subdivision thereof, and real estate and other tangible assets located in that country. Obligations issued, assumed or guaranteed by any institution created under the laws of the United States or any state thereof are not foreign obligations and investments.

(6) “Forward” means a contract, other than a future, between two parties that commits one party to purchase and the other to sell the instrument or commodity underlying the contract on a specified future date.

(7) “Future” means a standardized forward contract traded on a United States or qualified foreign exchange.

(8) “High yield obligations” means obligations that are not rated as investment grade by any nationally recognized United States rating agency or the National Association of Insurance Commissioners.

(9) “Institution” means business trusts, corporations, joint stock associations, partnerships and other legal entities organized under the laws of the United States, or any state or territory of the United States, but does not include agencies, authorities, or instrumentalities of or entities sponsored by the United States, its possessions or territories.

(10) “Insurance company” has the same meaning as provided in section 38a-1 and includes fraternal benefit societies as defined in section 38a-595 and health care centers as defined in section 38a-175, but does not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia or a state or political subdivision of a state.

(11) “Nonadmitted investment assets” means nonadmitted assets excluding real and personal property used in insurance business operations.

(12) “Obligations” includes bonds, debentures, notes and other evidences of indebtedness.

(13) “Option” means a contract that gives the purchaser the right, but not the obligation, to enter into a transaction with the seller for option rights on terms specified in the contract.

(14) “Subsidiary” or “subsidiaries” has the same meaning as provided in section 38a-1 except that the term “controlled by”, as used in said section, has the same meaning as provided in section 38a-129. For the purposes of sections 38a-102 to 38a-102h, inclusive, a person may rebut the presumption of control used to define a subsidiary by providing written notice to the commissioner of such person's intent to disavow control notwithstanding the direct or indirect ownership, control or holding with the power to vote, or holding of proxies representing ten per cent or more but less than a majority of the voting securities or voting power of any other person. Control shall be conclusively presumed to exist under sections 38a-102 to 38a-102h, inclusive, if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing over fifty per cent of the voting securities or voting power of any other person.

(15) “Swap” means a contract to exchange, for a period of time, the investment performance of one underlying instrument for the investment performance of another underlying instrument without exchanging the instruments themselves.

(P.A. 91-262, S. 3, 19; P.A. 95-168, S. 3; P.A. 09-48, S. 2.)

History: P.A. 95-168 amended Subsec. (h) by making technical clarifications re use of term “controlled by” in “subsidiary or subsidiaries” definition; P.A. 09-48 defined “cap” and “collar” in Subdivs. (1) and (2), “floor” in Subdiv. (4), “forward” and “future” in Subdivs. (6) and (7), “option” in Subdiv. (13) and “swap” in Subdiv. (15), redesignated existing Subdivs. (a) to (h) as Subdivs. (3), (5), (8) to (12) and (14), and made conforming and technical changes throughout, effective May 20, 2009.

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Sec. 38a-102c. Investments of admitted assets. Limitations. (a) A domestic insurer may invest up to ten per cent of admitted assets per obligor in obligations (1) issued, assumed or guaranteed by any agency, political subdivision or instrumentality of any state which obligations are not general obligations thereof; and (2) issued, assumed or guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the International Finance Corporation and any other agency or entity engaged in similar activities and in which the government of the United States participates.

(b) A domestic insurer may invest up to five per cent of admitted assets in obligations of any single institution other than high yield obligations. The foregoing limitation shall not apply to obligations with a final maturity of one year or less from the date of acquisition.

(c) A domestic insurer may invest up to one per cent of admitted assets in high yield obligations of any one institution and up to ten per cent of admitted assets in the aggregate in high yield obligations registered under the Securities Act of 1933. The commissioner may adopt regulations limiting the percentage of admitted assets that may be invested in high yield obligations not registered under the Securities Act of 1933.

(d) A domestic insurer may invest in foreign obligations and investments (1) up to ten per cent of admitted assets in any exempted country, and (2) up to two per cent of admitted assets in any other foreign country and up to fifteen per cent of admitted assets in the aggregate in all such other foreign countries. The aggregate foreign obligations and investments shall not exceed thirty per cent of admitted assets. All such foreign obligations and investments made within the limitation of this subsection shall also be subject to the percentage limitations prescribed by subsections (a), (b), (c), (e) and (f) of this section as applicable to such investment class, but this subsection shall not apply to investments which otherwise constitute an ownership interest in a subsidiary or affiliate of the domestic insurer. In addition to the foregoing, a domestic insurer transacting insurance in a foreign country or countries may invest funds necessary to meet its obligations in connection with such foreign insurance business without limitations under sections 38a-102 to 38a-102h, inclusive.

(e) A domestic insurer may invest up to five per cent of admitted assets in the common stock, preferred stock, limited partnership interests or other equity interests of any single institution other than subsidiaries and affiliates or in the shares of investment companies and up to twenty-five per cent of admitted assets in all such investments other than preferred stocks, which shall not be subject to such aggregate limitation.

(f) A domestic insurer may invest (1) up to five per cent of admitted assets in any single real estate investment or other tangible investment, and (2) up to ten per cent of admitted assets in the aggregate in (A) tangible investments and non-income-producing real estate and (B) that portion of any loan secured by mortgages or other interests in real estate which when made exceeds a loan-to-value ratio of more than seventy-five per cent. A “real estate investment” means any interest in real estate including, without limitation, a direct equity interest, joint venture interest, partnership interest and an interest in obligations secured by a mortgage or deed of trust but shall not include investments in subsidiaries.

(P.A. 91-262, S. 4, 19; P.A. 93-60, S. 3.)

History: P.A. 93-60 amended Subsec. (a) to include investments in the International Finance Corporation as admitted assets for domestic insurers and made certain technical changes for accuracy.

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Sec. 38a-102d. Affiliate relationships in the investment of admitted assets. Limitations. (a) In addition to investments in common stock, preferred stock, debt obligations and other securities permitted under sections 38a-102 to 38a-102h, inclusive, a domestic insurer may also: (1) Invest in common stock, preferred stock, debt obligations and other securities of one or more subsidiaries or affiliates, amounts which do not exceed the lesser of ten per cent of such insurer's assets or fifty per cent of such insurer's surplus as regards policyholders, provided after such investments, the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, investments in domestic or foreign insurance subsidiaries or affiliates shall be excluded, and there shall be included: (A) Total net moneys or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary or affiliate, including all organizational expenses and contributions to capital and surplus of such subsidiary or affiliate whether or not represented by the purchase of capital stock or issuance of other securities, and (B) all amounts expended in acquiring additional common stock, preferred stock, debt obligations and other securities and all contributions to the capital and surplus, of a subsidiary or affiliate subsequent to its acquisition or formation; (2) invest any amount in common stock, preferred stock, debt obligations and other securities of one or more subsidiaries or affiliates engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer, provided each such subsidiary or affiliate agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subdivision (1) of this subsection or in sections 38a-102 to 38a-102h, inclusive, applicable to the insurer. For purposes of this subdivision, “the total investment of the insurer” includes: (A) Any direct investment by the insurer in an asset, and (B) the insurer's proportionate share of any investment in an asset by any subsidiary or affiliate of the insurer, which shall be calculated by multiplying the amount of the subsidiary's or affiliate's investment by the percentage of the ownership of such subsidiary or affiliate; and (3) with the approval of the commissioner, invest any greater amount in common stock, preferred stock, debt obligations or other securities of one or more subsidiaries or affiliates, provided after such investment the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

(b) In determining the financial condition of an insurance company, its investments in subsidiaries or affiliates shall be valued in accordance with any applicable valuation method approved by the commissioner and consistent with procedures promulgated by the National Association of Insurance Commissioners.

(c) With respect to the activities conducted by a domestic insurer's subsidiaries, the commissioner shall have the power to: (1) Order said company to curtail the conduct of any activity if he finds, after notice and opportunity to be heard, that such activity is not lawful or is against public policy or that the continuation of such activity is materially adverse to the interests of the insurer's policyholders; and (2) require separate books, accounts and records for such classes of activities of the insurance company subsidiary as he shall determine, which books, accounts and records shall be so maintained as to disclose clearly and accurately the nature and details of such activities. The commissioner may determine that an activity is materially adverse to policyholders if he finds that subsidiaries are being used to avoid the quantitative limitations directly applicable to insurers under section 38a-102c.

(P.A. 91-262, S. 5, 19; P.A. 93-239, S. 21; P.A. 95-168, S. 2; P.A. 06-54, S. 2.)

History: P.A. 93-239 replaced former Subsec. (a) re investment limits with new provisions re certain investments and amounts allowed in relation to insurer's assets, liabilities and surplus and the formula for calculating such limits; P.A. 95-168 amended Subsec. (b) to provide that valuation method be consistent with the National Association of Insurance Commissioners standards and procedures; P.A. 06-54 amended Subsecs. (a) and (b) to allow insurer to invest in its affiliates, subject to the same limitations and requirements that apply to investments in subsidiaries.

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Sec. 38a-102e. Loan or investment prohibition. No domestic insurer shall make any loan or investment, other than a life insurance policy loan secured by its policies in an amount not exceeding the net reserve value thereof, unless authorized or approved by its board of directors or a committee thereof responsible for supervising or making such loan or investment or by committees or persons pursuant to a delegation of authority. The terms and limitations of any delegation of authority by the board of directors or any committee shall be by its actions which are duly recorded.

(P.A. 91-262, S. 6, 19.)

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Sec. 38a-102f. Prohibition of compensation for negotiating a loan. No director or officer of a domestic insurer shall receive any money or valuable consideration for negotiating, procuring or recommending any loan from such domestic insurer or for selling or aiding in the sale of any stocks or securities to or by such domestic insurer.

(P.A. 91-262, S. 7, 19.)

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Sec. 38a-102g. Investments of foreign and alien insurers. Foreign and alien insurers, as defined in section 38a-1, transacting the business of insurance in this state, shall have assets of the same general character and quality and policies and procedures relating to the approval of investments as specified in sections 38a-102 to 38a-102h, inclusive, for domestic insurers, except that other investments authorized by the law of such an insurer's state or country of domicile, may be recognized as admitted assets at the discretion of the commissioner.

(P.A. 91-262, S. 8, 19.)

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Sec. 38a-102h. Policies and procedures re use of special knowledge or information. Each domestic insurer shall adopt policy and implementation procedures designed to prevent directors, officers, employees or any other person from inappropriately benefiting, either directly or indirectly, from a conflict of interest arising from their position in or special knowledge of the company. Such policy and procedures shall be maintained for inspection by the commissioner at the principal office of the insurer and shall be filed with the commissioner upon his request and along with any application for authority to do business within this state.

(P.A. 91-262, S. 9, 19.)

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Sec. 38a-102i. Exceptions. None of the provisions of sections 38a-102 to 38a-102h, inclusive, shall be preempted by the provisions of section 106 of Title I of the Secondary Mortgage Market Enhancement Act of 1984, 15 USC Section 77r-1.

(P.A. 91-356, S. 2, 3.)

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Secs. 38a-103 to 38a-116. Reserved for future use.

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PART IV

INSIDER TRADING OF EQUITY SECURITIES

Sec. 38a-117. (Formerly Sec. 38-68a). Insider trading of equity securities. Definitions. As used in sections 38a-118 to 38a-124, inclusive, “equity security” means any stock or similar security, or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or to purchase such a security, or any such warrant or right, or any other security which the Insurance Commissioner shall deem to be of similar nature and consider necessary or appropriate, by such regulations as he may prescribe in the public interest or for the protection of investors, to treat as an equity security.

(February, 1965, P.A. 273, S. 1; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 283, 348.)

Annotation to former section 38-68a:

Cited. 207 C. 77.

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Sec. 38a-118. (Formerly Sec. 38-68b). Beneficial owners of securities to file with commissioner. Every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of any equity security of a domestic stock insurance company or who is an officer, as defined by the Insurance Commissioner, or a director of such company shall file in the office of the commissioner on or before December 31, 1965, or within ten days after he becomes such beneficial owner, director or officer, whichever is later, a statement, in such form as the commissioner may prescribe, of the amount of all equity securities of such company of which he is the beneficial owner, and within ten days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file in the office of the commissioner a statement, in such form as the commissioner may prescribe, indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.

(February, 1965, P.A. 273, S. 2; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 284, 348.)

Annotation to former section 38-68b:

Cited. 207 C. 77.

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Sec. 38a-119. (Formerly Sec. 38-68c). Disposition of certain profits realized by owners and officers. For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director or officer by reason of his relationship to such domestic stock insurance company, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such company within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the company, irrespective of any intention on the part of such beneficial owner, director or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the company or by the owner of any security of the company in the name and on behalf of the company if the company fails or refuses to bring such suit within sixty days after written request or fails diligently to prosecute the same thereafter; but no such suit shall be brought more than two years next after the filing with the commissioner of the report showing that the profit was realized. This section shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the commissioner by regulations may exempt as not comprehended within the purpose of this section.

(February, 1965, P.A. 273, S. 3; P.A. 10-32, S. 116.)

History: Sec. 38-68c transferred to Sec. 38a-119 in 1991; P.A. 10-32 made a technical change, effective May 10, 2010.

Annotation to former section 38-68c:

Cited. 207 C. 77.

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Sec. 38a-120. (Formerly Sec. 38-68d). Sales of securities restricted. No such beneficial owner, director or officer, directly or indirectly, shall sell any equity security of such company if the person selling the security or his principal (i) does not own the security sold, or (ii) if, owning the security, does not deliver it against such sale within twenty days thereafter, or does not within five days after such sale deposit it in the mails or other usual channels of transportation; but no person shall be deemed to have violated this section if he proves that, notwithstanding the exercise of good faith, he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.

(February, 1965, P.A. 273, S. 4.)

History: Sec. 38-68d transferred to Sec. 38a-120 in 1991.

Annotation to former section 38-68d:

Cited. 207 C. 77.

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Sec. 38a-121. (Formerly Sec. 38-68e). Excepted transactions. The provisions of section 38a-119 shall not apply to any purchase and sale, or sale and purchase, and the provisions of section 38a-120 shall not apply to any sale, of an equity security of a domestic stock insurance company not then or theretofore held by him in any investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market for such security. The commissioner may, by such regulations as he deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

(February, 1965, P.A. 273, S. 5.)

History: Sec. 38-68e transferred to Sec. 38a-121 in 1991.

Annotation to former section 38-68e:

Cited. 207 C. 77.

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Sec. 38a-122. (Formerly Sec. 38-68f). Foreign or domestic arbitrage transactions. The provisions of sections 38a-118, 38a-119 and 38a-120 shall not apply to foreign or domestic arbitrage transactions unless made in contravention of such regulations as the commissioner may adopt in order to carry out the purposes of sections 38a-117 to 38a-124, inclusive.

(February, 1965, P.A. 273, S. 6.)

History: Sec. 38-68f transferred to Sec. 38a-122 in 1991.

Annotation to former section 38-68f:

Cited. 207 C. 77.

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Sec. 38a-123. (Formerly Sec. 38-68g). Securities of certain companies not covered. The provisions of sections 38a-118, 38a-119 and 38a-120 shall not apply to any equity securities of a domestic stock insurance company if (i) any class of its equity securities shall be registered, or shall be required to be registered, pursuant to section 12 of the Securities Exchange Act of 1934, as amended, or (ii) such domestic stock insurance company shall not have any class of its equity securities held of record by one hundred or more persons on the last business day of the year next preceding the year in which equity securities of the company would be subject to the provisions of sections 38a-118, 38a-119 and 38a-120 except for the provisions of this subdivision (ii).

(February, 1965, P.A. 273, S. 7.)

History: Sec. 38-68g transferred to Sec. 38a-123 in 1991.

Annotation to former section 38-68g:

Cited. 207 C. 77.

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Sec. 38a-124. (Formerly Sec. 38-68h). Regulations. The commissioner may, by regulation, exempt in whole or in part any company or class of companies, and any officer, director or beneficial owner of securities of any company, from the provisions of sections 38a-117 to 38a-123, inclusive, upon such terms and conditions and for such period as he deems necessary or appropriate, if he finds, by reason of the number of public investors, amount of trading interest in the securities, the nature and extent of the activities of the company, or otherwise, that such action is not inconsistent with the public interest or the protection of investors. The commissioner may classify companies and prescribe requirements appropriate for each such class. No provision of sections 38a-118, 38a-119 and 38a-120 imposing any liability shall apply to any act done or omitted in good faith in conformity with any regulation of the commissioner, notwithstanding that such regulation may, after such act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason.

(February, 1965, P.A. 273, S. 8.)

History: Sec. 38-68h transferred to Sec. 38a-124 in 1991.

Annotation to former section 38-68h:

Cited. 207 C. 77.

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Secs. 38a-125 to 38a-128. Reserved for future use.

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PART V

ACQUISITION OF CONTROLLING INTEREST

Sec. 38a-129. (Formerly Sec. 38-39a). Purpose. Definitions. Applicability to captive insurance companies. (a) It shall be the purpose of sections 38a-129 to 38a-140, inclusive, to safeguard the financial security of Connecticut domestic insurance companies by empowering the Insurance Commissioner to supervise the activities of insurance companies doing business within this state which are affiliated with an insurance holding company system, to review the acquisition of control over the management of domestic insurance companies, however effectuated, and to provide standards for such supervision and review.

(b) As used in sections 38a-129 to 38a-140, inclusive, the following terms shall have the respective meanings hereinafter set forth, unless the context shall otherwise require:

(1) “Affiliate” or “affiliated” has the same meaning as provided in section 38a-1;

(2) “Commissioner” means the Insurance Commissioner and any assistant to the Insurance Commissioner designated and authorized by the commissioner while acting under such designation;

(3) “Control”, “controlled by” or “under common control with” has the same meaning as provided in section 38a-1;

(4) “Enterprise risk” means any activity, circumstance, event or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or the insurer's insurance holding company system as a whole, including, but not limited to, any activity, circumstance, event or series of events that would cause an insurer's risk-based capital to fall below minimum threshold levels, as described in subsection (d) of section 38a-72 or, for a health care center, in subdivision (2) of subsection (a) of section 38a-193, or would cause the insurer to be in a hazardous financial condition;

(5) “Group capital calculation instructions” means the Group Capital Calculation Instructions and Reporting Template as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC;

(6) “Insurance holding company system” means two or more affiliated persons, one or more of which is an insurance company;

(7) “Insurance company” or “insurer” has the same meaning as provided in section 38a-1, except that it does not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;

(8) “NAIC” means the National Association of Insurance Commissioners;

(9) “NAIC liquidity stress test framework” means the NAIC Liquidity Stress Test Framework publication which includes a history of the NAIC's development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress test instructions and reporting templates for a specific data year, such scope criteria, instructions, and reporting template being as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC;

(10) “Person” has the same meaning as provided in section 38a-1, or any combination of persons so defined acting in concert;

(11) “Scope criteria” means the designated exposure bases along with minimum magnitudes thereof for the specified data year used to establish a preliminary list of insurers considered scoped into the NAIC liquidity stress test framework for that data year;

(12) A “securityholder” of a specified person means one who owns any security of such person, including common stock, preferred stock, debt obligations and any other security convertible into or evidencing the right to acquire any of the foregoing;

(13) “Subsidiary” has the same meaning as provided in section 38a-1; and

(14) “Voting security” includes any security convertible into or evidencing a right to acquire a voting security.

(c) The provisions of sections 38a-129 to 38a-140, inclusive, shall apply to captive insurance companies, as defined in section 38a-91aa, as specified in section 38a-91oo.

(1969, P.A. 444, S. 1; P.A. 77-614, S. 163, 587, 610; P.A. 78-303, S. 85, 136; P.A. 80-482, S. 275, 345, 348; P.A. 85-16, S. 1, 6; P.A. 90-243, S. 13; P.A. 92-93, S. 42; 92-112, S. 13, 35; P.A. 04-174, S. 3; P.A. 12-103, S. 1; P.A. 14-6, S. 7; P.A. 15-144, S. 5; P.A. 22-118, S. 212.)

History: P.A. 77-614 and 78-303 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 85-16 inserted new Subsec. (a), stating the purpose of Secs. 38-39a to 38-39l, inclusive, designated prior provisions as Subsec. (b) and replaced alphabetic Subdiv. indicators with numeric indicators; P.A. 90-243 added a definition for “affiliate” and “affiliated” and made technical corrections for clarity; Sec. 38-39a transferred to Sec. 38a-129 in 1991; P.A. 92-93 and 92-112 amended Subsec. (a) to empower the commissioner to supervise insurers which are affiliated with an insurance holding company system, added Subsec. (b)(7) and (9) defining “securityholder”, and “voting security”, renumbering former Subdiv. (7) as (8), and made technical corrections for statutory consistency; P.A. 04-174 amended Subsec. (b)(3) to delete “pursuant to subsection (j) of section 38a-135” re rebutting presumption that control exists; P.A. 12-103 amended Subsec. (b) to add new Subdivs. (4) and (7) defining “enterprise risk” and “NAIC”, redesignate existing Subdivs. (4) to (9) as Subdivs. (5), (6) and (8) to (11), add provision re commissioner to make specific findings of fact to support determination that control exists in fact in Subdiv. (3) and make technical changes; P.A. 14-6 added Subsec. (c) re applicability of Secs. 38a-129 to 38a-140 to captive insurance companies; P.A. 15-144 amended Subsec. (b)(3) to delete provisions re presumption of control, effective July 1, 2015; P.A. 22-118 amended Subsec. (b) to add new Subdivs. (5), (9) and (11) defining “group capital calculation instructions”, “NAIC liquidity stress test framework” and “scope criteria”, and to redesignate existing Subdivs. (5) as (6), (6) as (7), (7) as (8), (8) as (10), (9) as (12), (10) as (13) and (11) as (14) and made a technical correction for clarity, effective July 1, 2022.

Annotation to former section 38-39a:

Cited. 184 C. 352.

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Sec. 38a-129a. Presumption of control. (a) For the purposes of sections 38a-129 to 38a-140, inclusive, control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, ten per cent or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not exist in fact.

(b) The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard, that a person, directly or indirectly, alone or pursuant to an oral or a written agreement, arrangement or understanding with one or more other persons, exercises such influence over the management or policies of an insurance company that it is necessary or in the public interest for the protection of such company's policyholders that such person or persons be deemed to control such company. The commissioner shall make specific findings of fact to support the determination that control exists in fact, notwithstanding the absence of a presumption to that effect.

(P.A. 15-144, S. 6.)

History: P.A. 15-144 effective July 1, 2015.

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Sec. 38a-130. (Formerly Sec. 38-39b). Acquisition and divestiture of domestic insurance companies. Required statement and notice filings. Violations. (a)(1) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, enter into any agreement to exchange securities for, seek to acquire or acquire, in the open market or otherwise, any voting security, or solicit any proxy for the purpose of acquiring control, of a domestic insurance company or, subject to the provisions of subsection (c) of this section, any corporation controlling a domestic insurance company if, after the consummation thereof, such person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of such domestic insurance company or corporation controlling a domestic insurance company. As used in this section, (A) “domestic insurance company” includes any person controlling a domestic insurance company unless such person is directly or through affiliates primarily engaged in business other than the business of insurance, as determined by the commissioner, and (B) “person” does not include a securities broker holding, in the usual and customary broker's function, less than twenty per cent of the voting securities of an insurance company or of any entity that controls an insurance company.

(2) (A) (i) No person shall enter into an agreement, arrangement or understanding, whether written or oral, to merge with or otherwise acquire control of a domestic insurance company or any corporation controlling a domestic insurance company unless, at the time any form of initial offer, request or invitation is made or the agreement, arrangement or understanding is entered into, or prior to the acquisition of such securities or proxies if no offer, agreement, arrangement or understanding is involved, such person has filed with the commissioner and has sent to such insurance company a statement containing the information required by subsection (b) of this section and such offer, request, invitation, agreement, arrangement, understanding or acquisition has been approved by the commissioner in the manner hereinafter prescribed.

(ii) If any offer, request, invitation, agreement or acquisition is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, the person required to file the statement under subparagraph (A)(i) of this subdivision may utilize the registration statement or such documents furnishing the similar information to provide the information required by subsection (b) of this section, to the extent that the registration statement or such documents contains such information.

(B) If the acquisition will result in a change of control of an insurance company authorized to do business in this state, the person seeking to acquire control of such insurance company shall file the preacquisition notification set forth in subsection (c) of section 38a-131 with the commissioner and comply with the provisions of subsection (c) of section 38a-131.

(3) Any controlling person of a domestic insurance company seeking to divest in any manner such person's controlling interest in such insurance company shall file with the commissioner and send to such insurance company a confidential notice of the proposed divestiture at least thirty days prior to such divestiture, except that if a statement set forth in subparagraph (A) of subdivision (2) of this subsection has been filed with the commissioner with respect to such transaction, such controlling person shall not be required to file or send such confidential notice. The notice shall remain confidential until the conclusion of the divestiture unless the commissioner determines that such confidential treatment will interfere with the enforcement of this section. The commissioner shall adopt regulations, in accordance with the provisions of chapter 54, to establish the circumstances under which a controlling person shall be required to obtain the commissioner's prior approval of such divestiture.

(b) (1) The statement required under subparagraph (A) of subdivision (2) of subsection (a) of this section shall be made under oath or affirmation and shall contain the following information:

(A) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (a) of this section is to be effected, hereinafter called “acquiring party”, and (i) if such person is an individual, such individual's principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years, or (ii) if such person is not an individual, (I) a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence, (II) an informative description of the business intended to be done by such person and such person's subsidiaries, and (III) a list of all individuals who are or who have been selected to become directors or executive officers of such person or who perform functions appropriate to such positions. Such list shall include for each such individual the information required by subparagraph (A)(i) of this subdivision;

(B) The source, nature and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose including any pledge of the insurance company's stock or the stock of any of its subsidiaries or controlling affiliates and the identity of persons furnishing such consideration, provided, where a source of such consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential if the person filing such statement so requests;

(C) Fully audited financial information as to the earnings and financial condition of each acquiring party or for the preceding five fiscal years of each such acquiring party for such lesser period as such acquiring party and any predecessors thereof shall have been in existence, and similar unaudited information as of a date not earlier than ninety days prior to the filing of the statement;

(D) Any plans or proposals that each acquiring party may have to liquidate such insurance company, to sell such insurance company's assets or merge or consolidate it with any person, or to make any other material change in such insurance company's business or corporate structure or management;

(E) The number of shares of any security referred to in subsection (a) of this section that each acquiring party proposes to acquire, the terms of the offer, request, invitation, agreement or acquisition referred to in said subsection (a), and a statement as to the method by which the fairness of the proposal was arrived at;

(F) The amount of each class of any security referred to in subsection (a) of this section that is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party;

(G) A full description of any contracts, arrangements or understandings with respect to any security referred to in subsection (a) of this section in which any acquiring party is involved, including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into;

(H) A description of the purchase of any security referred to in subsection (a) of this section during the twelve calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers and consideration paid or agreed to be paid;

(I) A description of any recommendations to purchase any security referred to in subsection (a) of this section made during the twelve calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interview or at the suggestion of such acquiring party;

(J) Copies of all tender offers for, requests, invitations for tenders of, exchange offers for and agreements to acquire or exchange any securities referred to in subsection (a) of this section and of additional soliciting material relating thereto;

(K) The term of any agreement, contract or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities referred to in subsection (a) of this section for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto;

(L) An acknowledgment by the person filing such statement that such person shall make a good faith effort to ensure that the annual enterprise risk report required under subsection (f) of section 38a-135 is filed in a timely manner for as long as such person's control exists;

(M) An acknowledgment by the person filing such statement that such person and all subsidiaries in the insurance holding company system within such person's control will provide such information as the commissioner may request to evaluate enterprise risk to the insurance company; and

(N) Such additional information as the commissioner may prescribe as necessary or appropriate for the protection of policyholders of the insurance company or in the public interest.

(2) If the person required to file the statement under subparagraph (A) of subdivision (2) of subsection (a) of this section is a partnership, limited partnership, syndicate or other group, the commissioner may require that the information called for by subparagraphs (A) to (N), inclusive, of subdivision (1) of this subsection shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group and each person who controls such partner or member. If any such partner, member or person or the person required to file such statement is a corporation, the commissioner may require that the information called for by subparagraphs (A) to (N), inclusive, of subdivision (1) of this subsection shall be given with respect to such corporation, each officer and director of such corporation and each person who is directly or indirectly the beneficial owner of more than ten per cent of the outstanding voting securities of such corporation. If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to such insurance company pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the commissioner and sent to such insurance company not later than two business days after the person learns of such change.

(c) Any person seeking to acquire control of any corporation that is not itself a domestic insurance company but that controls a domestic insurance company shall remain fully subject to all the provisions of sections 38a-129 to 38a-140, inclusive, except if such control is sought to be acquired by means of a tender offer, exchange offer or solicitation of proxies, the required approval of the commissioner need not be obtained prior to commencement of such tender offer, exchange offer or solicitation of proxies. Such person shall be required to furnish the commissioner with a statement under oath or affirmation containing the information required in subsection (b) of this section no later than the date on which the tender offer, exchange offer or solicitation of proxies commences.

(d) The following shall constitute violations of subsections (a) to (c), inclusive, of this section: (1) The failure to file any statement, amendment or other material required to be filed pursuant to subsection (a) or (b) of this section; (2) the effectuation of or any attempt to effectuate an acquisition of control of, divestiture of or merger with a domestic insurance company, other than a domestic insurance company referred to in subsection (c) of this section, unless the commissioner has given the commissioner's approval thereto after a hearing held pursuant to section 38a-132; or (3) the effectuation of an acquisition of control of or merger with a domestic insurance company referred to in subsection (c) of this section, unless the commissioner has given the commissioner's approval thereto after a hearing held pursuant to section 38a-132. For purposes of subdivision (3) of this subsection, the acquisition, directly or indirectly, of ten per cent or more of the voting securities of any corporation that is not itself a domestic insurance company but that controls a domestic insurance company, whether by tender offer, exchange offer or otherwise, or the voting of proxies representing ten per cent or more of the voting securities of any such corporation shall be presumed to be the effectuation of an acquisition of control of a domestic insurance company referred to in subsection (c) of this section.

(e) The courts of this state hereby are vested with jurisdiction over every person not resident, domiciled or authorized to do business in this state who files a statement with the commissioner under subsection (a) of this section and over all actions involving such persons arising out of violations of this section. Each such person shall be deemed to have performed acts equivalent to and constituting an appointment by such person of the commissioner to be such person's true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the commissioner in accordance with section 38a-26.

(1969, P.A. 444, S. 2; P.A. 84-185, S. 2; P.A. 85-16, S. 2, 6; P.A. 92-112, S. 14, 35; P.A. 93-239, S. 12, 22; P.A. 12-103, S. 2; P.A. 13-134, S. 5; P.A. 14-235, S. 14; P.A. 15-144, S. 7.)

History: P.A. 84-185 amended Subsec. (a) to include the control of proxies of a domestic insurance company and the control of any corporation controlling such a company within the limitations and requirements of the section; P.A. 85-16 added Subsec. (c) re acquisition of control of corporation which controls a domestic insurance company; Sec. 38-39b transferred to Sec. 38a-130 in 1991; P.A. 92-112 amended Subsec. (a) to provide that no entity may control a domestic insurance company without the approval of the commissioner, making technical corrections for statutory consistency, amended Subsec. (b) deleting the prior minimum provisions of the statement made under oath and added twelve new Subdivs. outlining new criteria, deleted the previous Subsec. (c)(1) and relettered and renumbered the previous Subsec. (c)(2), made technical changes re nondomestic insurance companies which control domestic insurers, deleted the requirement of the commissioner's approval, deleted language from the former Subsec. (c)(3) and created new Subsec. (c)(2) re public hearings given to review any acquisition of control and applicable exemptions, added new Subsec. (d) re minimum provisions of what constitutes a violation of this section and added new Subsec. (e) empowering the courts of this state with jurisdiction over persons not resident, domiciled or authorized to do business in this state who file a statement with the commissioner; P.A. 93-239 deleted Subsec. (c)(2) re public hearings given to review any acquisition of control and applicable exemptions and deleted obsolete references in Subsec. (d); P.A. 12-103 amended Subsec. (a) to designate provision re prohibitions on person other than the issuer as Subdiv. (1) and amend same by adding Subparas. (A) and (B) re “domestic insurance company” inclusion and “person” exclusion, designate provision re person to file information statement as Subdiv. (2)(A)(i), add Subdiv. (2)(A)(ii) permitting person required to file information statement to use registration statement under Securities Act of 1933 or Securities Exchange Act of 1934, add Subdiv. (2)(B) requiring filing of preacquisition notification and add Subdiv. (3) re filing requirements for divestiture, amended Subsec. (b) to designate provisions re required statement as new Subdiv. (1) and amend same by redesignating existing Subdivs. (1) to (12) as Subparas. (A) to (K) and (N), adding Subpara. (L) re acknowledgment of good faith effort to file annual enterprise risk report and adding Subpara. (M) re acknowledgment to provide information to commissioner, and to designate provisions re information requirement for group as new Subdiv. (2), amended Subsec. (d) to add provision re effectuation of divestiture as violation, and made technical and conforming changes; P.A. 13-134 made a technical change in Subsec. (b)(1)(M); P.A. 14-235 made a technical change in Subsec. (a)(3); P.A. 15-144 amended Subsec. (a)(2)(A)(i) to add references to arrangement or understanding and “, whether written or oral,”, effective July 1, 2015.

Annotations to former section 38-39b:

Cited. 166 C. 43; 184 C. 352.

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Sec. 38a-131. (Formerly Sec. 38-39c). Acquisitions. Exemptions. Preacquisition notifications. Violations of competitive standards. Hearing. Penalties. (a) For purposes of this section, (1) “acquisition” includes any agreement, arrangement or activity the consummation of which will result in a person acquiring, directly or indirectly, the control of another through the acquisition of voting securities, assets or bulk reinsurance or through a merger, and (2) “involved insurer” means (A) an insurance company that acquires or is acquired by another person, (B) is affiliated with an insurance company that acquires or is acquired by another person, or (C) an insurance company that is the result of a merger.

(b) The provisions of this section shall apply to any acquisition in which there will be a change of control of an insurance company authorized to do business in this state, except for the following:

(1) A purchase of securities solely for investment purposes, provided such securities are not used by voting or otherwise to cause or attempt to cause substantial reduction of competition in any insurance market in this state. If a purchase of securities results in a presumption of control as set forth in subdivision (3) of subsection (b) of section 38a-129, such purchase shall be deemed not to be solely for investment purposes unless (A) the insurance regulatory official of such insurance company's state of domicile accepts a disclaimer of control from such insurance company or such regulatory official affirmatively finds that control does not exist, and (B) such regulatory official communicates such disclaimer or affirmative finding to the commissioner;

(2) The acquisition of a person by another person when neither person is directly or through affiliates primarily engaged in the business of insurance;

(3) The acquisition of an affiliate;

(4) An acquisition if, as an immediate result of such acquisition, (A) the combined market share of the involved insurers will not exceed five per cent of the total market in any market, (B) there will be no increase in any market share, or (C) (i) the combined market share of the involved insurers will not exceed twelve per cent of the total market in any market, and (ii) the market share will not increase more than two per cent of the total market in any market;

(5) An acquisition for which a preacquisition notification would be required solely due to the resulting effect on the ocean marine insurance line of business in this state;

(6) An acquisition of an insurance company that is affirmatively determined by the insurance regulatory official of such insurance company's state of domicile to be in failing condition and (A) there is a lack of a feasible alternative to improving such condition, (B) the public benefits of improving such insurance company's condition through the acquisition exceed the public benefits that would arise from not causing a reduction in competition in this state, and (C) such regulatory official has communicated such determination and findings to the Insurance Commissioner.

(c) For an acquisition not exempt under subsection (b) of this section, the acquiring party shall file a preacquisition notification in accordance with this section and the acquired party may file a preacquisition notification. The commissioner shall treat any information filed under this subsection as confidential in the same manner as provided under section 38a-137.

(1) The preacquisition notification shall be in such form and contain such information as the National Association of Insurance Commissioners prescribes. The commissioner may require additional material and information the commissioner deems necessary, including, but not limited to, the opinion of an economist as to the impact of the proposed acquisition on competition in this state, to evaluate whether the proposed acquisition will violate the competitive standard described in subsection (d) of this section.

(2) There shall be a waiting period after the acquiring party files the preacquisition notification. Such waiting period shall begin on the date the commissioner receives the preacquisition notification and shall end on the thirtieth day after such date or upon termination by the commissioner of such waiting period, whichever is earlier. Prior to the end of the waiting period, the commissioner may require, on a one-time basis, the acquiring party or the acquired party to submit additional needed information relevant to the proposed acquisition, in which case the waiting period shall end on the thirtieth day after the commissioner receives the additional information or upon termination by the commissioner of such waiting period, whichever is earlier.

(d) (1) For a proposed acquisition not exempt under subsection (b) of this section, the commissioner shall evaluate whether such proposed acquisition will reduce substantially competition in any line of insurance business in this state or tend to create a monopoly in this state. In making such evaluation, the commissioner shall consider the percentages of market share the involved insurers possess and the market in which the involved insurers compete.

(A) (i) With respect to an acquisition involving more than two involved insurers, if a comparison of the percentage of market share of the insurance company with the largest market share, designated as Insurer A, against each involved insurer shows for any such comparison that the percentages exceed those in the tables set forth in this subparagraph, such showing shall be prima facie evidence of a violation of the competitive standards described in this subdivision. Percentages not shown in the tables shall be interpolated proportionately to the percentages shown:

(I) In a highly concentrated market and the involved insurers possess the following shares of the market:

Insurer A	Insurer B
4%	4% or more
10%	2% or more
15%	1% or more

or;

(II) In a market not highly concentrated and the involved insurers possess the following shares of the market:

Insurer A	Insurer B
5%	5% or more
10%	4% or more
15%	3% or more
19%	1% or more

(ii) For purposes of this subparagraph, a highly concentrated market is one in which the share of the four largest insurance companies is seventy-five per cent or more of the market.

(B) (i) An acquisition involving two or more involved insurers competing in the same market shall be prima facie evidence of a violation of the competitive standards described in this subdivision if (I) there is a significant trend toward increased concentration in the market, (II) one of the involved insurers is included in a grouping of large insurance companies that shows the increase in market share specified in subparagraph (B)(ii) of this subdivision, and (III) another involved insurer's market share is two per cent or more.

(ii) For purposes of this subparagraph, there is a significant trend toward increased concentration in the market when the aggregate market share for any grouping of the largest insurance companies in the market, from the two largest to the eight largest, has increased by seven per cent or more of the market over a period extending from any base year not less than five years and not more than ten years prior to the proposed acquisition.

(2) For purposes of subdivision (1) of this subsection, “market” means the relevant product and geographical markets. In determining the relevant product and geographical markets, the commissioner shall give due consideration to (A) definitions or guidelines, if any, promulgated by the National Association of Insurance Commissioners, (B) information submitted, if any, by an acquiring party or an acquired party, and (C) any other information the commissioner deems relevant. In the absence of sufficient information to the contrary, the relevant product market shall be the direct written insurance premium for a line of business, such line being that used in the annual statement insurance companies doing business in this state are required to file with the commissioner, and the relevant geographical market shall be this state.

(3) (A) An acquiring party or an acquired party may rebut a prima facie violation set forth in subdivision (1) of this subsection based on substantial evidence of the absence of the requisite anticompetitive effect. Factors relevant to such rebuttal include, but are not limited to, the involved insurers' market shares, the volatility of market leader rankings, the number of competitors in the market, the concentration and the trend in concentration in the insurance industry and ease of entry to and exit from the market.

(B) The commissioner may find, based on substantial evidence, a violation of the competitive standards described in subdivision (1) of this subsection that is not a prima facie violation as set forth in said subdivision (1).

(e) (1) (A) If the commissioner finds that a proposed acquisition violates the competitive standards described in subdivision (1) of subsection (d) of this section or if an acquiring party fails to file or fails to provide adequate information in the preacquisition notification required under subsection (c) of this section, the commissioner may issue an order, after notice and hearing, (i) directing an involved insurer to cease and desist from doing business in this state with respect to any line of insurance involved in the violation, or (ii) denying the application of an involved insurer for a license to do business in this state.

(B) The commissioner shall not issue such order unless (i) there is a hearing, (ii) notice of the hearing is provided to the involved insurers prior to the end of the waiting period specified in subsection (c) of this section and not less than fifteen days prior to the hearing, and (iii) the hearing is concluded and the order issued not later than sixty days after the date the acquiring party filed the preacquisition notification under subsection (c) of this section. Any such order shall be accompanied by a written decision by the commissioner setting forth findings of fact and conclusions of law.

(C) Any person who violates a cease and desist order of the commissioner may, after notice and hearing, be fined not more than ten thousand dollars for each day of such violation or be subject to suspension or revocation of such person's license or both.

(D) An order issued pursuant to this subdivision shall not apply if the proposed acquisition is not consummated.

(2) The commissioner shall not issue an order under subdivision (1) of this subsection if:

(A) The proposed acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way and the public benefits that would arise from such economies exceed the public benefits that would arise from not causing a reduction in competition in this state; or

(B) The proposed acquisition will substantially increase the availability of insurance in this state and the public benefits of such increase exceed the public benefits that would arise from not causing a reduction in competition in this state.

(f) Any person that fails to make a filing required under this section and fails to demonstrate a good faith effort to comply with such filing requirement shall be fined not more than fifty thousand dollars.

(1969, P.A. 444, S. 3; P.A. 12-103, S. 3.)

History: Sec. 38-39c transferred to Sec. 38a-131 in 1991; P.A. 12-103 replaced former provisions permitting person required to file information statement to use a registration statement under Securities Act of 1933 or Securities Exchange Act of 1934 with Subsecs. (a) to (f) re acquisitions and preacquisition notifications.

Annotation to former section 38-39c:

Cited. 184 C. 352.

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Sec. 38a-132. (Formerly Sec. 38-39d). Approval of acquisitions. Hearing. Expenses. (a) The commissioner shall approve any merger or other acquisition of control referred to in subsection (a) of section 38a-130 unless, after a public hearing, the commissioner finds that:

(1) After the change of control, the domestic insurance company referred to in subsection (a) of section 38a-130 would not be able to satisfy the requirements for the issuance of a license to write the line or lines of business for which it is presently licensed;

(2) (A) The effect of the merger or other acquisition of control would be to substantially lessen competition of insurance in this state or tend to create a monopoly herein. The commissioner shall consider the information required under subdivision (1) of subsection (c) of section 38a-131 and the considerations specified in subdivision (1) of subsection (d) of section 38a-131 in evaluating the effect of the merger or other acquisition of control on competition in this state.

(B) The commissioner shall not disapprove the merger or other acquisition of control on the basis of subparagraph (A) of this subdivision if the commissioner finds that a situation as described in subdivision (2) of subsection (e) of section 38a-131 exists.

(C) The commissioner may condition the approval of the merger or other acquisition of control on the correction or removal, within a specified period of time, of the basis of the commissioner's disapproval under subparagraph (A) of this subdivision;

(3) The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurance company or prejudice the interests of its policyholders;

(4) The plans or proposals of the acquiring party to liquidate the insurance company, sell such insurance company's assets or consolidate or merge such insurance company with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurance company and not in the public interest;

(5) The competence, experience and integrity of those persons who would control the operation of the insurance company are such that it would not be in the interest of policyholders of the insurance company and of the public to permit the merger or other acquisition of control; or

(6) The acquisition is likely to be hazardous or prejudicial to those buying insurance.

(b) (1) Any public hearing held by the commissioner pursuant to subsection (a) of this section shall be held not later than thirty days after the statement required by section 38a-130 is filed with the commissioner. The commissioner shall provide at least twenty days' notice of such hearing to the person filing the statement. The person filing the statement shall (A) provide at least seven days' notice of such public hearing to the insurance company and to such other persons as may be designated by the commissioner, (B) publish, in a manner prescribed by the commissioner, notice of such hearing in a newspaper of general circulation in the city of Hartford and in such other municipality as the commissioner may direct, and (C) provide notice in such other manner as the commissioner deems appropriate under the circumstances. If any amendment to the statement is filed, the commissioner may postpone the public hearing for a reasonable period not to exceed thirty days after the filing of such amendment.

(2) The person filing the statement, the insurance company, any person to whom notice of hearing was sent and any other person whose interest may be affected shall have the right at the hearing to present evidence, have counsel, examine and cross-examine witnesses and offer oral and written argument; and in connection therewith shall be entitled to conduct discovery proceedings in the same manner as is prescribed by the rules for the Superior Court. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearing.

(3) If a proposed merger or other acquisition of control under section 38a-130 requires the approval of any other insurance regulatory official of another state, a public hearing may be held on a consolidated basis at the discretion of the commissioner. Such hearing shall be held within the United States before the insurance regulatory officials of the states in which the insurance companies are domiciled, who shall hear and receive evidence. An insurance regulatory official may attend such hearing in person or by telecommunication.

(4) The commissioner shall make a determination not later than thirty days after the conclusion of the hearing whether to approve such merger or other acquisition of control. If there will be a change of control of a domestic insurance company, the commissioner shall additionally make a determination not later than thirty days after the conclusion of the hearing whether the acquiring party shall be required to maintain or restore such insurance company's capital to the level required under this title.

(c) All expenses incurred by the commissioner in connection with the proceedings under this section, including expenses for the services of any attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff as may be reasonably necessary to assist the commissioner in reviewing the proposed merger or other acquisition of control shall be paid by the person filing the statement required by section 38a-130.

(1969, P.A. 444, S. 4; P.A. 75-289; P.A. 78-331, S. 17, 58; P.A. 85-16, S. 3, 6; P.A. 92-112, S. 15, 35; P.A. 12-103, S. 4; P.A. 13-134, S. 6; P.A. 17-15, S. 8.)

History: P.A. 75-289 added Subsec. (c) re payment of commissioner's expenses; P.A. 78-331 substituted reference to Sec. 38-39b for reference to Sec. 38-39c in Subsec. (a); P.A. 85-16 inserted new Subsec. (c) to permit the commissioner to conduct public hearings to review the acquisition of control of any corporation which controls a domestic insurance company, and to establish standards for the commissioner's determination as to whether the acquisition is prejudicial to the interests of policyholders, relettering former Subsec. (c) as (d); Sec. 38-39d transferred to Sec. 38a-132 in 1991; P.A. 92-112 amended Subsec. (a) to change the time limitation from 180 days to 30 days for the commissioner to hold a public hearing after the statement required under Sec. 38a-130 has been submitted, divided the section into Subdivs., amended the public hearing procedure held to review the acquisition of control of any corporation which controls a domestic insurance company, created new Subdiv. (2) with language taken from old Subsec. (a) re right to present evidence, have counsel, examine and cross-examine witnesses in the public hearing, added a provision requiring that all discovery be completed 3 days prior to the public hearing, added new Subdiv. (3) allowing the commissioner to engage the services of various professionals at the acquiring person's expense, deleted former Subsecs. (b) and (c), added new Subsec. (b) re commissioner's grant of approval of a merger or acquisition based on the public hearing findings and relettered the previous Subsec. (d) accordingly; P.A. 12-103 deleted former Subsec. (a) re public hearing for approval of an acquisition, redesignated existing Subsec. (b)(1) as Subsec. (a) and amended same by redesignating existing Subparas. (A) and (C) to (F) as Subdivs. (1) and (3) to (6), redesignating existing Subpara. (B) as Subdiv. (2)(A) and adding provision therein re considerations by commissioner in evaluating effect of a merger or acquisition, and adding Subdiv. (2)(B) and (C) re disapproval and condition on approval of an acquisition, deleted former Subsec. (b)(2) re “other acquisition of control”, added new Subsec. (b) re requirements for public hearing held on an acquisition, amended Subsec. (c) to add provision re expenses for services of attorneys, actuaries, accountants and other experts, and made technical changes; P.A. 13-134 made technical changes in Subsec. (a)(2); P.A. 17-15 amended Subsec. (b)(1) to delete “subdivision (1) of” re Subsec. (a).

Annotations to former section 38-39d:

Cited. 166 C. 43; 184 C. 352.

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Sec. 38a-133. (Formerly Sec. 38-39e). Exemptions. The provisions of sections 38a-130 and 38a-132 and subsection (i) of section 38a-136 shall not apply to any offer, request, invitation, agreement or acquisition that the commissioner by order shall exempt therefrom as (1) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurance company, or (2) otherwise not comprehended within the purposes of sections 38a-129 to 38a-140, inclusive.

(1969, P.A. 444, S. 5; P.A. 92-112, S. 16, 35; P.A. 93-57, S. 1; P.A. 96-227, S. 4; P.A. 12-103, S. 5.)

History: Sec. 38-39e transferred to Sec. 38a-133 in 1991; P.A. 92-112 made technical corrections for statutory consistency; P.A. 93-57 made technical corrections for statutory consistency and deleted specific exemption references; P.A. 96-227 corrected the citation to Sec. 38a-136; P.A. 12-103 deleted reference to Sec. 38a-131 and made technical changes.

Annotation to former section 38-39e:

Cited. 184 C. 352.

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Sec. 38a-134. (Formerly Sec. 38-39f). Nonvotable securities. Injunctive relief. (a) No security which is the subject of any agreement or arrangement regarding acquisition or which is acquired or to be acquired in contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or of any regulation or order promulgated by the commissioner hereunder may be voted at any securityholders' meeting or may be counted for quorum purposes, and any action of securityholders requiring the affirmative vote of a specified percentage of shares may be taken as though such securities were not issued and outstanding; but, in the event the status of any such securities is not challenged by the issuer or any stockholder at a meeting, such securities may be voted and counted for quorum purposes at the meeting and the voting of such securities shall not invalidate the action taken at any such meeting.

(b) The insurance company or the commissioner may apply to the superior court for the judicial district of Hartford or to the superior court for the judicial district in which the insurance company has its principal place of business, or to any judge thereof, for equitable relief to enjoin any offer, request, invitation, agreement or acquisition made in contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or any regulation or order promulgated by the commissioner hereunder or the voting of any security so acquired. In any case where a person has acquired or is proposing to acquire any securities in violation of said sections or any regulation or order promulgated by the commissioner hereunder, the superior court for the judicial district of Hartford or the superior court for the judicial district in which the insurance company has its principal place of business may, on such notice as the court deems appropriate, upon the application of the insurance company or the commissioner, seize or sequester any securities of the insurance company owned directly or indirectly by such person with such orders with respect thereto as the court deems appropriate to effectuate the provisions of said sections. Notwithstanding any other provision of law, for the purposes of said sections the situs of the ownership of all securities of all domestic insurance companies shall be construed to be this state.

(1969, P.A. 444, S. 6; P.A. 78-280, S. 2, 6, 127; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 92-112, S. 17, 35; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6.)

History: P.A. 78-280 replaced “Hartford county” with “judicial district of Hartford-New Britain” and “county” with “judicial district” in Subsec. (b); P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-39f transferred to Sec. 38a-134 in 1991; P.A. 92-112 amended Subsec. (a) to make technical corrections for statutory consistency and replaced references to “stockholders” with “securityholders”; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995.

Annotation to former section 38-39f:

Cited. 184 C. 352.

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Sec. 38a-135. (Formerly Sec. 38-39g). Insurance holding company system member registration. Registration statement. Annual enterprise risk report. Group capital calculation. Liquidity stress test framework. Termination of registration statement. Disclaimer of affiliation. Exemptions. Supervisory college. Group-wide supervision of internationally active insurance group. (a) Every insurance company that is authorized to do business in this state and is a member of an insurance holding company system shall register with the commissioner on a form prescribed by the commissioner. Any insurance company that is subject to registration under this section shall register not later than fifteen days after it becomes subject to registration, and annually thereafter by June first of each year for the previous calendar year, unless the commissioner, for good cause shown, extends the time for registration, in which case it shall register within such extended time.

(b) (1) Every insurance company subject to registration shall file a registration statement that shall contain the following current information:

(A) The capital structure, general financial condition, ownership and management of the insurance company and any person controlling the insurance company;

(B) The identity and relationship of every member of the insurance holding company system;

(C) The following agreements in force, and transactions outstanding or that have occurred during the last calendar year between such insurance company and its affiliates: (i) Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurance company or of the insurance company by its affiliates; (ii) purchases, sales or exchanges of assets; (iii) transactions not in the ordinary course of business; (iv) guarantees or undertakings for the benefit of an affiliate that result in an actual contingent exposure of the insurance company's assets to liability, other than insurance contracts entered into in the ordinary course of the insurance company's business; (v) management agreements, service contracts and cost-sharing arrangements; (vi) reinsurance agreements; (vii) dividends and other distributions to securityholders; and (viii) consolidated tax allocation agreements;

(D) Any pledge of the insurance company's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system;

(E) If requested by the commissioner, financial statements of or within an insurance holding company system, including all affiliates. Such statements may include, but are not limited to, annual audited financial statements filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended from time to time, or the Securities Exchange Act of 1934, as amended from time to time. An insurance company required to file financial statements under this subparagraph may provide the commissioner with its parent corporation's financial statements that are most recently filed with said commission;

(F) Statements that the insurance company's board of directors oversees corporate governance and internal controls of such company, and that such company's officers or senior management have approved, implemented and continue to maintain such governance and controls;

(G) Other matters concerning transactions between registered insurance companies and any affiliates as may be included from time to time in any registration forms adopted or approved by the commissioner; and

(H) Any other information required by regulations adopted in accordance with the provisions of chapter 54.

(2) All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.

(c) No information need be disclosed on the registration statement filed pursuant to subsection (b) of this section if such information is not material for the purposes of this section. Unless the commissioner by regulation or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one per cent or less of the insurance company's admitted assets as of the thirty-first day of December next preceding shall not be deemed material for purposes of this section.

(d) Subject to subsection (b) of section 38a-136, each registered insurance company shall report to the commissioner all dividends and other distributions to securityholders not later than fifteen business days after the declaration thereof or such other period as the commissioner shall prescribe by regulation.

(e) Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurance company, where such information is reasonably necessary to enable the insurance company to comply with the provisions of sections 38a-129 to 38a-140, inclusive.

(f) (1) The ultimate controlling person of each insurance company subject to registration under this section shall file an annual enterprise risk report in a form and manner prescribed by the commissioner. Beginning in 2014 and annually thereafter, the report shall be filed by June first for the previous calendar year. The annual enterprise risk report shall identify, to the best of such person's knowledge and belief, the material risks within the insurance holding company system that could pose enterprise risk to the insurance company. The report shall be filed with the lead state commissioner as determined by the procedures in NAIC's applicable financial analysis handbook. Such report shall (A) be confidential by law and privileged, (B) not be subject to disclosure under section 1-210, (C) not be subject to subpoena, and (D) not be subject to discovery or admissible in any civil action. The commissioner shall not make such report public without the prior written consent of the ultimate controlling person that filed such report unless the commissioner, after giving the ultimate controlling person and the insurance company to which such report pertains and its affiliates within the insurance holding company system who would be affected thereby notice and opportunity to be heard, determines that the interests of policyholders, securityholders or the public will be served by the publication thereof, in which event the commissioner may publish all or any part thereof in such manner as the commissioner may deem appropriate. The commissioner may use such report in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties.

(2) The commissioner may share the enterprise risk report only with the insurance regulatory official of another state with laws or regulations substantially similar to subsection (a) of section 38a-137 and who has agreed, in writing, to maintain the confidentiality and privileged status of such report.

(g) (1) Except as provided in subdivision (2) of this subsection, the ultimate controlling person of every insurer subject to registration shall concurrently file with such registration an annual group capital calculation not later than June first of each year, with the lead state commissioner. The report shall be completed in accordance with the NAIC group capital calculation instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the lead state commissioner in accordance with the procedures contained in the Financial Analysis Handbook adopted by the NAIC.

(2) An insurance holding company system shall be exempt from filing the group capital calculation if it is:

(A) An insurance holding company system that has only one insurer within its holding company structure, that only writes business and is only licensed in its domestic state and assumes no business from any other insurer;

(B) An insurance holding company system that is subject to the group capital requirements applicable to an insurance group that owns a depository institution or institutions by the United States Federal Reserve Board. The lead state commissioner shall request such group capital requirements applicable to the insurance group from the United States Federal Reserve Board under the terms of information sharing agreements in effect. If the United States Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance holding company system shall not be exempt from the group capital calculation filing;

(C) An insurance holding company system whose non-United States group-wide supervisor is located within a reciprocal jurisdiction as described in section 38a-85 that recognizes the United States regulatory approach to group supervision and group capital; or

(D) An insurance holding company system:

(i) That provides information to the lead state commissioner that meets the requirements for accreditation under the NAIC financial standards and accreditation program, either directly or indirectly through the group-wide supervisor, who has determined such information is satisfactory to allow the lead state commissioner to comply with the NAIC group supervision approach, as detailed in the NAIC Financial Analysis Handbook; and

(ii) Whose non-United States group-wide supervisor that is not in a reciprocal jurisdiction recognizes and accepts, as specified by the lead state commissioner in regulation, the group capital calculation as the world-wide group capital assessment for United States insurance groups who operate in that jurisdiction.

(3) Notwithstanding subparagraphs (C) and (D) of subdivision (2) of this subsection, a lead state commissioner shall require the group capital calculation for the United States operations of any non-United States based insurance holding company system where, after any necessary consultation with other supervisors or officials, it is determined appropriate by the lead state commissioner for prudential oversight and solvency monitoring purposes or for ensuring competitiveness of the insurance marketplace.

(4) Notwithstanding subparagraphs (A) and (D) of subdivision (2) of this subsection, the lead state commissioner shall have the discretion to exempt the ultimate controlling person from filing the annual group capital calculation or to accept a limited group capital filing or report in accordance with criteria as specified by the lead state commissioner in regulation.

(5) If the lead state commissioner determines that an insurance holding company system no longer meets one or more of the requirements for an exemption for filing the group capital calculation under subdivision (2) of this subsection, the insurance holding company system shall file the group capital calculation at the next annual filing date unless given an extension by the lead state commissioner based on reasonable grounds shown.

(6) The information reported and provided to the lead state commissioner by an insurance holding company, including an insurance holding company supervised by the United States Federal Reserve Board pursuant to this subsection, shall:

(A) Be confidential by law and privileged;

(B) Not be subject to disclosure under section 1-210;

(D) Not be subject to discovery or admissible in any civil action.

(7) The group capital calculation and resulting group capital ratio required pursuant to this subsection are regulatory tools for assessing group risks and capital adequacy and are not intended as a means to rank insurers or insurance holding company systems generally.

(h) The ultimate controlling person of every insurer subject to registration and also scoped into the NAIC liquidity stress test framework shall file the results of a specific year's liquidity stress test to the lead state insurance commissioner of the insurance holding company system as determined by procedures within the Financial Analysis Handbook adopted by the NAIC.

(1) The NAIC liquidity stress test framework includes scope criteria applicable to a specific data year. These scope criteria are reviewed at least annually by the NAIC Financial Stability Task Force or its successor. Any change to the NAIC liquidity stress test framework or to the data year for which the scope criteria are to be measured shall be effective on January first of the year following the calendar year when such changes are adopted. Insurers meeting at least one threshold of the scope criteria shall be considered scoped into the NAIC liquidity stress test framework for the specified data year unless the lead state commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should not be scoped into the NAIC liquidity stress test framework for that data year. Insurers that do not trigger at least one threshold of the scope criteria shall be considered scoped out of the NAIC liquidity stress test framework for the specified data year, unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should be scoped into the NAIC liquidity stress test framework for that data year.

(2) The performance of, and filing of the results from, a specific year's liquidity stress test shall comply with the NAIC liquidity stress test framework's instructions and reporting templates for that year and any lead state insurance commissioner determinations, in conjunction with the NAIC Financial Stability Task Force or its successor, provided within the NAIC liquidity stress test framework.

(3) The information reported and provided to the lead state commissioner by an insurance holding company, including an insurance holding company supervised by the United States Federal Reserve Board pursuant to this subsection, shall:

(A) Be confidential by law and privileged;

(B) Not be subject to disclosure under section 1-210;

(D) Not be subject to discovery or admissible in any civil action.

(4) The liquidity stress test along with its results and supporting disclosures required pursuant to this subsection are regulatory tools for assessing group liquidity risks and are not intended as a means to rank insurers or insurance holding company systems generally.

(i) The commissioner shall terminate the registration of any insurance company that demonstrates that it no longer is a member of an insurance holding company system.

(j) The commissioner may require or allow two or more affiliated insurance companies subject to registration hereunder to file a consolidated registration statement.

(k) The commissioner may allow an insurance company that is authorized to do business in this state and is part of an insurance holding company system to register on behalf of any affiliated insurer that is required to register under subsection (a) of this section and to file all information and materials required to be filed under this section.

(l) Any person may file with the commissioner a disclaimer of affiliation with any insurance company and any insurance company may file a disclaimer of affiliation with any other person. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurance company as well as the basis for disclaiming such affiliation. After a disclaimer has been filed, the insurance company shall be relieved of any duty to register or report under this section that may arise out of the insurance company's relationship with such person unless the commissioner disallows such disclaimer. The commissioner shall disallow such disclaimer only after furnishing all parties in interest with notice and an opportunity to be heard, and after making specific findings of fact to support such disallowance.

(m) The failure to file a registration statement or any amendment, addition thereto or summary or an enterprise risk report required by this section within the time specified for such filing shall be a violation of sections 38a-129 to 38a-140, inclusive.

(n) The commissioner may by regulation or order exempt any insurance company or class of insurance companies from registration under this section if, in the commissioner's judgment, registration by such company or class of companies is not necessary to effectuate the purposes of said sections.

(o) A foreign or alien insurer shall not be required to register pursuant to this section if it is (1) subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile that are substantially similar to those contained in this section and subsections (a), (b), (f) and (g) of section 38a-136, or (2) admitted in the domiciliary jurisdiction of the principal insurer in its holding company system and in said jurisdiction is subject to disclosure requirements and standards adopted by statute or regulation that are substantially similar to those contained in this section and subsections (a), (b), (f) and (g) of section 38a-136. The commissioner may require any authorized insurer that is a member of a holding company system not subject to registration under this section to furnish a copy of the registration statement or other information filed by such insurance company with the insurance regulatory authority of its domicile or the domicile of the principal insurer in its holding company system, as the case may be.

(p) (1) To assess the business strategy, financial, legal or regulatory position risk exposure, risk management or governance processes of a domestic insurance company registered under this section that is part of an insurance holding company system that has international operations, and as part of the examination pursuant to section 38a-14a of such insurance company, the commissioner may initiate, be a member of or participate in a supervisory college, which shall be a temporary or permanent forum for communication between and cooperation among state, federal and international regulatory officials.

(2) If the commissioner initiates a supervisory college, the commissioner shall (A) establish the membership of, and participation by state, federal or international regulatory officials in, such supervisory college, (B) establish the functions of the supervisory college and the role of members and participants, and select a chairperson for such supervisory college, (C) coordinate the activities of the supervisory college, including meeting planning and processes for information sharing that comply with the applicable confidentiality provisions set forth in section 38a-137, and (D) establish a crisis management plan for such supervisory college.

(3) The commissioner may enter into written agreements with state, federal or international regulatory officials for the governing of the activities of a supervisory college. Any such agreements shall maintain the confidentiality requirements under section 38a-137.

(4) Each insurance company subject to registration under this section shall be assessed for and shall pay to the commissioner its share of the reasonable costs, including reasonable travel expenses, of the commissioner's participation in a supervisory college. Such payment shall be in addition to any other taxes, fees and moneys otherwise payable to the state. The commissioner shall establish the assessment method for such costs and provide reasonable notice to each insurance company subject to any such assessment.

(5) Nothing in this subsection shall be construed to limit the authority of the commissioner to regulate an insurance company or its affiliate under the commissioner's jurisdiction or to delegate any regulatory authority of the commissioner to a supervisory college.

(q) (1) As used in this subsection: (A) “Group-wide supervisor” means the regulatory official (i) authorized by such official's jurisdiction to conduct and coordinate group-wide supervisory activities, and (ii) who is determined or acknowledged to be the group-wide supervisor of an internationally active insurance group pursuant to this subsection; and (B) “internationally active insurance group” means any insurance holding company system that (i) includes an insurance company registered pursuant to this section, and (ii) meets the following criteria: (I) Premiums are written in at least three countries; (II) the percentage of gross premiums written, including, for purposes of this subsection, administrative service fees, associated expenses and claims payments, without such amounts transacted in the United States is at least ten per cent of the insurance holding company system's total gross written premiums; and (III) based on a three-year rolling average, the total assets of the insurance holding company system are at least fifty billion dollars or the total gross written premiums of the insurance holding company system are at least ten billion dollars.

(2) (A) The commissioner, in cooperation with other state, federal and international regulatory agencies of the jurisdictions where members of the internationally active insurance group are domiciled, shall determine a single group-wide supervisor for an internationally active insurance group. An insurance holding company system that does not qualify as an internationally active insurance group may request that the commissioner make a determination or acknowledgment of a group-wide supervisor as set forth in this subsection.

(B) The commissioner may determine that the commissioner is the appropriate group-wide supervisor for an internationally active insurance group that conducts substantial insurance business operations in this state and may act as a group-wide supervisor for any internationally active insurance group in accordance with the provisions of this subsection.

(C) The commissioner may acknowledge that the regulatory official of another jurisdiction is an appropriate group-wide supervisor for an internationally active insurance group that (i) does not conduct substantial insurance business operations in the United States, (ii) conducts substantial insurance business operations in the United States but not in this state, or (iii) conducts substantial insurance business operations in the United States and in this state but the commissioner has determined, pursuant to the factors set forth in subdivision (3) of this subsection, that the regulatory official of another jurisdiction is the appropriate group-wide supervisor.

(D) When another regulatory official is acting as the group-wide supervisor of an internationally active insurance group, the commissioner shall acknowledge such official as the group-wide supervisor, except that the commissioner shall make a determination or acknowledgment of a group-wide supervisor for such insurance group if a material change in such insurance group results in (i) the largest share of such insurance group's premiums, assets or liabilities being held by member insurance companies domiciled in this state, or (ii) this state being the place of domicile of the top-tiered insurance company or companies in such insurance group.

(E) A regulatory official determined or acknowledged to be a group-wide supervisor of an internationally active insurance group may determine, after considering the factors set forth in subdivision (3) of this subsection, that it is appropriate to acknowledge another regulatory official to serve as the group-wide supervisor of such insurance group. Such acknowledgment shall be made (i) in cooperation with and subject to the acknowledgment of other regulatory officials of the jurisdictions where members of such insurance group are domiciled, and (ii) in consultation with such insurance group.

(3) The commissioner shall consider the following factors in making a determination or acknowledgment under subdivision (2) of this subsection:

(A) The place of domicile of the member insurance companies of the internationally active insurance group that holds the largest share of such insurance group's premiums, assets or liabilities;

(B) The place of domicile of the top-tiered insurance company or companies in the internationally active insurance group;

(C) The locations of the executive offices or the largest operational offices of the internationally active insurance group; and

(D) Whether (i) a regulatory official of another jurisdiction is acting or seeking to act as the group-wide supervisor under a regulatory system the commissioner determines to be substantially similar to that provided under the laws of this state or is otherwise sufficient in terms of group-wide supervision, enterprise risk analysis and cooperation with other regulatory officials, and (ii) such regulatory official acting or seeking to act as the group-wide supervisor provides the commissioner with reasonably reciprocal recognition and cooperation.

(4) The commissioner may collect, pursuant to section 38a-14a, from any insurance company registered pursuant to this section any information necessary for the commissioner to determine whether the commissioner may act as the group-wide supervisor of an internationally active insurance group of which such company is a member or whether the commissioner may acknowledge that a regulatory official of another jurisdiction should act as the group-wide supervisor of such insurance group.

(5) Prior to issuing any determination or acknowledgment under this subsection, the commissioner shall notify the member insurance company registered pursuant to this section and the ultimate controlling person of the internationally active insurance group of such pending determination or acknowledgment. The commissioner shall provide the internationally active insurance group at least thirty calendar days to submit any additional information pertinent to such determination or acknowledgment that is requested by the commissioner or that such insurance group chooses to submit. The commissioner shall publish in the Connecticut Law Journal and post on the Insurance Department's Internet web site a current list of internationally active insurance groups that the commissioner has determined are subject to group-wide supervision by the commissioner.

(6) The commissioner may conduct and coordinate the following group-wide supervision activities for an internationally active insurance group for which the commissioner is determined to be the group-wide supervisor:

(A) Assess the enterprise risks within the internationally active insurance group to ensure that material financial conditions of and liquidity risks to the members of such insurance group that are engaged in the business of insurance are identified by management and that reasonable and effective mitigation measures are in place;

(B) Request from members of such insurance group information necessary and appropriate to assess enterprise risk, including, but not limited to, information about governance, risk assessment and management, capital adequacy and material intercompany transactions;

(C) Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the internationally active insurance group are domiciled, compel the development and implementation of reasonable measures designed to ensure the internationally active insurance group is able to timely recognize and mitigate material enterprise risks to the members of such insurance group that are engaged in the business of insurance;

(D) Communicate with other state, federal and international regulatory agencies of the jurisdictions where members of the internationally active insurance group are domiciled and share relevant information, subject to the confidentiality provisions of section 38a-137, through a supervisory college, as set forth in subsection (p) of this section;

(E) Enter into agreements with or obtain documentation from any member insurance company registered under this section, any other member of the internationally active insurance group and any other state, federal and international regulatory agencies of the jurisdictions where members of the internationally active insurance group are domiciled, to establish or clarify the commissioner's role as group-wide supervisor and that may include provisions for resolving disputes with other regulatory officials. No such agreement or documentation shall serve as evidence that an insurance company or person within an insurance company holding system that is not domiciled or incorporated in this state is doing business in this state or is otherwise subject to the jurisdiction of this state; and

(F) Other activities necessary to effectuate the group-wide supervisory purposes of this section and sections 38a-129 to 38a-140, inclusive, and within the authority granted in said sections.

(7) If the commissioner acknowledges that a regulatory official of a jurisdiction not accredited by NAIC is the group-wide supervisor of an internationally active insurance group, the commissioner shall reasonably cooperate through a supervisory college or otherwise with group supervision undertaken by such group-wide supervisor, provided such cooperation is in compliance with the laws of this state and such group-wide supervisor recognizes and cooperates with the commissioner's activities as a group-wide supervisor for other internationally active insurance groups, where applicable. The commissioner may refuse to cooperate if the commissioner determines such recognition and cooperation are not reasonably reciprocated. The commissioner may enter into agreements with or obtain documentation from any member insurance company registered pursuant to this section, any affiliate of such insurance company and any other state, federal and international regulatory agencies of the jurisdictions where members of the internationally active insurance group are domiciled, to establish or clarify such official's role as group-wide supervisor.

(8) The commissioner may adopt regulations, in accordance with the provisions of chapter 54, to carry out the provisions of this subsection.

(9) Each insurance company registered pursuant to this section shall be liable for and shall pay the reasonable expenses of the commissioner's administration of this subsection, including the engagement of the services of attorneys, actuaries and other professionals and all reasonable travel expenses.

(1969, P.A. 444, S. 7; 1971, P.A. 368, S. 1; P.A. 92-112, S. 18, 35; P.A. 93-239, S. 23; June 12 Sp. Sess. P.A. 12-2, S. 126, 127; P.A. 13-147, S. 1; June Sp. Sess. P.A. 15-5, S. 51; P.A. 17-15, S. 9; P.A. 22-118, S. 213.)

History: 1971 act deleted Subsec. (d)(1) which authorized exemption for company or class of companies “subject to adequate regulation where domiciled or elsewhere” and inserted new Subsec. (e) in its stead; Sec. 38-39g transferred to Sec. 38a-135 in 1991; P.A. 92-112 amended Subsec. (a) to change registration deadline from 90 days to 15 days and to require annual registration, added new Subsec. (b) re filing of registration statement by insurers, added new Subsec. (c) re contents of the registration statements, added new Subsec. (d) re disclosure of information deemed immaterial, added new Subsec. (e) re reporting to the commissioner all dividends and other distributions to securityholders, added new Subsec. (f) requiring those subject to register within the insurance holding company system to provide complete and accurate information to insurance companies where necessary, added new Subsec. (g) re termination of registration if no longer a member of the insurance holding company system, added new Subsec. (h) re consolidated registration statement, added new Subsec. (i) allowing registration on behalf of an affiliate and relettered the remaining Subsecs. accordingly; P.A. 93-239 in Subsec. (m) added reference to relevant Subsecs. of Sec. 38a-136 for statutory consistency; June 12 Sp. Sess. P.A. 12-2 added Subsec. (n) re supervisory colleges, effective July 1, 2012, and amended Subsec. (b) to redesignate existing provisions as new Subdiv. (1), redesignate existing Subdivs. (1) to (5) as Subparas. (A) to (D) and (G), add Subpara. (E) re financial statements to be provided to commissioner on request, add Subpara. (F) re statement of corporate governance and internal controls, and add Subpara. (H) re provision of other information required by regulations, redesignated existing Subsecs. (c) to (f) as Subsecs. (b)(2) and (c) to (e), added new Subsec. (f) re annual enterprise risk report, amended Subsec. (k) to add provision re failure to file summary or enterprise risk report as violations, and made technical changes, effective October 1, 2012; P.A. 13-147 amended Subsec. (f)(1) by changing reporting date of annual enterprise risk report from June 1, 2013, and annually thereafter to June first beginning in 2014 and annually thereafter for the previous calendar year, and by making a technical change, effective June 21, 2013; June Sp. Sess. P.A. 15-5 added Subsec. (o) re group-wide supervision of members of internationally active insurance group; P.A. 17-15 made a technical change in Subsec. (o)(3)(A); P.A. 22-118 added new Subsec. (g) re criteria for filing annual group capital calculation and exemptions, added new Subsec. (h) re criteria for filing liquidity stress test results, redesignated existing Subsecs. (g) as (i), (h) as (j), (i) as (k), (j) as (l), (k) as (m), (l) as (n), (m) as (o), (n) as (p) and (o) as (q) and in same redefined “internationally active insurance group” re percentage of gross premiums includes administrative fees, associated expenses and claims payments, without such amounts transacted in the United States, effective July 1, 2022.

Annotation to former section 38-39g:

Cited. 184 C. 352.

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Sec. 38a-136. (Formerly Sec. 38-39h). Requirements re transactions within an insurance holding company system. Prohibited transactions. Extraordinary dividends or distributions. Affiliate consent to jurisdiction. (a) Transactions within an insurance holding company system to which an insurance company subject to registration under section 38a-135 is a party shall be subject to the following requirements:

(1) The terms shall be fair and reasonable;

(2) Charges or fees for services performed shall be reasonable;

(3) Expenses incurred and payment received shall be allocated to the insurance company in conformity with customary insurance accounting practices consistently applied;

(4) The books, accounts and records of each party shall be so maintained as to clearly and accurately disclose the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties;

(5) The insurance company's surplus shall be reasonable in relation to such company's outstanding liabilities and adequate to its financial needs;

(6) Agreements for cost-sharing services and management shall include such provisions as may be required by regulations adopted by the commissioner;

(7) If an insurance company subject to sections 38a-129 to 38a-140, inclusive, is determined by the commissioner to be in a hazardous financial condition as set forth in sections 38a-8-101 to 38a-8-104, inclusive, of the regulations of Connecticut state agencies or a condition that would be grounds for supervision, conservation or a delinquency proceeding as set forth in chapter 704c, the commissioner may require the insurance company to secure and maintain either a deposit, held by the commissioner, or a bond, as determined by the insurance company at the insurance company's discretion, for the protection of the insurance company for the duration of the contracts or agreements, or the existence of the condition for which the commissioner required the deposit or the bond. In determining whether the bond is required, the commissioner shall consider whether concerns exist with respect to affiliates of the insurance company to fulfill the contracts or agreements if the insurance company were to be put into liquidation. Once the insurance company is determined to be in a hazardous financial condition or a condition that is grounds for supervision, conservation or a delinquency proceeding, and a deposit or bond is necessary, the commissioner may determine the amount of the deposit or bond, not to exceed the value of the contracts or agreements in any one year, and whether such deposit or bond shall be required for a single contract, multiple contracts or a contract only with a specific affiliate of the insurance company;

(8) All records and data of the insurance company held by an affiliate shall remain the property of the insurance company and shall be subject to control of the insurance company, identifiable, and segregated or readily capable of segregation, at no additional cost to the insurance company, from all other persons' records and data, including, but not limited to, all records and data that are otherwise the property of the insurance company, in whatever form maintained, including, but not limited to, claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records or similar records within the possession, custody or control of the affiliate. At the request of the insurance company, the affiliate shall provide that the receiver can obtain a complete set of all records of any type that pertain to the insurance company's business; obtain access to the operating systems on which the data is maintained; obtain the software that runs such systems either through assumption of licensing agreements or otherwise; and restrict the use of the data by the affiliate if it is not operating the insurance company's business. The affiliate shall provide a waiver of any landlord lien or other encumbrance to give the insurance company access to all records and data in the event of the affiliate's default under a lease or other agreement; and

(9) Premiums or other funds that belong to the insurance company that are collected by or held by an affiliate or affiliates are the exclusive property of the insurance company and shall be subject to the control of the insurance company. Any right of offset of amounts due to or due from the insurance company and an affiliate or affiliates in the event an insurance company is placed into receivership shall be subject to chapter 704c.

(b) (1) The following transactions involving a domestic insurance company and any person in its holding company system, including amendments to or modifications of affiliate agreements previously filed pursuant to this section and that are subject to any materiality standards specified in subparagraphs (A) to (G), inclusive, of this subdivision, may not be entered into unless the insurance company has notified the commissioner in writing of its intention to enter into such transaction at least thirty days prior thereto, or such shorter period as the commissioner may permit, and the commissioner has approved or not disapproved it within such period. The written notice for such amendments or modifications shall specify the reasons for the change and the financial impact on the domestic insurance company. Not later than thirty days after the termination of a previously filed agreement, the domestic insurance company shall notify the commissioner of such termination for the commissioner's determination of what written notice or filing shall be required, if any:

(A) Sales, purchases, exchanges, loans or extensions of credit, or investments, provided such transactions are equal to or exceed: (i) With respect to nonlife insurance companies, the lesser of three per cent of the insurance company's admitted assets or twenty-five per cent of surplus; or (ii) with respect to life insurance companies, three per cent of the insurance company's admitted assets; each as of the thirty-first day of December next preceding;

(B) Loans or extensions of credit to any person who is not an affiliate, where the insurance company makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurance company making such loans or extensions of credit, provided such transactions are equal to or exceed: (i) With respect to nonlife insurance companies, the lesser of three per cent of the insurance company's admitted assets or twenty-five per cent of surplus; or (ii) with respect to life insurance companies, three per cent of the insurance company's admitted assets; each as of the thirty-first day of December next preceding;

(C) Reinsurance agreements or modifications thereto, including (i) all reinsurance pooling agreements, and (ii) agreements in which the reinsurance premium or a change in the insurance company's liabilities, or the projected reinsurance premium or a projected change in the insurance company's liabilities in any of the next three years, equals or exceeds five per cent of the insurance company's surplus, as of the thirty-first day of December next preceding, including those agreements that may require as consideration the transfer of assets from an insurance company to a nonaffiliate, if an agreement or understanding exists between the insurance company and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurance company;

(D) All management agreements, service contracts, tax allocation agreements and cost-sharing arrangements;

(E) Guarantees by a domestic insurance company, except that a guarantee that is (i) quantifiable as to amount, and (ii) does not exceed the lesser of one-half of one per cent of the insurance company's admitted assets or ten per cent of surplus with regard to policyholders, as of the thirty-first day of December next preceding, shall not be subject to the notice requirement of this subsection;

(F) Direct or indirect acquisitions or investments in a person that controls the domestic insurance company or in an affiliate of the insurance company in an amount that, together with the insurance company's present holdings in such investments, exceeds two and one-half per cent of the insurance company's surplus with regard to policyholders. This subsection shall not apply to direct or indirect acquisitions of or investments in (i) subsidiaries acquired pursuant to section 38a-102d or authorized pursuant to any section of this title other than sections 38a-129 to 38a-140, inclusive, or (ii) nonsubsidiary affiliates that are subject to the provisions of sections 38a-129 to 38a-140, inclusive; and

(G) Any material transactions, specified by regulation, that the commissioner determines may adversely affect the interests of the insurance company's policyholders.

(2) Nothing contained in this section shall be deemed to authorize or permit any transactions that, in the case of an insurance company not a member of the same insurance holding company system, would be otherwise contrary to law.

(c) A domestic insurance company may not enter into transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would otherwise occur. If the commissioner determines that such separate transactions were entered into over any twelve-month period for such purpose, the commissioner may exercise authority under section 38a-140.

(d) The commissioner, in reviewing transactions pursuant to subsection (b) of this section, shall consider whether the transactions comply with the standards set forth in subsection (a) of this section and whether they may adversely affect the interests of policyholders.

(e) Except as may be exempted pursuant to regulations adopted, in accordance with the provisions of chapter 54, by the commissioner or otherwise waived by the commissioner, the commissioner shall be notified not later than thirty days after any material investment of the domestic insurance company in any one corporation if the total investment in such corporation by such insurance company's insurance holding company system exceeds ten per cent of such corporation's voting securities.

(f) (1) No insurance company subject to registration under section 38a-135 shall pay any extraordinary dividend or make any other extraordinary distribution to its stockholders until the commissioner has approved such payment or until thirty days after the commissioner has received notice from such company of the declaration thereof within which period the commissioner has not disapproved such payment, whichever is sooner. For the purposes of this subsection, an extraordinary dividend or distribution is any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding twelve months, exceeds the greater of (A) ten per cent of such insurance company's surplus as of the thirty-first day of December last preceding, or (B) the net gain from operations of such insurance company, if such company is a life insurance company, or the net income, if such company is not a life insurance company, for the twelve-month period ending the thirty-first day of December last preceding, but shall not include pro rata distributions of any class of the insurance company's own securities.

(2) Notwithstanding any other provision of law, an insurance company may declare an extraordinary dividend or distribution that is conditional upon the commissioner's approval thereof, but such a declaration shall confer no rights upon stockholders until (A) the commissioner has approved the payment of such dividend or distribution, or (B) until thirty days after such declaration thereof within which period the commissioner has not disapproved such declaration, whichever is sooner.

(g) For purposes of sections 38a-129 to 38a-140, inclusive, in determining whether an insurance company's surplus is reasonable in relation to the insurance company's outstanding liabilities and adequate to its financial needs, the following factors, in addition to others, shall be considered: (1) The size of the insurance company as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria; (2) the extent to which the insurance company's business is diversified among the several lines of insurance; (3) the number and size of risks insured in each line of business; (4) the nature of the geographical dispersion of the insurance company's insured risks; (5) the nature and extent of the insurance company's reinsurance program; (6) the quality, diversification and liquidity of the insurance company's investment portfolio; (7) the recent past and projected future trend in the size of the insurance company's surplus; (8) the surplus maintained by other comparable insurance companies; (9) the adequacy of the insurance company's reserves; (10) the quality of the company's earnings and the extent to which the reported earnings include extraordinary items; and (11) the quality and liquidity of investments in affiliates. The commissioner may discount any such investment or treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus whenever, in the commissioner's judgment, such investment warrants.

(h) (1) Any domestic insurance company that is affiliated with an insurance holding company system shall report for informational purposes to the Insurance Commissioner all dividends and other distributions to securityholders, not later than five business days after the declaration and at least ten days, commencing from the date of receipt by the Insurance Department, prior to payment thereof.

(2) No dividend or other distribution may be paid when the surplus of the insurance company is less than the surplus required by section 38a-72 for the kind or kinds of business authorized to be transacted by such company, nor when the payment of a dividend or other distribution would reduce its surplus to less than such amount.

(3) Except as otherwise provided by law, no dividend or other distribution exceeding an amount equal to an insurance company's earned surplus may be paid without the Insurance Commissioner's prior approval. For purposes of this subsection, “earned surplus” means “unassigned funds-surplus”, as defined in the annual report of the insurance company that was most recently submitted pursuant to section 38a-53, reduced by twenty-five per cent of unrealized appreciation in value or revaluation of assets or unrealized profits on investments, as defined in such report.

(i) (1) The commissioner may require a domestic insurance company of which control has been acquired pursuant to section 38a-130 to submit to a financial examination and a market conduct examination within thirty days after such acquisition in accordance with procedures set forth by NAIC's examiner's handbook and such regulations as the commissioner may adopt.

(2) No domestic insurance company of which control has been acquired pursuant to section 38a-130 shall, without the prior approval of the commissioner: (A) Pay or propose to pay any dividend during the period of two years from the date of acquisition of control of such insurance company; (B) acquire or enter into an agreement or understanding to acquire control, during the period of three years after the date of acquisition of control of such insurance company, of any other person or persons whose assets exceed twenty-five million dollars; (C) provide or propose to provide directly or indirectly, during the period of three years after the date of acquisition of control of such insurance company, any loans, advances, guarantees, pledges or other financial assistance; or (D) engage in any material transaction with any person during the period of three years after the date of acquisition of such insurance company. For purposes of this subsection, a “material transaction” shall include, but not be limited to, any transfer or encumbrance of assets not in the ordinary course of business that, together with all other transfers or encumbrances made within the preceding twelve months, exceeds in value the greater of (i) ten per cent of such insurance company's surplus as of the December thirty-first last preceding, or (ii) the net gain from operations of such insurance company, if such company is a life insurance company, or the net investment income of such company, if such company is not a life insurance company, for the twelve-month period ending the December thirty-first last preceding.

(3) The commissioner shall, upon a written request from the controlled domestic insurance company and, upon public hearing after notice to all interested parties, determine whether any limitations contained in subdivision (2) of this subsection shall be continued, or whether and on what conditions they may be waived. Such determination shall be predicated on the results of the examinations under subdivision (1) of this subsection and such further examinations, if any, the commissioner may require concerning the adequacy of the insurance company's reserves, the effect any proposed transaction will have on the insurance company's surplus, its cash flow needs and its ability to satisfy any reasonably anticipated obligations in the foreseeable future, and any other effect the proposed transaction would have on the financial stability or solvency of the insurance company and the quality and liquidity of its assets. All fees and expenses relating to such examinations shall be paid by the insurance company.

(4) Nothing in this subsection shall be interpreted to prohibit any transactions between a domestic insurance company and any of its subsidiaries in the ordinary course of business.

(j) (1) Any affiliate that is a party to an agreement or contract with a domestic insurance company that is subject to subparagraph (D) of subdivision (1) of subsection (b) of this section shall be subject to the jurisdiction of any order of rehabilitation or liquidation against the insurance company and to the authority of any rehabilitator or liquidator for the insurance company appointed pursuant to chapter 704c, for the purpose of interpreting, enforcing and overseeing the affiliate's obligations under the agreements or contracts to perform services for the insurance company that:

(A) Are an integral part of the insurance company's operations, including, but not limited to, management, administration, accounting, data processing, marketing, underwriting, claims handling, investment or any other similar functions; or

(B) Are essential to the insurance company's ability to fulfill its obligations under insurance policies.

(2) The commissioner may require that an agreement or contract pursuant to subparagraph (D) of subdivision (1) of subsection (b) of this section for provisions or services set forth in subparagraphs (A) and (B) of subdivision (1) of this subsection specify that the affiliate consents to the jurisdiction described in subdivision (1) of this subsection.

(1969, P.A. 444, S. 8; 1971, P.A. 368, S. 2; P.A. 85-16, S. 4, 6; P.A. 92-112, S. 19, 35; P.A. 93-57, S. 6, 7, 12; 93-239, S. 29; P.A. 00-30, S. 10, 14; P.A. 12-103, S. 7; P.A. 15-144, S. 8; P.A. 22-118, S. 214.)

History: 1971 act reduced basis of calculation of extraordinary dividend or distribution from 15% to 10% of surplus in Subsec. (c)(1); P.A. 85-16 added Subsec. (d) re transactions between domestic insurance company and controlling entity; Sec. 38-39h transferred to Sec. 38a-136 in 1991; P.A. 92-112 amended Subsec. (a) to change requirements governing transactions of insurance companies subject to registration within a holding company system, replaced former Subsec. (b) with new provisions re transactions of domestic insurance companies, prior notification to the commissioner of certain transactions and the commissioner's approval, added new Subsec. (c) prohibiting domestic insurance companies from entering into transactions which seek to avoid statutory review, added new Subsec. (d) re commissioner's authority to review transactions of domestic insurance companies, added new Subsec. (e) requiring notification to the commissioner of any material investment of domestic insurance companies in one corporation, relettered Subsec. (c) as (f), changing reference to “stockholders” to “securityholders”, specifying determination of when a dividend or distribution is extraordinary and making technical corrections for statutory consistency, effective December 1, 1993, added new Subsec. (g) re factors of reasonableness concerning surplus, deleted parts of former Subsec. (d) and incorporated the remainder in new Subsec. (h) re financial examination and market conduct examination of any domestic insurance company which has been acquired subject to Sec. 38a-130, and made technical corrections for statutory consistency; P.A. 93-57 deleted changes to Subsec. (f) made by P.A. 92-112, effective December 1, 1993, and amended Subsec. (g) to include the quality of the insurance company's earnings and the extent to which such earnings are included as extraordinary items as a factor used to determine the reasonableness of surplus re outstanding liability and adequacy of financial needs, inserted new Subsec. (h) re required reporting of all dividends and other distributions, restrictions on dividends or other distributions paid in relation to the surplus requirements and commissioner's approval of certain transactions, relettered previously existing Subsec. (h) as (i) and made technical corrections for accuracy, effective October 1, 1993; P.A. 93-239 changed effective date of Subsec. (f), as amended by P.A. 92-112 and P.A. 93-57, from December 1, 1993, to October 1, 1993; P.A. 00-30 deleted references to “with respect to policyholders” and “as regards policyholders”, and made technical changes for purposes of gender neutrality, effective January 1, 2001; P.A. 12-103 amended Subsec. (a) to add Subdiv. (6) re agreements for cost-sharing services and management, amended Subsec. (b) to designate provisions re notice of certain transactions as new Subdiv. (1) and amend same by adding provisions re amendments to or modifications of affiliate agreements previously filed, re notice to specify reasons for change and financial impact and re commissioner to be notified of termination, redesignate existing Subdivs. (1) to (5) as Subparas. (A) to (D) and (G), delete “guarantee” in Subpara. (A), add provision re reinsurance pooling agreements in Subpara. (C), delete “material” re agreements in Subpara. (D), add Subpara. (E) re guarantees and add Subpara. (F) re direct or indirect acquisitions or investments, and to designate provision re disclaimer as new Subdiv. (2), amended Subsec. (f) to designate provisions re payment of extraordinary dividend or distribution as new Subdiv. (1) and designate provisions re declaration of extraordinary dividend or distribution as new Subdiv. (2), and made technical and conforming changes; P.A. 15-144 amended Subsec. (b)(1) by adding provision re projected reinsurance premium or projected change in insurance company's liabilities in Subpara. (C) and adding reference to tax allocation agreements in Subpara. (D), effective July 1, 2015; P.A. 22-118 amended Subsec. (a) by adding Subdiv. (7) re holding of deposit or bond for insurance company's protection, adding Subdiv. (8) re protection of insurance company's records held by affiliate and disclosure of records upon request, adding Subdiv. (9) re premiums or other insurance company funds held by affiliate remain property of insurance company, making technical changes to Subsec. (a), added Subsec. (j)(1) re affiliate who contracts with insurance company is subject to jurisdiction to any order of rehabilitation or liquidation against insurance company and to the authority of any rehabilitator or liquidator for insurance company for determining affiliate's contractual obligations and added Subsec. (j)(2) re commissioner may require affiliate to consent to jurisdiction, effective July 1, 2022.

Annotation to former section 38-39h:

Cited. 184 C. 352.

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Sec. 38a-137. (Formerly Sec. 38-39i). Confidentiality of information. (a) All information, documents, materials and copies thereof obtained by or disclosed to the commissioner or any other person in the course of an examination or investigation made pursuant to section 38a-14a and all information reported, furnished or filed pursuant to sections 38a-131, 38a-135 and 38a-136 shall (1) be confidential by law and privileged, (2) not be subject to disclosure under section 1-210, (3) not be subject to subpoena, and (4) not be subject to discovery or admissible in evidence in any civil action. The commissioner shall not make such information, documents, materials or copies public without the prior written consent of the insurance company to which it pertains unless the commissioner, after giving the insurance company and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interests of policyholders, securityholders or the public will be served by the publication thereof, in which event the commissioner may publish all or any part thereof in such manner as the commissioner may deem appropriate. The commissioner may use such information, documents, materials or copies in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties.

(b) Neither the commissioner nor any person who receives information, documents, materials or copies as set forth in subsection (a) of this section or with whom such information, documents, materials or copies are shared, while acting under the authority of the commissioner, shall testify or be required to testify in any civil action concerning such information, documents, materials or copies.

(c) Except as specified in subdivision (2) of subsection (f) of section 38a-135, to assist the commissioner in the performance of the commissioner's duties, the commissioner:

(1) May share information, documents, materials or copies thereof, including information, documents, materials or copies deemed confidential and privileged pursuant to subsection (a) of this section, with (A) other state, federal and international regulatory officials, (B) the NAIC and any third-party consultants designated by the commissioner, (C) the International Association of Insurance Supervisors, (D) the Bank for International Settlements, (E) the Federal Insurance Office, (F) state, federal and international law enforcement authorities, and (G) members or participants of a supervisory college, as described in subsection (p) of section 38a-135, of which the commissioner is a member or a participant, provided the recipient of any such information, documents, materials or copies agrees, in writing, to maintain the confidentiality and privileged status of such information, documents, materials and copies, and has verified, in writing, the recipient's legal authority to maintain confidentiality;

(2) May receive information, documents, materials or copies thereof, including confidential and privileged information, documents, materials or copies, from the NAIC and any third-party consultants designated by the commissioner, the International Association of Insurance Supervisors, the Bank for International Settlements, the Federal Insurance Office, or state, federal and international law enforcement authorities. The commissioner shall maintain as confidential and privileged any information, documents, materials or copies received with notice or the understanding that such information, documents, materials or copies are confidential and privileged under the laws of the jurisdiction that is the source of such information, documents, materials or copies; and

(3) Shall enter into written agreements consistent with this subsection with the NAIC and any third-party consultants designated by the commissioner, and may enter into written agreements consistent with this subsection with the International Association of Insurance Supervisors or the Bank for International Settlements, governing the sharing and use of information, documents, materials or copies thereof shared or received pursuant to sections 38a-129 to 38a-140, inclusive. Any such agreement consistent with this subsection shall (A) specify the procedures and protocols regarding the confidentiality and security of information shared (i) with the NAIC or a third-party consultant designated by the commissioner, the International Association of Insurance Supervisors or the Bank for International Settlements pursuant to sections 38a-129 to 38a-140, inclusive, and (ii) by the NAIC or a third-party consultant designated by the commissioner, the International Association of Insurance Supervisors or the Bank for International Settlements with other state, federal or international regulatory officials, (B) provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials or other information and has verified in writing the recipient's legal authority to maintain such confidentiality or privilege, (C) specify that the commissioner shall retain ownership of such information and that the use of such information by the NAIC or a third-party consultant, the International Association of Insurance Supervisors or the Bank for International Settlements is subject to the commissioner's discretion, (D) excluding documents, material or information reported pursuant to subsection (h) of section 38a-135, prohibit the NAIC or third-party consultant designated by the commissioner from storing such information shared pursuant to sections 38a-129 to 38a-140, inclusive, in a permanent database after the underlying analysis is completed, (E) require prompt notice to be given to an insurance company whose confidential information is in the possession of the NAIC or a third-party consultant designated by the commissioner, the International Association of Insurance Supervisors or the Bank for International Settlements, if the NAIC or a third-party consultant designated by the commissioner, the International Association of Insurance Supervisors or the Bank for International Settlements is subject to a request or subpoena for disclosure or production of such information, (F) require the NAIC or a third-party consultant designated by the commissioner, the International Association of Insurance Supervisors or the Bank for International Settlements, if any said entity is subject to disclosure of an insurance company's confidential information that has been shared with said entity, to allow such insurance company to intervene in any judicial or administrative action regarding such disclosure or information, and (G) for documents, material or information reported pursuant to subsection (h) of section 38a-135, in the case of an agreement involving a third-party consultant, provide for notification of the identity of the consultant to the applicable insurer.

(d) No waiver of any applicable privilege or claim of confidentiality in any information, documents, materials or copies thereof shall occur as a result of disclosure to the commissioner or of sharing in accordance with this section. Nothing in this section shall be construed to delegate any regulatory authority of the commissioner to any person or entity with which any information, documents, materials or copies thereof have been shared.

(e) Any information, documents, materials or copies thereof in the possession of the NAIC or a third-party consultant designated by the commissioner, the International Association of Insurance Supervisors or the Bank for International Settlements pursuant to this section shall be confidential by law and privileged and shall not be subject to discovery or admissible in evidence in any civil action in this state.

(1969, P.A. 444, S. 9; P.A. 92-112, S. 20, 35; P.A. 12-103, S. 8; P.A. 22-118, S. 215.)

History: Sec. 38-39i transferred to Sec. 38a-137 in 1991; P.A. 92-112 authorized the National Association of Insurance Commissioners and insurance departments of other states to have access to confidential material in the insurance department's possession, made the provisions of this section not subject to subpoena and made technical corrections for statutory consistency; P.A. 12-103 designated existing provisions as Subsec. (a) and amended same to include materials, add exemption from disclosure under Sec. 1-210 and from discovery or admission in evidence in civil action, authorize commissioner to use information, documents, materials or copies in action brought as part of commissioner's official duties, and make technical and conforming changes, and added Subsecs. (b) to (e) re confidentiality of information, documents, materials or copies; P.A. 22-118 amended Subsec. (a) by adding reference to Sec. 38a-131, amended Subdivs. (1) to (3) of Subsec. (c) to replace “or its affiliate or subsidiaries” with “and any third-party consultants designated by the commissioner”, added new Subsec. (c)(3)(B) re agreement between commissioner and NAIC or third-party shall provide that recipient agrees to maintain confidentiality and privileged status of information, added new Subsec. (c)(3)(D) re agreement between commissioner and NAIC or third-party shall prohibit storing of information on permanent database, added Subsec. (c)(3)(G) re agreement between commissioner and third-party shall provide for notification of identity of consultant to applicable insurer, amended Subsec. (e) to replace “its affiliates or subsidiaries” with “a third-party consultant designated by the commissioner” and made technical and conforming changes, effective July 1, 2022.

Annotation to former section 38-39i:

Cited. 184 C. 352.

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Sec. 38a-138. (Formerly Sec. 38-39j). Regulations. The commissioner may, after a public hearing called for the purpose, notice of which hearing shall be published in the Connecticut Law Journal at least thirty days prior to the date of such hearing, promulgate such regulations, in accordance with chapter 54, as shall be necessary to carry out the provisions of sections 38a-129 to 38a-140, inclusive.

(1969, P.A. 444, S. 10; P.A. 12-103, S. 9.)

History: Sec. 38-39j transferred to Sec. 38a-138 in 1991; P.A. 12-103 added reference to Ch. 54.

Annotation to former section 38-39j:

Cited. 184 C. 352.

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Sec. 38a-139. (Formerly Sec. 38-39k). Appeals. (a) Any person aggrieved by any regulation, order or other action of the commissioner pursuant to sections 38a-129 to 38a-l40, inclusive, or any failure of the commissioner to act as required by said sections may appeal therefrom to the superior court for the judicial district of Hartford. The court shall conduct its review without a jury and by trial de novo, except if all parties so stipulate, the review shall be confined to the record. Portions of the record may be introduced by stipulation into evidence in a trial de novo as to those parties so stipulating.

(b) The filing of an appeal pursuant to this section shall stay the application of any such regulation, order or other action of the commissioner to the appealing party unless the court, after giving such party notice and an opportunity to be heard, determines that such a stay would be detrimental to the interests of policyholders, securityholders, creditors or the public.

(1969, P.A. 444, S. 11; P.A. 78-280, S. 6, 127; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6.)

History: P.A. 78-280 substituted “judicial district of Hartford-New Britain” for “Hartford county” in Subsec. (a); P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-39k transferred to Sec. 38a-139 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995.

Annotations to former section 38-39k:

Party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in subject matter of decision and must successfully establish that this specific, personal and legal interest has been specifically and injuriously affected by the decision. 166 C. 43. Cited. 184 C. 352.

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Sec. 38a-140. (Formerly Sec. 38-39l). Remedial and penal provisions. (a)(1) Whenever it appears to the commissioner that any insurance company or any director, officer, employee or agent thereof has committed or is about to commit a violation of sections 38a-129 to 38a-140, inclusive, or of any regulation or order issued by the commissioner hereunder, the commissioner may apply to the superior court or any judge thereof for the judicial district in which the principal office of the insurance company is located or, if such insurance company has no such office in this state, to the superior court or any judge thereof for the judicial district of Hartford, for an order enjoining such insurance company or such director, officer, employee or agent thereof from violating or continuing to violate said sections or any such regulation or order, and for such other equitable relief as the nature of the case and the interests of the insurance company's policyholders, creditors and securityholders or the public may require.

(2) No security that is the subject of any agreement or arrangement regarding acquisition, or that is acquired or to be acquired, in contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or of any regulation or order issued by the commissioner hereunder may be voted at any shareholders' meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding; but no action taken at any such meeting shall be invalidated by the voting of such securities, unless the action would materially affect control of the insurer or unless the courts of this state have so ordered. If an insurer or the commissioner has reason to believe that any security of the insurer has been or is about to be acquired in contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or of any regulation or order issued by the commissioner hereunder, the insurer or the commissioner may apply to the superior court or any judge thereof for the judicial district of Hartford, to enjoin any offer, request, invitation, agreement or acquisition made in contravention of sections 38a-129 to 38a-140, inclusive, or any regulation or order issued by the commissioner thereunder to enjoin the voting of any security so acquired, to void any vote of such security already cast at any meeting of shareholders and for such other equitable relief as the nature of the case and the interest of the insurer's policyholders, creditors and shareholders or the public may require.

(3) In any case where a person has acquired or is proposing to acquire any voting securities in violation of sections 38a-129 to 38a-140, inclusive, or any regulation or order issued by the commissioner hereunder, the superior court for the judicial district of Hartford, on notice as the court deems appropriate, upon application of the insurer or the commissioner, may seize or sequester any voting securities of the insurer owned directly or indirectly by the person, and issue the order with respect thereto as may be appropriate to effectuate the purposes of sections 38a-129 to 38a-140, inclusive.

(4) Notwithstanding any other provisions of law, for the purposes of sections 38a-129 to 38a-140, inclusive, the situs of the ownership of the securities of domestic insurers shall be deemed to be in this state.

(b) Whenever it appears to the commissioner that any person has committed a violation of sections 38a-129 to 38a-140, inclusive, that so impairs the financial condition of a domestic insurance company as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, securityholders or the public, the commissioner may proceed as provided in chapter 704c to take possession of the property of such domestic insurance company and to conduct the business thereof.

(c) (1) Whenever it appears to the commissioner that any insurance company or any director, officer, employee or agent thereof has committed a wilful violation of sections 38a-129 to 38a-140, inclusive, the commissioner may cause criminal proceedings to be instituted by the state's attorney for the judicial district in which the principal office of the insurance company is located or, if such insurance company has no such office in the state, by the state's attorney for the judicial district of Hartford against such insurance company or the responsible director, officer, employee or agent thereof. Any insurance company that wilfully violates said sections shall be fined not more than fifty thousand dollars. Any individual who wilfully violates said sections shall be fined not more than fifteen thousand dollars or, if such wilful violation involves the deliberate perpetration of a fraud upon the commissioner, shall be imprisoned not more than two years or so fined, or both.

(2) Any officer, director or employee of an insurance holding company system who wilfully and knowingly subscribes to or makes or causes to be made any false statement or false report or false filing with the intent to deceive the commissioner in the performance of the commissioner's duties under sections 38a-129 to 38a-140, inclusive, upon conviction thereof, shall be guilty of a class D felony, except that such officer, director or employee shall be fined not more than fifty thousand dollars. Any fines imposed shall be paid by the officer, director or employee in his or her individual capacity.

(d) (1) Whenever it appears to the commissioner that any person has committed a violation of sections 38a-129 to 38a-140, inclusive, that makes the continued operation of an insurance company contrary to the interests of its policyholders or the public, the commissioner may, after giving notice and an opportunity to be heard, suspend, revoke or refuse to renew such insurance company's license or authority to do business in this state for such period as the commissioner finds is required for the protection of its policyholders or the public.

(2) Whenever it appears to the commissioner that any person has committed a violation of sections 38a-129 to 38a-140, inclusive, that prevents the full understanding of the enterprise risk posed by an insurer's insurance holding company system or an insurer's affiliate to such insurer, the commissioner may disapprove dividends and other distributions and place such insurer under administrative supervision in accordance with sections 38a-962 to 38a-962j, inclusive.

(e) Any insurance company failing, without just cause, to file any registration statement as required in section 38a-135 shall be fined, after notice and hearing, one hundred fifty dollars for each day's delay, to be paid into the Insurance Fund established under section 38a-52a. The maximum penalty under this section shall be fifteen thousand dollars. The commissioner may reduce the penalty if the insurance company demonstrates to the commissioner that the imposition of the penalty would constitute a hardship to the insurance company.

(f) Each director or officer of any insurance holding company system who wilfully and knowingly violates, participates in, or assents to, or who wilfully and knowingly permits any of the officers or agents of the insurance company to engage in transactions or make investments that have not been properly reported or submitted pursuant to section 38a-135 or 38a-136, or that violate sections 38a-129 to 38a-140, inclusive, shall pay, in their individual capacity, a civil forfeiture of not more than seven thousand five hundred dollars per violation, after notice and hearing before the commissioner. Any civil forfeiture so recovered shall be paid into the Insurance Fund as established under section 38a-52a. In determining the amount of the civil forfeiture, the commissioner shall take into account the appropriateness of the forfeiture with respect to the gravity of the violation, the history of previous violations, and such other matters as the commissioner deems necessary.

(g) Whenever it appears to the commissioner that any insurance company subject to sections 38a-129 to 38a-140, inclusive, or any director, officer, employee or agent thereof has engaged in any transaction or entered into a contract that is subject to section 38a-136 and that would not have been approved had such approval been requested, the commissioner may order the insurance company to cease and desist immediately any further activity under such transaction or contract. After notice and hearing, the commissioner may also order the insurance company to void any such contracts and restore the status quo if such action is in the best interests of the policyholders, creditors or the public.

(h) If any person required to file an information statement under subsection (b) of section 38a-130 or any required amendment thereto has (1) failed to do so within the prescribed time, (2) files a false or misleading information statement or amendment thereto, (3) obstructed the conduct of any hearing required by the commissioner, or (4) consummated a change of control of the domestic insurance company in the absence of a determination by the commissioner that such change of control would not be prejudicial to the interest of its policyholders, the commissioner and any interested party, including the domestic insurance company, may apply to the superior court for the judicial district of Hartford or to the superior court for the judicial district in which the domestic insurance company has its principal place of business, or to any judge thereof, for any injunctive or other relief necessary to remedy any such act or failure to act. Such relief may include an injunction prohibiting any consummation of the change of control until such act or failure to act is remedied. In addition, the commissioner may proceed under section 38a-912 for an order permitting the commissioner to take possession and control of the property and affairs of the domestic insurance company in accordance with the provisions of said section 38a-912.

(1969, P.A. 444, S. 12–15; P.A. 78-280, S. 2, 6, 127; P.A. 85-16, S. 5, 6; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 92-93, S. 43; P.A. 93-142, S. 4, 7, 8; 93-239, S. 24; May 25 Sp. Sess. P.A. 94-1, S. 34, 130; P.A. 95-220, S. 4–6; P.A. 08-178, S. 6; P.A. 12-103, S. 10; P.A. 13-258, S. 100; P.A. 17-198, S. 8.)

History: P.A. 78-280 replaced “county” with “judicial district” and “Hartford county” with “judicial district of Hartford-New Britain” where necessary; P.A. 85-16 added Subsec. (e); P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-39l transferred to Sec. 38a-140 in 1991; P.A. 92-93 added Subsec. (c)(2) re false statements intended to deceive the commissioner in the performance of his duties, added new Subsecs. (e) to (g) re insurance company failure to file registration statement, re improperly reported investments and re transactions resulting from unapproved contracts, relettered former Subsec. (e) as (h) and made technical corrections for statutory consistency; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 93-239 amended Subsec. (a), adding new Subdivs. (2) to (4) re securities acquired in contravention of Secs. 38a-129 to 38a-140, inclusive, and voting by the shareholders based on such acquisition; May 25 Sp. Sess. P.A. 94-1 amended Subsec. (a)(3) by making technical change, effective July 1, 1994; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 08-178 made technical changes in Subsecs. (c) to (f), amended Subsec. (c) by increasing maximum fines from $10,000 and $3,000 to $50,000 and $15,000, respectively, in Subdiv. (1) and from $25,000 to $50,000 in Subdiv. (2), amended Subsec. (e) by increasing per day penalty from $100 to $150 and maximum penalty from $10,000 to $15,000, and amended Subsec. (f) by increasing maximum civil forfeiture from $5,000 to $7,500 per violation; P.A. 12-103 amended Subsec. (d) to designate existing provisions as Subdiv. (1) and add Subdiv. (2) re violation that prevents full understanding of enterprise risk, amended Subsec. (e) to replace provisions re penalty of $150 with provision re fine of $150, and made technical changes; P.A. 13-258 amended Subsec. (c)(2) to substitute provision re class D felony for provision re imprisonment of not more than 5 years and make technical changes; P.A. 17-198 amended Subsec. (b) by replacing reference to Sec. 38a-18 with reference to Ch. 704c, effective July 1, 2017.

Annotation to former section 38-39l:

Cited. 184 C. 352.

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Sec. 38a-141. (Formerly Sec. 38-39m). Financial and market conduct examination of acquired domestic insurance company. Transactions limited. Penalties. Regulations. Section 38a-141 is repealed.

(P.A. 87-302, S. 1, 2; P.A. 90-243, S. 14; P.A. 92-112, S. 34, 35.)

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Sec. 38a-142. Own risk and solvency assessments. Reports. Penalty. Exemptions. Confidentiality of documents, materials or other information. (a) As used in this section:

(1) “Insurance group” means those insurers and affiliates included within an insurance holding company system, as defined in section 38a-129;

(2) “Insurer” includes any person or combination of persons doing any kind or form of insurance business and includes a receiver of any insurer when the context reasonably permits. “Insurer” does not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;

(3) “NAIC” means the National Association of Insurance Commissioners;

(4) “ORSA” or “Own Risk and Solvency Assessment” means a confidential internal assessment conducted by an insurer or insurance group, appropriate to the nature, scale and complexity of such insurer or insurance group, of the material and relevant risks associated with the insurer or insurance group's current business plan and the sufficiency of capital resources to support those risks;

(5) “ORSA Guidance Manual” means the current version of NAIC's Own Risk and Solvency Assessment Guidance Manual, as amended from time to time;

(6) “ORSA Summary Report” means a confidential high-level summary of an insurer or insurance group's ORSA;

(7) “Person” has the same meaning as provided in section 38a-1.

(b) (1) Each domestic insurer shall establish and maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which such insurer is a member maintains a risk management framework applicable to the operations of such insurer.

(2) Each domestic insurer or the insurance group of which such insurer is a member shall regularly conduct an ORSA consistent with a process comparable to that set forth in the ORSA Guidance Manual. Any change in the ORSA Guidance Manual shall be effective January first following the calendar year in which such change was adopted by NAIC. The ORSA shall be conducted at least annually and at any time when there are significant changes to the risk profile of such insurer or insurance group.

(c) Commencing January 1, 2015, upon request by the Insurance Commissioner, and not more than once each year, a domestic insurer shall submit to the commissioner an ORSA Summary Report and any combination of reports that together contain the information described in the ORSA Guidance Manual that is applicable to such insurer and insurance group. The date of submission of such report or reports shall be dependent on when such insurer or insurance group conducts its internal strategic planning process. If the commissioner is the lead state commissioner, as determined by the procedures in NAIC's applicable financial analysis handbook, of the insurance group of which such insurer is a member, such insurer shall submit to the commissioner the reports required under this subsection once each year regardless of whether the commissioner has requested such reports. A domestic insurer may comply with this subsection by providing the most recent and substantially similar reports that were provided by such insurer or another member of the insurance group of which such insurer is a member to the insurance regulatory official of another state or a foreign jurisdiction and that provide information that is comparable to the information described in the ORSA Guidance Manual. Any such report in a language other than English shall be accompanied by a translation of that report into the English language.

(d) Each domestic insurer or the insurance group of which such insurer is a member shall prepare an ORSA Summary Report consistent with the standards set forth in the ORSA Guidance Manual. Such insurer or insurance group shall maintain documentation and supporting information of an ORSA and shall make such documentation and information available for examination upon request by the commissioner. The commissioner or the commissioner's designee shall review the ORSA Summary Report and such documentation or information using procedures similar to those currently used in the analysis and examination of multistate or global insurers and insurance groups.

(e) The ORSA Summary Report shall include the signature of the domestic insurer's or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process, attesting that, to the best of such officer's or executive's belief and knowledge, the insurer applied the enterprise risk management process described in the ORSA Summary Report and that a copy of the report has been provided to the insurer's board of directors or appropriate committee thereof.

(f) The commissioner, after notice and hearing, may impose a civil penalty on a domestic insurer that fails, without just cause, to timely file an ORSA Summary Report, of one thousand dollars for each day the failure to file a report continues. The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.

(g) (1) A domestic insurer shall be exempt from the requirements of subsections (b) to (e), inclusive, of this section if (A) such insurer has annual direct written and unaffiliated assumed premiums, including international direct and assumed premiums but excluding premiums reinsured with the Federal Crop Insurance Corporation and the National Flood Insurance Program, of less than five hundred million dollars, and (B) the insurance group of which such insurer is a member has annual direct written and unaffiliated assumed premiums, including international direct and assumed premiums but excluding premiums reinsured with the Federal Crop Insurance Corporation and the National Flood Insurance Program of less than one billion dollars.

(2) If an insurer qualifies for an exemption pursuant to subparagraph (A) of subdivision (1) of this subsection but the insurance group of which such insurer is a member does not qualify for an exemption pursuant to subparagraph (B) of subdivision (1) of this subsection, the ORSA Summary Report shall include every insurer within such insurance group. This requirement may be satisfied by the submission of more than one ORSA Summary Report for any combination of insurers, provided such combination of reports includes every insurer within such insurance group.

(3) If an insurer does not qualify for an exemption pursuant to subparagraph (A) of subdivision (1) of this subsection but the insurance group of which such insurer is a member qualifies for an exemption pursuant to subparagraph (B) of subdivision (1) of this subsection, the only ORSA Summary Report required shall be the report applicable to such insurer.

(4) An insurer that does not qualify for an exemption pursuant to subparagraph (A) of subdivision (1) of this subsection may apply to the commissioner for a waiver from the requirements of subsections (b) to (e), inclusive, of this section, based on unique circumstances. In deciding whether to grant the insurer's request for a waiver, the commissioner may consider the type and volume of business written, ownership and organizational structure of the insurer and any other factors the commissioner considers relevant to the insurer or insurance group of which such insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the commissioner shall coordinate with the lead state commissioner, as determined by the procedures in NAIC's applicable financial analysis handbook, of such insurance group and with the other insurance regulatory officials of member insurers' states of domicile in considering whether to grant the insurer's request for a waiver.

(5) If an insurer that qualifies for an exemption pursuant to subdivision (1) of this subsection subsequently no longer qualifies for such exemption due to changes in premiums as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which such insurer is a member, such insurer shall have one year following the year the threshold is exceeded to comply with the requirements of subsections (b) to (e), inclusive, of this section.

(6) Notwithstanding the exemptions in this subsection, the commissioner may require that a domestic insurer comply with the requirements of subsections (b) to (e), inclusive, of this section: (A) Based on unique circumstances including, but not limited to, the type and volume of business written, ownership and organizational structure of the insurer and requests from a federal agency or the insurance regulatory official of a foreign jurisdiction; or (B) if the insurer (i) has risk-based capital for a company action level event, as set forth in sections 38a-72-1 to 38a-72-13, inclusive, and 38a-193-1 to 38a-193-13, inclusive, of the regulations of Connecticut state agencies, (ii) meets one or more of the standards of an insurer deemed to be in a hazardous financial condition, as set forth in section 38a-8-103 of the regulations of Connecticut state agencies, or (iii) otherwise exhibits qualities of a troubled insurer as determined by the commissioner.

(h) (1) All documents, materials or other information, including the ORSA Summary Report, in the possession or control of the Insurance Department that are obtained by, created by or disclosed to the commissioner or any other person pursuant to subsections (b) to (e), inclusive, or subsection (g) of this section shall be confidential by law and privileged, shall not be subject to disclosure under section 1-210, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any civil action in this state. The commissioner may use such documents, materials or information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make such documents, materials or other information public without the prior written consent of the insurer.

(2) Neither the commissioner nor any person who, while acting under the authority of the commissioner, obtained or created documents, materials or other information pursuant to subsections (b) to (e), inclusive, or subsection (g) of this section, or to whom such documents, materials or other information were disclosed, through examination or otherwise, shall be permitted or required to testify in any civil action in this state concerning any such documents, materials or information.

(i) (1) To assist the commissioner in the performance of the commissioner's regulatory duties, the commissioner:

(A) May share upon request documents, materials or other information set forth in subdivision (1) of subsection (h) of this section, including documents, materials or information deemed confidential and privileged or not disclosable pursuant to said subdivision, with (i) other state, federal and international regulatory officials, including members of a supervisory college as described in section 38a-135, (ii) NAIC, and (iii) any third-party consultants designated by the commissioner, provided the recipient of any such documents, materials or other information agrees, in writing, to maintain the confidentiality and privileged status of such documents, materials or other information and has verified, in writing, the recipient's legal authority to maintain confidentiality;

(B) May receive ORSA-related documents, materials or other information, including documents, materials or information deemed confidential and privileged, from regulatory officials of other states or foreign jurisdictions, including members of a supervisory college as described in section 38a-135, and NAIC. The commissioner shall maintain as confidential and privileged any documents, materials or information received with notice or the understanding that such documents, materials or information are confidential and privileged under the laws of the jurisdiction that is the source of such documents, materials or information; and

(C) Shall enter into a written agreement with NAIC or a third-party consultant, governing the sharing and use of documents, materials and information shared or received pursuant to subparagraph (A) or (B) of this subdivision. Any such agreement shall (i) specify policies and procedures regarding the confidentiality and security of such documents, materials or other information that are shared with NAIC or a third-party consultant, including (I) procedures and protocols limiting sharing by NAIC to only regulatory officials of states in which other member insurers of the insurance group of which a domestic insurer is a member are domiciled, and (II) a provision requiring NAIC or a third-party consultant to agree, in writing, and if applicable, a provision requiring NAIC to obtain from a regulatory official under subparagraph (C)(i)(I) of this subdivision an agreement, in writing, to maintain the confidentiality and privileged status of such documents, materials or other information, and verifying the recipient's legal authority to maintain confidentiality; (ii) specify that the commissioner shall retain ownership of such documents, materials or other information and that the use of such documents, materials or other information is subject to the commissioner's discretion; (iii) prohibit NAIC or the third-party consultant from storing such documents, materials or other information in a permanent database after the underlying analysis is completed; (iv) require prompt notice to be given to an insurer whose confidential information is in the possession of NAIC or a third-party consultant if NAIC or the third-party consultant is subject to a request or subpoena for disclosure or production of such documents, materials or other information; (v) require NAIC or the third-party consultant, if NAIC or such consultant is subject to disclosure of an insurer's confidential documents, materials or other information that has been shared with NAIC or such consultant pursuant to subparagraph (A) of this subdivision, to allow such insurer to intervene in any judicial or administrative action regarding such disclosure; and (vi) in the case of an agreement with a third-party consultant, require the commissioner to obtain the written consent of the insurer prior to sharing any such documents, materials and information.

(2) No waiver of any applicable privilege or claim of confidentiality in any documents, materials or other information thereof shall occur as a result of disclosure to the commissioner or of sharing in accordance with this subsection. Nothing in this subsection shall be construed to delegate any regulatory authority of the commissioner to any person or entity with which any documents, materials or other information thereof have been shared.

(3) The ORSA Summary Report and any related documents, materials or other information thereof in the possession or control of NAIC or a third-party consultant pursuant to this subsection shall be confidential by law and privileged, shall not be subject to disclosure under section 1-210, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any civil action in this state.

(P.A. 14-107, S. 1; P.A. 15-187, S. 3.)

History: P.A. 14-107 effective January 1, 2015; P.A. 15-187 amended Subsec. (i)(1) to delete provision in Subpara. (A) re written consent of insurer prior to sharing of documents, materials or other information by commissioner, and to add provision in Subpara. (C) re written consent of insurer prior to sharing of documents, materials and information by commissioner in the case of an agreement with a third-party consultant.

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Sec. 38a-142a. Corporate governance annual disclosures. Confidentiality of documents, materials or other information. CGAD reviews. Penalty. (a) As used in this section:

(1) “Board” means the board of directors of an insurer or insurance group;

(2) “CGAD” or “corporate governance annual disclosure” means a confidential report filed by an insurer or insurance group in accordance with the provisions of this section;

(3) “Insurance group” has the same meaning as provided in section 38a-142;

(4) “Insurer” means any person or combination of persons doing any kind or form of insurance business, including a fraternal benefit society, as described in chapter 700d, and a health care center, as defined in section 38a-175, and includes a receiver of any insurer when the context reasonably permits. “Insurer” does not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;

(5) “NAIC” means the National Association of Insurance Commissioners;

(6) “ORSA Summary Report” has the same meaning as provided in section 38a-142; and

(7) “Senior management” means any corporate officer of an insurer or insurance group responsible for reporting information to the board at regular intervals or providing information to shareholders or regulators, and includes, but is not limited to, a chief executive officer, chief financial officer, chief operations officer, chief procurement officer, chief legal officer, chief information officer, chief technology officer, chief revenue officer and chief visionary officer.

(b) (1) Not later than June 1, 2017, and annually thereafter, each domestic insurer or the insurance group of which such insurer is a member shall submit to the Insurance Commissioner a CGAD that contains the information required under subsection (c) of this section, except that if the insurer is a member of an insurance group, such insurer shall submit the CGAD to the lead state commissioner, as determined by the procedures in NAIC's applicable financial analysis handbook, of the insurance group of which such insurer is a member. If the commissioner is the lead state commissioner of such insurance group, the commissioner shall provide, in a manner consistent with the provisions of subdivision (3) of subsection (e) of this section, a copy of the CGAD upon request to the insurance regulatory official of any state in which such insurance group has a domestic insurer. A domestic insurer that is not required to submit a CGAD to the commissioner under this subdivision shall do so if requested by the commissioner.

(2) Each year after the initial submission of the CGAD, such insurer or insurance group shall submit an amended version of the previous year's CGAD that indicates where changes have been made. If no changes were made, such submission shall so state.

(1) A description of the insurer's or insurance group's corporate governance framework and structure, including (A) (i) its board and each significant committee thereof that is responsible for oversight of the insurer or insurance group and the level at which such oversight occurs, such as the ultimate control level, an intermediate holding company level or an individual legal entity level, and (ii) a description and discussion of its rationale for the current board size and structure, and (B) the duties of the board and such committees, the method by which each is governed, such as through bylaws, a charter or informal mandates, and a description of how the board's leadership is structured, including a discussion of the roles of the chief executive officer and the chairman of the board within the organization;

(2) A description of the policies and practices of the board and each significant committee thereof, including a discussion of (A) how the qualifications, expertise and experience of each board member meet the needs of the insurer or insurance group, (B) how the insurer or insurance group ensures an appropriate amount of independence is maintained on the board and such committees, (C) the number of meetings held by the board and such committees during the previous year and information on board member attendance, and (D) how the insurer or insurance group identifies, nominates and elects members to the board and such committees, including (i) whether a nomination committee is in place to identify and select individuals for consideration, (ii) whether term limits are placed on board members, (iii) how the election and reelection processes function, and (iv) whether a board diversity policy is in place and if so, how it functions;

(3) A description of the board's processes to evaluate its performance and the performance of its committees and any recent measures taken to improve performance, including any board or committee training programs that have been put in place;

(4) A description of the insurer's or insurance group's policies and practices for directing senior management, including (A) any processes or practices, such as suitability standards, to determine whether officers and key individuals in control functions have the appropriate background, experience and integrity to fulfill their roles, including (i) identification of specific positions for which suitability standards have been developed and a description of the standards applied, and (ii) the standards and procedures to monitor and evaluate an officer's or key individual's suitability and any changes in an officer's or key individual's suitability in the previous year as a result of applying such standards or procedures, (B) its code of business conduct and ethics, including a discussion of its compliance with laws, rules and regulations and its proactive reporting of any illegal or unethical conduct, (C) its senior management succession plans, and (D) its processes for performance evaluation, compensation and corrective action, to ensure effective senior management throughout the organization, including a description of the general objectives of its significant compensation programs and what such programs are designed to reward. The description under this subdivision shall contain sufficient detail to allow the commissioner to understand how the insurer or insurance group ensures that such compensation programs do not encourage or reward excessive risk-taking, and may include (i) the board's role in overseeing management compensation programs and practices, (ii) the elements of compensation awarded in a compensation program and how the insurer or insurance group determines and calculates the amount of each element of compensation paid, (iii) how the insurer's or insurance group's compensation programs are related to both organizational and individual performance over time, (iv) whether the insurer's or insurance group's compensation programs include risk adjustments and how such adjustments are incorporated into its employee compensation programs at different levels, (v) any clawback provisions built into the insurer's or insurance group's compensation programs to recover awards or payments if the performance measures upon which such awards or payments were based are restated or otherwise adjusted, and (vi) any other factors relevant to understanding how the insurer or insurance group monitors its compensation programs to determine whether its risk management objectives are met by incentivizing its employees.

(5) A description of the insurer's or insurance group's processes by which the board, each significant committee thereof and senior management ensure an appropriate amount of oversight of the critical risk areas impacting the insurer's or insurance group's business activities, including a discussion of (A) how oversight and management responsibilities are delegated between the board, such committees and senior management, (B) how the board is kept informed of the insurer's or insurance group's strategic plans, the associated risks and the steps senior management takes or has taken to monitor and manage such risks, and (C) how reporting responsibilities are organized for each critical risk area. The description under subparagraph (C) of this subdivision shall contain sufficient detail to allow the commissioner to understand the frequency at which information on each critical risk area is reported to and reviewed by the board and senior management, and may include the following critical risk areas: (i) Risk management processes. An insurer or insurance group that is required to file an ORSA Summary Report pursuant to section 38a-142 may refer to such report; (ii) actuarial function; (iii) investment decision-making processes; (iv) reinsurance decision-making processes; (v) business strategy and financial decision-making processes; (vi) compliance function; (vii) financial reporting and internal auditing; and (viii) market conduct decision-making processes.

(d) (1) For the purposes of completing the CGAD, the insurer or insurance group may provide the required information at the ultimate control level, an intermediate holding company level or an individual legal entity level, depending on the structure of such insurer's or insurance group's corporate governance system. Such insurer or insurance group may report information for the CGAD at the level at which (A) such insurer's or insurance group's risk appetite is determined, (B) such insurer's or insurance group's earnings, capital, liquidity, operations and reputation are overseen collectively and the supervision of such factors are coordinated and exercised, or (C) legal liability would be placed for such insurer's or insurance group's failure to comply with its corporate governance duties. An insurer or insurance group that determines its level of CGAD reporting based on the criteria specified in this subdivision shall indicate in the CGAD which of the three criteria was used to determine its level of reporting and explain any subsequent changes in its level of reporting.

(2) The insurer or insurance group may utilize and reference other existing documents such as ORSA Summary Reports, Holding Company Form B or F filings, Securities and Exchange Commission proxy statements or foreign regulatory required filings, that furnish information comparable to that required under subsection (c) of this section. The insurer or insurance group shall attach such other documents to the CGAD, if such documents are not already filed with or available to the commissioner, and clearly reference the applicable information within the CGAD that such other documents are intended to supply.

(3) The insurer or insurance group shall have discretion over the information it provides in a CGAD, provided such CGAD is consistent with subsection (c) of this section and contains the material information necessary to allow the commissioner to understand the insurer's or insurance group's corporate governance structure, policies and practices. The insurer or insurance group shall be as descriptive as possible in completing a CGAD and shall include attachments or document examples that such insurer or insurance group uses in its governance process. The commissioner may request additional information the commissioner deems material and necessary to understand the insurer's or insurance group's corporate governing policies, reporting or information system or controls over such policies or systems. The insurer or insurance group shall maintain any CGAD-related documents and supporting information and make such documents and information available to the commissioner upon request.

(4) Each CGAD shall be signed by the chief executive officer or corporate secretary of the insurer or insurance group, attesting that to the best of such individual's belief and knowledge, such insurer or insurance group has implemented the corporate governance practices described in the CGAD and that a copy of such CGAD has been provided to the insurer's or insurance group's board or appropriate committee thereof.

(e) (1) All documents, materials or other information, including the CGAD, in the possession or control of the Insurance Department that are obtained by, created by or disclosed to the commissioner or any other person pursuant to this section are deemed to be proprietary and to contain trade secrets and shall be confidential by law and privileged, shall not be subject to disclosure under section 1-210, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any civil action in this state. The commissioner may use such documents, materials or information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make such documents, materials or other information public without the prior written consent of the insurer, except that nothing in this subsection shall be construed to require written consent of the insurer prior to the commissioner sharing or receiving CGAD-related documents, materials or other information pursuant to subdivision (3) of this subsection.

(2) Neither the commissioner nor any person who, while acting under the authority of the commissioner, obtained or received CGAD-related documents, materials or other information, or to whom such documents, materials or other information were disclosed, shall be permitted or required to testify in any civil action in this state concerning any such documents, materials or information.

(3) To assist the commissioner in the performance of the commissioner's regulatory duties, the commissioner:

(A) May share upon request CGAD-related documents, materials or other information, including documents, materials or information deemed proprietary and containing trade secrets, confidential and privileged or not disclosable pursuant to this subsection, with (i) other state, federal and international financial regulatory officials, including members of a supervisory college as described in section 38a-135, (ii) NAIC, and (iii) any third-party consultants engaged by the commissioner pursuant to subsection (f) of this section, provided the recipient of any such documents, materials or other information agrees, in writing, to maintain the confidentiality and privileged status of such documents, materials or other information and has verified, in writing, the recipient's legal authority to maintain confidentiality; and

(B) May receive CGAD-related documents, materials or other information, including documents, materials or information deemed proprietary and containing trade secrets, confidential and privileged, from other state, federal and international financial regulatory officials, including members of a supervisory college and NAIC. The commissioner shall maintain as confidential and privileged any such documents, materials or information received with notice or the understanding that such documents, materials or information are confidential and privileged under the laws of the jurisdiction that is the source of such documents, materials or information.

(4) A written agreement between the commissioner and NAIC or a third-party consultant governing the sharing and use of documents, materials and information shared or received pursuant to subdivision (3) of this subsection shall expressly require the prior written consent of the insurer to NAIC or such third-party consultant making such documents, materials or information public and shall (A) specify policies and procedures for maintaining the confidentiality and security of such documents, materials or other information that are shared with NAIC or the third-party consultant, including (i) procedures and protocols limiting sharing by NAIC to only regulatory officials of states in which other member insurers of the insurance group of which a domestic insurer is a member are domiciled, and (ii) a provision requiring NAIC or a third-party consultant to agree, in writing, and if applicable, a provision requiring NAIC to obtain from a regulatory official under subparagraph (A)(i) of this subdivision an agreement, in writing, to maintain the confidentiality and privileged status of such documents, materials or other information, and verifying the recipient's legal authority to maintain confidentiality, (B) specify that the commissioner shall retain ownership of such documents, materials or other information and that the use of such documents, materials or other information is subject to the commissioner's discretion, (C) prohibit NAIC or the third-party consultant from storing such documents, materials or other information in a permanent database after the underlying analysis is completed, (D) require NAIC or the third-party consultant to promptly notify the commissioner and the insurer or insurance group whose confidential information is in the possession of NAIC or the third-party consultant if NAIC or the third-party consultant is subject to a request or subpoena for disclosure or production of such documents, materials or other information, and (E) require NAIC or the third-party consultant, if NAIC or such consultant is subject to disclosure of an insurer's or insurance group's confidential documents, materials or other information that has been shared with NAIC or such consultant pursuant to subparagraph (A) of subdivision (3) of this subsection, to allow such insurer or insurance group to intervene in any judicial or administrative action regarding such disclosure.

(5) No waiver of any applicable privilege or claim of confidentiality in any CGAD-related documents, materials or other information shall occur as a result of sharing by or disclosure to the commissioner in accordance with this section. Nothing in this subsection shall be construed to delegate any regulatory authority of the commissioner to any person or entity with which any such documents, materials or other information have been shared.

(f) (1) Any review of a CGAD or a request for CGAD-related documents, materials or other information shall be conducted by or made through the lead state commissioner, as determined by the procedures in NAIC's applicable financial analysis handbook, of the insurance group of which the insurer is a member.

(2) The commissioner may engage the services of third-party consultants including attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff, at the insurer's or insurance group's expense, as shall be reasonably necessary to assist the commissioner in a review of such insurer's or insurance group's CGAD and related documents, materials and other information or of such insurer's or insurance group's compliance with the requirements of this section. Any such consultant shall (A) be under the direction and control of the commissioner and act in an advisory capacity only, and (B) verify to the commissioner and provide notice to the insurer or insurance group that such consultant is free of any conflict of interest regarding such insurer or insurance group and has internal procedures in place to monitor conflicts of interest that may arise and to comply with the confidentiality standards and requirements of this section.

(3) Nothing in this section shall be construed to (A) prescribe or impose corporate governance standards or internal procedures beyond that required under state corporation laws, or (B) affect the provisions of section 38a-14 or 38a-14a.

(g) The commissioner, after notice and hearing, may impose a civil penalty on an insurer or insurance group that fails, without just cause, to timely file a CGAD, of one hundred seventy-five dollars for each day the failure to file a CGAD continues. The commissioner may reduce the penalty if the insurer or insurance group demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer or insurance group.

(P.A. 16-206, S. 1.)

History: P.A. 16-206 effective January 1, 2017.

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Secs. 38a-143 to 38a-145. Reserved for future use.

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PART VI

MONOPOLIES. SALE OR EXCHANGE OF STOCK.
MERGERS. CONVERSIONS. REORGANIZATIONS

Sec. 38a-146. (Formerly Sec. 38-37). Domestic insurance company may acquire stock of other companies. Any domestic insurance company may retain or acquire the whole or any part of the stock or other share capital of other insurance corporations, provided no insurance corporation shall, by reason of such retention or acquisition of stock or other share capital, conduct its business with the public in a manner which substantially lessens competition or tends to create a monopoly.

(1949 Rev., S. 6093.)

History: Sec. 38-37 transferred to 38a-146 in 1991.

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Sec. 38a-147. (Formerly Sec. 38-37a). Solicitation of proxies. (a) No person shall, in contravention of such regulations as the Insurance Commissioner may prescribe as necessary or appropriate in the public interest or for the protection of investors, solicit or permit the use of his name to solicit any proxy or consent or authorization in respect of any security issued by any domestic stock insurance company. No proxy, consent or authorization solicited in contravention of such regulations shall be valid or effective. Such regulations shall conform to those prescribed or approved by the National Association of Insurance Commissioners, including such exemptive provisions as may be prescribed by or contained in the regulations of said association.

(b) Unless proxies, consents or authorizations in respect of a security of a domestic stock insurance company are solicited by or on behalf of the management of such company from the holders of record of such security in accordance with the regulations prescribed under subsection (a) of this section, prior to any annual or other meeting of the holders of such security, such company shall, in accordance with regulations prescribed by the Insurance Commissioner, file with the commissioner and transmit to all holders of record of such security information substantially equivalent to the information which would be required to be transmitted if a solicitation were made.

(c) Any person aggrieved by any act of the Insurance Commissioner hereunder may appeal therefrom to the superior court for the judicial district of Hartford.

(February, 1965, P.A. 113, S. 1, 2, 3; 1971, P.A. 870, S. 96; P.A. 76-436, S. 629, 681; P.A. 77-614, S. 163, 610; P.A. 78-280, S. 4–6, 127; P.A. 80-482, S. 274, 348; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6.)

History: 1971 act replaced superior court with court of common pleas in Subsec. (c), effective September 1, 1971, except that courts with cases pending retain jurisdiction unless pending matters deemed transferable; P.A. 76-436 replaced court of common pleas with superior court, effective July 1, 1978; P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 78-280 replaced “Hartford county” with “judicial district of Hartford-New Britain” in Subsec. (c); P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-37a transferred to Sec. 38a-147 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995.

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Sec. 38a-148. (Formerly Sec. 38-37b). Redemption of shares of domestic insurance company. Notice. Determination of fair value. (a) Any stock of a domestic insurance corporation licensed to conduct an insurance business in this state may be made subject to redemption by that corporation if, in the good faith determination of the corporation's board of directors, any holder of its stock either fails to meet the qualifications prescribed under the laws of this state for licensure of the corporation, or otherwise fails to secure the regulatory approvals required under the laws of this state for ownership of such stock, such determination to be reflected in a resolution adopted by the board. Prior to any such determination, the corporation shall give such holder or holders of stock written warning that such determination may be made. Any stock subject to redemption under this section may be redeemed in cash, property or rights, including securities of the same or another corporation, or any combination thereof, at such time or times, price or prices, or rate or rates, and with such adjustments, as shall be stated in the certificate of incorporation, or in the resolution or resolutions providing for the issuance of such stock adopted by the board of directors, or in the resolution of the board at the time of its determination as provided in this section. A certified copy of the resolution of the board with respect to its determination shall be filed with the Insurance Commissioner within three days of its adoption. Notice, specifying the shares called for redemption, the redemption date, the redemption consideration and the place where the redemption consideration is payable, shall be mailed not less than thirty days before the redemption date, to each holder of stock so called at the holder's address as it appears upon the books of the corporation. If notice of such call has been duly given and if, on or before the redemption date designated in such notice, the consideration necessary for the redemption has been set aside, so as to be and continue to be available therefor, then, notwithstanding that any certificate of the stock so called for redemption shall not have been surrendered for cancellation, (1) the dividends thereon shall cease to accrue from and after the date of redemption so designated, (2) the holder of such shares shall not have the right to receive notice of or to vote such shares at any meeting of the corporation's shareholders or to grant a consent or authorization with respect to the shares, and (3) all other rights with respect to the shares of the stock so called for redemption shall after such redemption date cease and terminate, except the right of the holder to receive the redemption consideration thereof without interest.

(b) If, at least ten days prior to the redemption date, such shareholder gives written notice to the corporation objecting to the redemption consideration set forth in the corporation's notice, the fair value for such shareholder's shares shall be determined and such shares shall be acquired by the corporation in the manner set forth in sections 33-863 to 33-872, inclusive. The right to be paid the value of such shares pursuant to said sections shall be such shareholder's exclusive remedy as holder of such shares against the corporation's redemption of such shares, whether or not the shareholder proceeds as provided in said sections. Such notice by the shareholder shall be deemed to be the notice required by section 33-862.

(c) The provisions of this section relating to stock redemptions shall apply only to shares of a corporation the beneficial ownership of which is acquired after April 3, 1984.

(P.A. 84-13, S. 1, 2; P.A. 96-271, S. 212, 254.)

History: Sec. 38-37b transferred to Sec. 38a-148 in 1991; P.A. 96-271 amended Subsec. (b) to replace references to “section 33-374” with “sections 33-863 to 33-872, inclusive” or “said sections”, as appropriate, replace reference to “subsection (b) of said section 33-374” with “section 33-862” and delete provision that deemed the corporation's redemption consideration as set forth in its notice to the shareholder to be the written offer required by Sec. 33-374(d), effective January 1, 1997; (Revisor's note: In 1997 in Subsec. (b) after the phrase “... manner set forth in sections 33-863 to 33-872.” the word “, inclusive” was inserted editorially by the Revisors for consistency with customary statutory usage).

Cited. 220 C. 721.

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Sec. 38a-149. (Formerly Sec. 38-38). Interlocking directorate. Any person may be a director in two or more insurance corporations when such interlocking directorate is not used as a means of substantially lessening competition or tending to create a monopoly.

(1949 Rev., S. 6094.)

History: Sec. 38-38 transferred to Sec. 38a-149 in 1991.

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Sec. 38a-150. (Formerly Sec. 38-39). Monopoly. Complaint and hearing. Cease and desist order. (a) Whenever the commissioner has reason to believe that there is a violation of section 38a-146 or 38a-149, he shall serve upon the insurance corporation or director concerned a complaint stating the commissioner's charge in that respect, to which complaint there shall be attached, or in which there shall be contained, a notice of hearing specifying the time and place of such hearing, which shall be not less than thirty days after the service of such complaint, and requiring such insurance corporation or director to show cause why an order should not be made by the commissioner directing such insurance corporation or director to cease and desist from such violation. Such insurance corporation or director so complained of may, at the time and place so fixed, show cause why such an order should not be entered. The evidence taken at such a hearing shall be reduced to writing and made a part of the record therein.

(b) If upon such hearing the commissioner finds that there has been a violation of section 38a-146 or 38a-149, he shall issue and cause to be served upon such insurance corporation or director an order reciting the facts found by the commissioner and the respects in which there has been a violation of section 38a-146 or 38a-149, and directing such insurance corporation or director to cease and desist from such violation.

(c) Any finding and order of the commissioner shall be subject to appeal in accordance with the provisions of section 4-183, except venue for such appeal shall be in the judicial district of New Britain.

(d) Nothing contained in section 38a-146, 38a-149 or this section shall authorize any order, judgment or decree directing any insurance company to divest itself of the stock or other capital of another insurance corporation. Nothing in said sections shall affect any statute relating to the investments of any domestic life insurance company.

(1949 Rev., S. 6095; P.A. 77-603, S. 26, 125; P.A. 78-280, S. 6, 127; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6; P.A. 99-215, S. 24, 29.)

History: P.A. 77-603 replaced previous detailed appeal provisions in Subsec. (c) with provision requiring that appeals be made in accordance with Sec. 4-183 but retaining venue in Hartford county; P.A. 78-280 replaced “Hartford county” with “judicial district of Hartford-New Britain”; P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-39 transferred to Sec. 38a-150 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 99-215 replaced “judicial district of Hartford” with “judicial district of New Britain” in Subsec. (c), effective June 29, 1999.

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Sec. 38a-151. (Formerly Sec. 38-34). Reduction of capital stock. Any insurance company, with the consent of the commissioner, may reduce its capital stock to such extent, and change the par value of its shares to such amount, as is approved by at least two-thirds of its board of directors, notwithstanding any limitations contained in its charter, by a majority vote of the stockholders present at a meeting called for the purpose, and may transfer the amount of such reduction to the surplus or reserve accounts of the company as the stockholders and directors may determine. A copy of such vote of the stockholders, together with a vote of approval of the board of directors, certified under the corporate seal by the secretary and with the approval of the commissioner endorsed thereon, shall be filed in the office of the Secretary of the State. The directors, after such reduction of capital, may require each stockholder to surrender his certificate and in lieu thereof may issue a new certificate for the number of shares to which he is entitled. Such company may, thereafter, increase its capital stock to any amount not exceeding the amount authorized by its charter.

(1949 Rev., S. 6092.)

History: Sec. 38-34 transferred to Sec. 38a-151 in 1991.

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Sec. 38a-152. (Formerly Sec. 38-35). Issuance of stock in exchange for stock of another company. (a) Any domestic insurance company with capital stock may, with the prior approval of the commissioner, issue its capital stock within the limit of its authorized capital in exchange for outstanding stock of another domestic insurance company or of a foreign or alien insurance company, or partly in exchange for such stock and partly for cash. Such an exchange shall require the prior approval of the domestic company's stockholders, unless, immediately prior to the exchange, the domestic company owns beneficially or of record ninety per cent or more of the outstanding voting securities of the insurance company whose shares are being acquired.

(b) Whenever an insurance company proposes to issue its stock in exchange for outstanding stock of another insurance company, it shall bring its petition to the commissioner, setting forth the terms and conditions of the proposed exchange offer. The commissioner shall thereafter hold a hearing upon the fairness of the terms and conditions of the proposed issuance and exchange of stock, at which hearing any policyholder or stockholder of any company or other interested party shall have the right to appear.

(c) Notice of the hearing shall be given by publication in a newspaper of general circulation in the city of Hartford, and in such other city or cities as the commissioner may direct, once a week for three successive weeks, and the commissioner shall require that written notice be mailed to all stockholders of the petitioner and of any other company whose stockholders may be entitled to exchange their stock for stock of the petitioner. The commissioner may require such other notice as, under the circumstances, he deems appropriate. The commissioner, in his discretion, may waive all notice requirements if immediately prior to the exchange the domestic company owns beneficially or of record ninety per cent or more of the outstanding voting securities of the insurance company whose shares are being acquired.

(d) The commissioner may, if he finds that the interest of the policyholders and stockholders of all companies are protected and that the terms and conditions of the proposed issuance and exchange of stock are fair and reasonable, approve and authorize the issuance and exchange of stock. All expenses in connection with the proceedings shall be borne by the petitioner or petitioners.

(e) In the event of any proposed issuance and exchange of stock which is for the purpose or has the effect of acquiring control of a domestic insurance company, the provisions of sections 38a-129 to 38a-140, inclusive, shall apply.

(1955, S. 2814d; 1957, P.A. 123, S. 1; P.A. 79-103; P.A. 90-243, S. 12; P.A. 92-112, S. 32, 35.)

History: P.A. 79-103 allowed issuance of stock in exchange for stock of another company without stockholders' prior approval where “immediately prior to the exchange, the domestic company owns beneficially or of record 90% or more of the outstanding voting securities of the outstanding voting securities of the other insurance company whose shares are being acquired” and added similarly worded exception to notice requirement; P.A. 90-243 divided section into Subsecs., made technical corrections re inclusion of references of “foreign” and “alien” and added a provision in which the commissioner may waive notice requirement in an exchange of stock if the domestic company has an interest of 90% or more; Sec. 38-35 transferred to Sec. 38a-152 in 1991; P.A. 92-112 added new Subsec. (e) re proposed issuance or exchange of stock to acquire control of a domestic insurance company.

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Sec. 38a-153. (Formerly Sec. 38-42). Merger or consolidation of companies. (a) Any domestic insurance company may, with the prior approval of the commissioner, merge or consolidate with one or more other domestic insurance companies or with one or more foreign or alien insurance companies that are either authorized to do an insurance business in this state, or are not authorized to do an insurance business in this state provided the resulting corporation is a corporation of this state and the laws of the other jurisdictions so permit. Prior to approving any such merger or consolidation, the commissioner may hold a hearing upon the fairness of the terms and conditions of the proposed merger or consolidation after such notice as, under the circumstances, the commissioner deems appropriate and shall find that the interests of the policyholders and the interests of the stockholders, if any, are protected. Such merger or consolidation may be effected either in accordance with the provisions of the general statutes relating to merger or consolidation of corporations organized under the general statutes or in accordance with any provisions in the charters of the companies merging or consolidating relating to merger or consolidation. All expenses in connection with the proceedings shall be borne by the resulting corporation.

(b) The domestic or foreign subsidiary of an existing domestic mutual holding company, as defined in section 38a-156, may, with the prior approval of the commissioner, merge with a foreign mutual insurer in accordance with the provisions of this section.

(c) In the event of any merger or consolidation that is for the purpose or has the effect of acquiring control of a domestic insurance company, the provisions of sections 38a-129 to 38a-140, inclusive, shall apply.

(d) The commissioner may permit the formation of a domestic insurance company that is established for the sole purpose of merging or consolidating with an existing domestic insurer simultaneously with a division authorized by section 38a-156s. Upon request of the dividing insurer, as defined in section 38a-156r, the commissioner may waive the requirements of subsections (a) to (c), inclusive, of this section and section 38a-41. Each insurer formed under this subsection shall be deemed to exist before a merger and division under this section becomes effective, but solely for the purpose of being a party to such merger and division. The commissioner shall not require that such insurer be licensed to transact insurance business in this state before such merger and division. All insurance policies, annuities or reinsurance agreements allocated to such insurer shall become the obligation of the insurer that survives the merger simultaneously with the effectiveness of the merger and division. The plan of merger shall be deemed to have been approved by such insurer if the dividing insurer approved such plan. The certificate of merger shall state that it was approved by the insurer formed under this subsection.

(1949 Rev., S. 6118-6121, 6162-6165; 1955, S. 2813d; 1957, P.A. 124, S. 1; 1963, P.A. 103, S. 2; P.A. 90-243, S. 15; Nov. Sp. Sess. P.A. 91-4, S. 1, 2; P.A. 92-112, S. 33, 35; P.A. 01-139, S. 4; P.A. 14-123, S. 15; P.A. 17-2, S. 10.)

History: 1963 act made provisions applicable to domestic insurance companies generally where previously applicable to domestic insurance companies with capital stock; P.A. 90-243 inserted references to “foreign” and “alien” insurance companies; Sec. 38-42 transferred to Sec. 38a-153 in 1991; Nov. Sp. Sess. P.A. 91-4 deleted the requirement that a merged or incorporated insurance company result in a domestic corporation; P.A. 92-112 divided the section into Subsecs., adding new Subsec. (b) re proposed merger or consolidation of stock to acquire control of a domestic insurance company; P.A. 01-139 amended Subsec. (a) to permit mergers or consolidations with foreign or alien insurance companies that are not authorized to do insurance business in this state if the resulting corporation is a corporation of this state and made technical changes, including changes for the purpose of gender neutrality; P.A. 14-123 added new Subsec. (b) re merger of domestic or foreign subsidiary of existing domestic mutual holding company with a foreign mutual insurer, and redesignated existing Subsec. (b) as Subsec. (c) and made a technical change therein, effective June 6, 2014; P.A. 17-2 added Subsec. (d) re domestic insurance company established to merge or consolidate with domestic insurer.

See chapter 601, parts X, XI and XII re merger, share exchange, sale of assets and business combinations of business corporations.

See Sec. 38a-73 re limitation of risks.

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Sec. 38a-154. (Formerly Sec. 38-36). Filing of the certificate of merger or consolidation with the Secretary of the State. If the commissioner approves and authorizes the proposed merger or consolidation or issuance and exchange of stock, such merger or consolidation or issuance and exchange of stock shall become effective upon the filing in the office of the Secretary of the State, a copy of the certificate of merger or consolidation as to the terms of merger or consolidation or certificate as to the terms of the issuance and exchange of stock and the certificate of the commissioner approving and authorizing the proposed merger or consolidation or issuance and exchange of stock.

(1955, S. 2815d; P.A. 92-60, S. 6.)

History: Sec. 38-36 transferred to Sec. 38a-154 in 1991; P.A. 92-60 deleted references to “directors' agreement” and further clarified the filing process with the secretary of the state of all mergers, consolidations and issuance of stocks in the merger or consolidation of insurance companies.

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Sec. 38a-155. (Formerly Sec. 38-42b). Conversion of hospital service corporation and medical service corporation to mutual insurance company. Procedure. Authorized agents to sell products. (a) Any consolidated hospital service corporation and medical service corporation organized and formed pursuant to sections 38a-199 to 38a-209, inclusive, or sections 38a-214 to 38a-225, inclusive, in existence on July 1, 1982, and possessing contingency reserves in an amount of fifty million dollars or more may, at its option and without reincorporation, convert to a domestic mutual insurance company under the laws of this state (1) by amending and restating its certificate of incorporation to grant it such powers consistent with the provisions of this section, provided the amended and restated certificate of incorporation shall not state that said domestic mutual insurance company is a nonprofit corporation or that it is created under the Nonstock Corporation Act, and (2) by obtaining a license pursuant to section 38a-41 to operate as a domestic mutual insurance company.

(b) The board of directors of any such corporation electing to convert to a domestic mutual insurance company shall adopt a resolution prior to October 1, 1984, declaring the election of the corporation to make such conversion and to become subject to all of the laws of the state governing such companies, except as limited by the terms of this section. After the adoption of such resolution, the board of directors of such corporation shall adopt such amendments to its certificate of incorporation as are consistent with the provisions of this section and as are necessary for it to convert to a domestic mutual insurance company and file such amended and restated certificate of incorporation with the Secretary of the State. Such amendment shall designate the members of the company. Any subsequent amendment to the certificate of incorporation shall be consistent with the terms of this section.

(c) No such amended and restated certificate of incorporation shall be effective unless and until it is filed with the Secretary of the State. Prior to the filing of such certificate, the corporation shall apply to the Insurance Commissioner for a license pursuant to section 38a-41, provided such license, if issued, shall only become effective upon the filing of the certificate. Upon the filing of such amended and restated certificate of incorporation, the corporation shall be a domestic mutual insurance company and shall not be a consolidated hospital and medical service corporation. Upon such filing the company shall no longer be subject to the provisions of section 12-212a, sections 38a-199 to 38a-209, inclusive, or sections 38a-214 to 38a-225, inclusive.

(d) From the date of filing of such amended and restated certificate of incorporation, such company shall be authorized to do a life, accident and health insurance business, including any business or type of business which any other corporation now or hereafter chartered by or incorporated in Connecticut and empowered to do a life, accident and health insurance business may now or hereafter lawfully do; and the company is specifically empowered to accept and to cede reinsurance of any and all insurance risks or hazards.

(e) No consolidated hospital service corporation and medical service corporation that converts to a domestic mutual insurance company under this section shall thereafter avail itself of the provisions of either sections 38a-199 to 38a-209, inclusive, or sections 38a-214 to 38a-225, inclusive. Such company shall not organize or participate in the organization of, revert or convert to the status of, own or organize a subsidiary that is, have common management or directors with, or in any other way be affiliated with, a corporation or other legal entity organized, formed or acting pursuant to said sections. Until the filing with the Secretary of the State of the amended and restated certificate of incorporation as provided herein, the permission currently granted to any such corporation by the Insurance Commissioner shall continue in full force and effect, and such corporation shall continue to provide comprehensive health care and related services to its present or future subscribers and covered persons by health care contracts and may make provision for the payment for such health care services. Upon converting to a domestic mutual insurance company, the company shall be subject to all of the laws of the state governing domestic mutual insurance companies and, except as otherwise provided in this section, shall have all of the powers of any other domestic mutual insurance company now or hereafter chartered or incorporated by this state and empowered to do an insurance business including, but not limited to, the power to establish, maintain, own and operate health care centers as a line of business.

(f) Upon the filing of the amended and restated certificate of incorporation with the Secretary of the State, as provided by this section, the company shall be liable for taxes under chapters 207 and 208 and for any other tax for which any other domestic mutual insurance company is liable to the state or any political subdivision thereof.

(g) All insurance products sold through the insurance companies authorized by this section and the insurance company authorized by section 4 of public act 84-323* shall be available to be sold by any licensed independent agent, as provided in sections 38a-702j, 38a-703 to 38a-718, inclusive, 38a-731 to 38a-735, inclusive, 38a-741 to 38a-745, inclusive, 38a-769 to 38a-776, inclusive, 38a-786, 38a-790, 38a-792 and 38a-794 and so authorized by such insurance company.

(P.A. 84-323, S. 1, 3, 5, 6; P.A. 91-29, S. 2, 8; P.A. 93-229, S. 6, 21; P.A. 95-207, S. 8, 9; P.A. 01-113, S. 24, 42; P.A. 11-19, S. 2, 3; P.A. 12-145, S. 3.)

*Note: Section 4 of public act 84-323 is special in nature and therefore has not been codified but remains in full force and effect according to its terms.

History: Sec. 38-42b transferred to Sec. 38a-155 in 1991; P.A. 91-29 made technical changes in Subsec. (h) deleting references to sections repealed by the same act; (Revisor's note: In 1993 references to Secs. 38a-94 to 38a-101, inclusive, and 38a-966 to 38a-970, inclusive, repealed by P.A. 92-60, were deleted editorially by the Revisors); P.A. 93-229 deleted former Subdiv. (1) containing obsolete provision re discount under Subsec. (h) of Sec. 19a-166, renumbering as necessary, effective June 4, 1993; P.A. 95-207 made technical corrections to Subsecs. (c) and (g), in Subsec. (d) made an allowance for an insurance company to transact life, accident and health insurance business and to accept and cede reinsurance in lieu of writing accident and health insurance only, deleted former Subsec. (f) which provided a prohibition against any corporation which converts to a domestic mutual insurance company, relettered the previous Subsecs. (g) and (h) as (f) and (g) and deleted Subsec. (i), effective June 28, 1995; P.A. 01-113 amended Subsec. (g) to delete references to Secs. 38a-702 and 38a-795, and to substitute “section 38a-702j” for “section 38a-783”, effective September 1, 2002; P.A. 11-19 made technical changes in Subsecs. (a) and (e); P.A. 12-145 amended Subsec. (g) to replace reference to Sec. 38a-777 with reference to Sec. 38a-776, effective June 15, 2012.

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Sec. 38a-156. Definitions. As used in this section and sections 38a-156a to 38a-156m, inclusive:

(1) “Adoption date” means the date a mutual insurer's board of directors adopts a plan of reorganization;

(2) “Commissioner” means the Insurance Commissioner;

(3) “Converted company” means the domestic stock corporation into which a mutual holding company has been converted in accordance with the provisions of section 38a-156j;

(4) “Converting company” means a mutual holding company that is converting into a domestic stock corporation in accordance with the provisions of section 38a-156j;

(5) “Effective date” means the date upon which the reorganization of the mutual insurer is effective, as provided in subsection (g) of section 38a-156a;

(6) “Equity rights” means the rights conferred to members, by law or by a mutual holding company's articles of incorporation, in the equity of such company, including the right to participate in any distribution of such company's equity or assets. “Equity rights” do not include any rights expressly conferred solely by the terms of a policy except for the right to vote;

(7) “Institution” means a corporation, stock corporation, limited liability company, association, business trust, partnership or any similar entity;

(8) “Intermediate stock holding company” means an institution (A) of which at least fifty-one per cent of its voting stock is owned from the effective date, directly or through another intermediate stock holding company, by a mutual holding company, and (B) that owns from the effective date, directly or indirectly, at least fifty-one per cent of the voting stock of at least one reorganized insurer. For purposes of calculating the percentage of voting stock, any issued and outstanding securities of the reorganized insurer or any intermediate stock holding company that are convertible into voting stock are considered voting stock;

(9) “Member” means, (A) with respect to a reorganizing insurer, a policyholder of such insurer, and (B) with respect to a mutual holding company, a person entitled to vote, by law or by the mutual holding company's charter or bylaws, at such company's meetings;

(10) “Membership interests” means the rights other than equity rights conferred to members, by law or by a mutual holding company's charter or bylaws. “Membership interests” do not include any rights expressly conferred solely by the terms of a policy;

(11) “Mutual holding company” means a corporation organized in accordance with sections 38a-156a and 38a-156b, (A) that, from the effective date, owns, directly or through one or more intermediate stock holding companies, at least fifty-one per cent of the voting stock of one or more reorganized insurers, (B) that is not authorized to issue voting stock, and (C) whose articles of incorporation contain the provisions set forth in subsection (c) of section 38a-156b. For purposes of calculating the percentage of voting stock, any issued and outstanding securities of the reorganized insurer or any intermediate stock holding company that are convertible into voting stock are considered voting stock;

(12) “Mutual insurer” has the same meaning as provided in section 38a-1;

(13) “Officer” means an individual elected to such position by the board of directors of the mutual holding company, intermediate stock holding company or reorganized insurer, as applicable;

(14) “Outside director” means a director of the mutual holding company, intermediate stock holding company or reorganized insurer, who is not an officer or employee of such company or insurer;

(15) “Person” means an individual, a public or private corporation, a stock corporation, a limited liability company, an association, a business trust, a partnership, a board of directors, an estate, a trustee, a fiduciary, or any similar entity, or the state or any political subdivision of the state;

(16) “Plan of conversion” means a plan adopted by a mutual holding company in accordance with section 38a-156j;

(17) “Plan of reorganization” means a plan adopted by a mutual insurer in accordance with section 38a-156a;

(18) “Policy” means an individual or group insurance policy, an individual or group annuity contract or a fidelity or surety bond, issued by a mutual insurer. “Policy” does not include a reinsurance contract;

(19) “Reorganized insurer” means the domestic stock insurer into which a mutual insurer has been reorganized in accordance with the provisions of section 38a-156a;

(20) “Reorganizing insurer” means a domestic mutual insurer that is reorganizing under a plan of reorganization in accordance with the provisions of section 38a-156a;

(21) “Stock purchase right” means a nontransferable right, granted to each policyholder of the reorganized insurer that has been a policyholder of the reorganizing insurer for at least one year prior to the effective date, to acquire stock in the reorganized insurer or in any intermediate stock holding company affiliated with such insurer if such insurer or company conducts an initial public offering of voting stock;

(22) “Voting stock” means securities of any class or any ownership interest having voting power for the election of directors, trustees or management of a person. “Voting stock” does not include securities having voting power only because of the occurrence of a contingency.

(P.A. 14-123, S. 1.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-156a. Reorganization of domestic mutual insurer as domestic stock insurer owned by mutual holding company. Plan of reorganization. Approval. Use of the word “mutual” in name. Voting stock ownership. Prohibited fees, commission or other consideration. (a) A domestic mutual insurer may reorganize, in accordance with this section and section 38a-156b, as a domestic stock insurer owned, directly or indirectly, by a mutual holding company.

(b) (1) A domestic mutual insurer seeking such reorganization shall propose a plan of reorganization that includes the reasons for the proposed reorganization and provisions for:

(A) Amending the domestic mutual insurer's articles of incorporation to reorganize such insurer into a domestic stock corporation, including provisions governing an initial voting stock offer, if any;

(B) Forming a mutual holding company, including such company's acquisition, directly or through one or more intermediate stock holding companies, of at least fifty-one per cent of the voting stock of the reorganized insurer;

(D) The members of the reorganizing insurer becoming members of the mutual holding company;

(E) The members of the reorganizing insurer with policies in force on the effective date having equity rights and membership interests in the mutual holding company; and

(F) Any proposed fees, commissions or other consideration to be paid to any person for aiding, promoting or assisting, in any manner, such reorganization.

(2) A plan of reorganization may also include provisions restricting the ability of any person or persons acting in concert from directly or indirectly acquiring or offering to acquire the beneficial ownership of ten per cent or more of any class of voting stock of the reorganized insurer or any entity that directly or indirectly controls such insurer.

(3) The proposed plan of reorganization shall be approved by an affirmative vote of three-fourths of the board of directors of the domestic mutual insurer.

(4) Upon approval by its board of directors, a domestic mutual insurer seeking such reorganization shall submit to the Insurance Commissioner an application, in a form prescribed by the commissioner, that is executed by an authorized officer of such insurer. Such application shall be accompanied by the following:

(A) The proposed plan of reorganization;

(B) The proposed articles of incorporation of each corporation that will be a constituent corporation of the reorganization;

(D) The names and biographies of the officers and directors of each corporation that will be a constituent corporation of the reorganization;

(E) A resolution of the board of directors of the mutual insurer and certified by the secretary of such board, authorizing the reorganization;

(F) Financial statements in a form acceptable to the commissioner giving effect to the reorganization, for the mutual holding company and any corporation that will be a constituent corporation of the reorganization and that will experience a change in capitalization due to the reorganization;

(G) A draft of the materials the domestic mutual insurer intends to mail to its members to seek their approval of the plan, including a summary of the plan of reorganization; and

(H) Any other information the commissioner deems necessary to the commissioner's review of the proposed plan of reorganization.

(c) (1) The commissioner shall hold a public hearing on the reasons for and purpose of such reorganization, the fairness of the terms and conditions of the proposed plan of reorganization and whether such reorganization is in the best interest of the domestic mutual insurer, is fair and equitable to its members and is not detrimental to the insuring public.

(2) The reorganizing insurer shall mail a notice of the public hearing to each member at such member's last known mailing address as shown in the insurer's records. The notice shall (A) be mailed at least sixty days prior to the date of the hearing, (B) include the date, time, place and purpose of the hearing, and (C) be accompanied or preceded by a true and complete copy of the proposed plan of reorganization or summary thereof approved by the commissioner and any other explanatory information or materials the commissioner may require. In addition, the reorganizing insurer shall provide notice of the date, time, place and purpose of the hearing by publication in three newspapers having general circulation, one of which shall be in the county in which the principal office of the reorganizing insurer is located, and two that shall be in other municipalities within or without the state and approved by the commissioner. Such notice shall be published not less than fifteen days and not more than sixty days prior to the hearing and shall be in a form approved by the commissioner. Any director, officer, employee or member of the reorganizing insurer shall have the right to appear and be heard at the hearing.

(3) (A) The commissioner shall approve or disapprove the proposed plan of reorganization, in writing, not later than sixty days after the conclusion of the public hearing held under subdivision (1) of this subsection. The commissioner shall approve the proposed plan of reorganization if the commissioner finds that: (i) The proposed reorganization is in the best interest of the reorganizing insurer; (ii) the plan is fair and equitable to the members of the reorganizing insurer; (iii) the plan will not substantially lessen competition in any line of insurance business; (iv) the plan provides for the enhancement of the operations of the reorganizing insurer; (v) the plan, when completed, provides for the reorganized insurer's paid-in capital stock to be in an amount at least equal to the minimum paid-in capital stock and the net surplus required of a new domestic stock insurer upon such domestic stock insurer's initial authorization to transact like kinds of insurance; and (vi) the plan complies with the provisions of this section and sections 38a-156b to 38a-156f, inclusive.

(B) The commissioner may engage the services of private consultants to assist the commissioner in determining whether a plan of reorganization meets the requirements of this section, the cost of which shall be borne by the domestic mutual insurer submitting such plan.

(C) Upon approval by the commissioner, the reorganizing insurer shall file with the commissioner the approved plan of reorganization.

(D) The commissioner may request such insurer to modify the proposed plan of reorganization if the commissioner finds that such plan does not meet the requirements for approval as set forth in subparagraph (A) of this subdivision. Such request for modification shall not prevent such insurer from withdrawing such plan pursuant to subsection (e) of this section.

(E) If the commissioner disapproves the proposed plan of reorganization, such disapproval shall be in writing and shall set forth the reasons for such disapproval. Within fifteen days after receipt of such disapproval, the reorganizing insurer may request a hearing. The commissioner shall provide such hearing within fifteen days after such request.

(d) (1) Upon approval by the commissioner of the proposed plan of reorganization, the board of directors, the chairperson of the board of directors or the president of the reorganizing insurer shall call a members' meeting to present and hold a vote on the plan of reorganization. Such meeting shall be held not earlier than thirty days after the date of the public hearing held under subsection (c) of this section. The plan shall be approved by an affirmative vote of two-thirds of the members of the reorganizing insurer voting.

(2) (A) The reorganizing insurer shall mail a notice of the meeting to each member at such member's last known mailing address as shown in the insurer's records. The notice shall (i) be mailed at least sixty days prior to the date of the meeting and may be combined with the public hearing notice required under subsection (c) of this section, (ii) include the date, time, place and purpose of the meeting, and (iii) be accompanied or preceded by (I) a true and complete copy of the plan of reorganization or summary thereof approved by the commissioner, (II) the financial statements described in subparagraph (F) of subdivision (4) of subsection (b) of this section, (III) a description of material risks and benefits to members' interests, (IV) any information pertaining to an initial offering of voting stock included in the plan of reorganization, and (V) any other explanatory information or materials the commissioner may require.

(B) (i) Each member whose name appears in the reorganizing insurer's records as a member on the adoption date shall be entitled to vote on the proposed plan of reorganization. Each such member shall vote by written ballot cast in person, by mail or by proxy.

(ii) The commissioner shall have the power, to the extent the commissioner deems necessary to ensure a fair and accurate vote and consistent with the provisions of this section and sections 38a-156b to 38a-156f, inclusive, to prescribe and supervise the procedures for such vote. Such powers include, but are not limited to, the supervision and regulation of (I) the determination of members entitled to notice of the meeting and to vote on the proposed plan of reorganization, (II) the provision of notice to members of the meeting and the proposed plan or reorganization, (III) the receipt, custody, safeguarding, verification and tabulation of ballots and proxy forms, and (IV) the resolution of any disputes arising from such vote.

(e) (1) At any time before the effective date, the reorganizing insurer may, by an affirmative vote of three-fourths of its board of directors, amend or withdraw the plan of reorganization. With respect to an amended plan of reorganization, all references to a plan of reorganization in sections 38a-156 to 38a-156m, inclusive, shall be deemed to include such plan as amended. The reorganizing insurer shall submit any such amendment to the commissioner for approval. Upon approval by the commissioner, the reorganizing insurer shall file with the commissioner the approved plan of reorganization as amended.

(2) No amendment shall (A) be deemed to change the adoption date, or (B) change the plan of reorganization in a manner the commissioner determines is prejudicial to the members of the reorganizing insurer.

(3) (A) If the amendment is submitted after the public hearing held pursuant to subsection (c) of this section, the commissioner shall hold another public hearing on the plan of reorganization as amended, in accordance with the notice requirements set forth in subsection (c) of this section.

(B) If the amendment is submitted after the members have approved the plan of reorganization as set forth in subsection (d) of this section, the board of directors, the chairperson of the board of directors or the president of the reorganizing insurer shall call another members' meeting, in accordance with the notice requirements set forth in subsection (d) of this section, to present and hold a vote on the plan of reorganization as amended. The plan of reorganization as amended shall be approved by an affirmative vote of two-thirds of the members of the reorganizing insurer.

(f) Upon approval by the members of the reorganizing insurer, the commissioner shall issue a new certificate of authority to the reorganized insurer and approve the articles of incorporation of the mutual holding company and the articles of incorporation of the reorganized insurer. The commissioner shall provide to the mutual holding company and the reorganized insurer certificates of approval for the articles of incorporation in such form as the commissioner prescribes.

(g) (1) The plan of reorganization shall be effective upon the date the mutual holding company and the reorganized insurer both file their articles of incorporation with the Secretary of the State, or upon such later date as is specified in the plan of reorganization or the articles of incorporation of the reorganized insurer, except that such later date shall not be more than thirty days after the date the mutual holding company files its articles of incorporation with said Secretary.

(2) If the name of a reorganizing insurer includes the word “mutual”, the reorganized insurer may continue to use such word in its name unless the commissioner finds the continued use of such word is likely to mislead or deceive the public.

(3) From the effective date, (A) at least fifty-one per cent of the issued and outstanding voting stock of the reorganized insurer shall be owned, directly or through another intermediate stock holding company, by the mutual holding company, and (B) at least fifty-one per cent of the issued and outstanding voting stock of any intermediate holding company shall be owned, directly or through another intermediate stock holding company, by the mutual holding company. For purposes of calculating the percentage of issued and outstanding voting stock, any issued and outstanding securities of the reorganized insurer or any intermediate stock holding company that are convertible into voting stock are considered voting stock.

(4) Upon the effective date:

(A) The reorganizing insurer shall immediately become a domestic stock insurer, which shall be a continuation of the corporate existence of the reorganizing insurer;

(B) All rights of any person to (i) vote on any matter concerning the reorganizing insurer, or (ii) share in any distribution of or receive any consideration based on the surplus of the reorganizing insurer in a conservation, liquidation or dissolution proceeding or under such insurer's articles of incorporation or bylaws or the general statutes, shall be extinguished, except that any rights expressly conferred solely by the terms of a policy shall not be extinguished;

(C) The members of the reorganizing insurer shall immediately become members of the mutual holding company, except that in the case of a group annuity contract issued by a reorganizing insurer that is a domestic mutual life insurer, the group policyholder only shall become a member of the mutual holding company. The rights bestowed by virtue of such membership shall continue only as long as the related policy remains in force;

(D) The members of the reorganizing insurer whose policies in force on the effective date confer the right to vote shall immediately have equity rights in the mutual holding company. Such equity rights shall continue only as long as the related policy remains in force; and

(E) All of the voting stock initially issued by the reorganized insurer shall be owned, directly or through one or more intermediate stock holding companies, by the mutual holding company.

(5) Policyholders of policies that confer the right to vote and are issued after the effective date by the reorganized insurer shall be members of and have equity rights in the mutual holding company.

(h) Except as provided in the plan of reorganization approved by the commissioner, no person shall receive any fee, commission or other consideration, other than such person's regular salary and compensation, for aiding, promoting or assisting, in any manner, a reorganization under this section and sections 38a-156b to 38a-156m, inclusive. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys, accountants, actuaries and other individuals who are directors or officers of the reorganizing insurer for services performed in the independent practice of their professions.

(P.A. 14-123, S. 2; P.A. 15-118, S. 34; P.A. 17-15, S. 10; P.A. 19-125, S. 3.)

History: P.A. 14-123 effective June 6, 2014; P.A. 15-118 made a technical change in Subsec. (g)(5); P.A. 17-15 made a technical change in Subsec. (c)(2); P.A. 19-125 amended Subsec. (d)(1) by replacing “members of the reorganizing insurer” with “members of the reorganizing insurer voting”, effective July 1, 2019.

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Sec. 38a-156b. Mutual holding company requirements. (a) No mutual holding company shall engage in the business of insurance.

(b) A mutual holding company shall comply with all applicable provisions of law relating to the powers, duties and liabilities of corporations.

(1) The company is a mutual holding company organized under this section and section 38a-156a;

(2) One purpose of the company is to own, directly or through one or more intermediate stock holding companies, at least fifty-one per cent of the voting stock of one or more reorganized insurers;

(3) The company is not authorized to issue voting stock;

(4) The company's members have the rights specified in subdivisions (4) and (5) of subsection (g) of section 38a-156a and in the company's articles of incorporation and bylaws; and

(5) The company's assets and liabilities are subject to inclusion, to the extent authorized under sections 38a-156 to 38a-156m, inclusive, in the estate of a reorganized insurer of which the company owns voting stock in any proceeding brought against the reorganized insurer under chapter 704c.

(d) A mutual holding company shall file with the commissioner, not later than thirty days after the adoption of any amendment to its bylaws, a copy of such amendment, certified by such company's secretary under such company's corporate seal.

(e) A mutual holding company may hold, directly or indirectly, multiple subsidiaries including multiple intermediate stock holding companies. An intermediate stock holding company may hold, directly or indirectly, multiple subsidiaries including multiple reorganized insurers. A mutual holding company and its subsidiaries and affiliates shall be deemed members of an insurance holding company system, as defined in section 38a-129, and the provisions of sections 38a-129 to 38a-140, inclusive, shall apply to the extent such provisions do not conflict with the provisions in sections 38a-156 to 38a-156m, inclusive.

(f) No mutual holding company shall make any payment of income, dividends contingent upon an apportionment of profits or any other distribution of profits except to the extent provided in such company's articles of incorporation or as otherwise directed or approved by the commissioner.

(g) Membership interests in a mutual holding company shall not be considered a security, as defined in section 36b-3. A description of the membership interests and related factual disclosures shall not be deemed inducements to buy insurance in violation of section 38a-816 or 38a-825, and a recipient of such description and related factual disclosures shall not be deemed to be in violation of the provisions of section 38a-825.

(h) (1) The mutual holding company shall hold an annual meeting and shall mail a notice of the meeting to each member at such member's last known mailing address as shown in the company's records. The notice shall be mailed at least sixty days prior to the date of the meeting.

(2) Members of a mutual holding company may vote by proxies dated and executed within ninety days of, and returned to and recorded on the books of the company not later than seven days before, the meeting at which such proxies are to be used. Unless otherwise provided in the articles of reorganization or bylaws of the reorganizing insurer, each member of a mutual holding company shall be entitled to one vote.

(3) Unless a greater percentage for approval is required by law or specified in a mutual holding company's articles of incorporation, any required approval by the members shall be by a majority vote of the members voting.

(i) No mutual holding company shall transfer its domicile to another state for a period of five years after the effective date without the approval of the commissioner.

(j) (1) A mutual holding company may specify in its articles of incorporation or its bylaws that its directors may be divided into two or more classes, which terms of office shall expire at different times, provided no term of office shall be longer than six years. If a mutual holding company does not specify such provision in its articles of incorporation or its bylaws, the term of office for each director of such company shall be one year.

(2) Upon the expiration of a director's term of office, such director shall continue to serve until such director's successor has been elected and qualified. Any vacancy on the board that occurs prior to the expiration of a director's term of office shall be filled by a majority vote of the remaining directors, notwithstanding any quorum requirements. Any director so elected shall hold office until the next annual meeting.

(P.A. 14-123, S. 3.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-156c. Amendments to articles of incorporation and plan of reorganization. (a) A reorganized insurer may amend its articles of incorporation that have been adopted pursuant to a plan of reorganization and filed with the Secretary of the State, in accordance with subdivision (1) of subsection (g) of section 38a-156a, after the effective date in accordance with the provisions of chapter 601.

(b) (1) A reorganized insurer may amend its plan of reorganization after the effective date. The insurer shall comply with the following:

(A) Approval by the board of directors of the reorganized insurer by a majority vote;

(B) Submission of the proposed amendment to the commissioner, in writing, in accordance with the provisions of subdivision (4) of subsection (b) of section 38a-156a; and

(C) Approval by members of the mutual holding company that were entitled to vote, as members of the former domestic mutual insurer, on the original plan of reorganization. Such approval shall be by a majority vote of the members voting. The board of directors, the chairperson of the board of directors or the president of the mutual holding company shall call a meeting for members entitled to vote, pursuant to the articles of incorporation or bylaws of the mutual holding company, to present and hold a vote on the proposed amendment. Each such member shall vote by written ballot cast in person, by mail or by proxy.

(2) If a proposed amendment under subdivision (1) of this subsection would adversely affect the rights of one or more, but not all, classes of members, only the members of each class whose rights would be adversely affected by the proposed amendment shall vote on the proposed amendment.

(3) Any such amendment shall take effect upon filing with the commissioner after compliance with and approval as required under subdivision (1) of this subsection.

(c) (1) At any time before the plan amendment becomes effective, the reorganized insurer may, by a majority vote of its board of directors, amend or withdraw the plan amendment. For an amendment to a plan amendment, all references in sections 38a-156 to 38a-156m, inclusive, to a plan amendment shall be deemed to refer to the plan amendment as amended. The reorganizing insurer shall submit any such amendment to the commissioner for approval.

(2) No amendment shall (A) be deemed to change the adoption date of the plan amendment, or (B) change the plan of reorganization in a manner the commissioner determines is prejudicial to the affected members.

(P.A. 14-123, S. 4.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-156d. Transfer of assets or liabilities and acquisition of subsidiaries by reorganized insurer. (a)(1) A reorganized insurer may, either pursuant to the plan of reorganization or upon the prior approval of the commissioner, on any one or more occasions on or after the effective date, transfer assets or liabilities, including any one or more of its subsidiaries, to the mutual holding company or to one or more persons owned or controlled by the mutual holding company, except that the liabilities so transferred in either a single instance or in the aggregate shall not be greater than the assets so transferred. The commissioner shall approve such a proposed transfer unless the commissioner finds that the transfer would materially adversely affect the ability of the reorganized insurer to meet its obligations under its policies.

(2) The provisions of section 38a-136 shall not apply to any transfer made under this section.

(b) A reorganized insurer shall not acquire subsidiaries if the total adjusted capital, as defined in subsection (d) of section 38a-72, of such insurer is less than three hundred per cent of its authorized control level risk-based capital, as defined in section 38a-72-1 of the regulations of Connecticut state agencies, as of any calendar year-end after the reorganization effective date, for as long as such deficiency continues, without prior notice to and review by the commissioner.

(P.A. 14-123, S. 5.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-156e. Requirements of reorganizing mutual life insurer. Report. (a) In the case of a reorganizing insurer that is a mutual life insurer, upon the effective date the reorganizing insurer shall, at its option, either:

(1) (A) Establish a closed block for policyholder dividend purposes only, consisting of all participating individual policies of the reorganizing insurer in force on the effective date and for which the insurer had an experience-based dividend scale payable in the year in which the plan of reorganization was adopted. On or before the effective date, such insurer shall allocate assets to such closed block in an amount that produces cash flows, together with anticipated revenues from the closed block business that is sufficient to support the closed block business, including provision for payment of claims, expenses and taxes specified in the plan of reorganization and continuation of dividend scales in effect on the adoption date, if the experience underlying such scales continues. No policies entering into force after the effective date shall be included in the closed block; and

(B) May provide, with the approval of the commissioner, under its terms for the establishment of the closed block, for conditions under which the reorganized insurer may cease to maintain the closed block and allocation of assets thereto, provided the policies constituting closed block business shall remain obligations of the reorganized insurer and dividends on such policies shall be apportioned by the board of directors of the reorganized insurer in accordance with the terms of such policies and any applicable provisions of law; or

(2) Provide an alternative practice to subdivision (1) of this subsection that protects the contractual rights of individual policyholders of the reorganizing insurer with policies in force on the effective date, if the commissioner determines that such alternative is substantially as protective of the interests of individual participating policyholders as the establishment of a closed block pursuant to subdivision (1) of this subsection.

(b) The equity interest of the policyholders of the reorganized insurer shall be equal in the aggregate to the value of the entire capital and surplus of the mutual holding company, excluding any funds required to be held in segregated accounts by federal law. Such equity interest shall be the basis for consideration to policyholders in the event the mutual holding company converts into a domestic stock corporation as set forth in subparagraph (B) of subdivision (1) of subsection (b) of section 38a-156j.

(c) At the end of the third year following the year of reorganization and at the end of each third year thereafter or more frequently as determined by the commissioner, an independent accounting or actuarial firm shall provide a report to the commissioner, the board of directors of the mutual holding company and the board of directors of the reorganized insurer attesting to whether or not the closed block and related assets, or alternative practice pursuant to subdivision (2) of subsection (a) of this section, has been administered in accordance with the plan of reorganization. Such firm shall take into consideration the dividend payments to policyholders resulting from the closed block and any other relevant factors. The reorganized insurer shall pay the expenses incurred in retaining the independent accounting or actuarial firm. Such report shall be completed and delivered to the commissioner, the board of directors of the mutual holding company and the board of directors of the reorganized insurer not later than the close of business on April first following the end of the period for which such report is being provided.

(P.A. 14-123, S. 6; P.A. 15-118, S. 35.)

History: P.A. 14-123 effective June 6, 2014; P.A. 15-118 made a technical change in Subsec. (a)(2).

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Sec. 38a-156f. Voting stock offerings. (a)(1) The offering of voting stock by a reorganized insurer or intermediate stock holding company to any person other than the mutual holding company or a wholly owned subsidiary thereof, which offering is the first to occur after the effective date of the plan of reorganization, shall be made only in accordance with such provisions as the plan of reorganization may contain governing such an initial offering or with the prior approval of the commissioner after submission of an application by the proposed issuer. The commissioner shall approve any such application unless the commissioner finds, (A) in the case of a public offering, that the offering would not be conducted in a manner generally consistent with customary practices for initial public offerings to the extent reasonably comparable, or (B) in the case of any other offering, that the offering would be prejudicial to the members of the mutual holding company. Nothing in this subsection shall prohibit the filing of a registration statement with the Securities and Exchange Commission or the Secretary of the State prior to such approval.

(2) The commissioner may engage the services of private consultants to assist the commissioner in determining whether an application under subdivision (1) of this subsection meets the requirements of this section, the cost of which shall be borne by the proposed issuer submitting such application.

(b) For purposes of this section, any securities of the reorganized insurer or any intermediate stock holding company that are convertible into voting stock shall be considered voting stock.

(c) All references to a specified percentage of voting stock of any person means securities having the specified percentage of the voting power in that person for the election of directors, trustees or management of that person, other than securities having voting power only because of the occurrence of a contingency.

(d) No stock purchase right shall provide for a purchase of less than fifty shares of the common stock being offered in the public offering. The price per share shall be equal to the public offering price. In the event that the exercise of such right exceeds fifty per cent of the number of shares being offered to the public or such lesser percentage as may be approved by the commissioner, exercise of such stock purchase right shall be subject to proration, subject to a minimum of fifty shares. A stock purchase right shall be subject to any exclusions or limitations authorized by law applicable to particular classes of policyholders.

(P.A. 14-123, S. 7.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-156g. Restrictions on stock offerings and stock ownership. (a)(1) Until six months after the completion of an initial public offering, private equity placement or the first issuance of public or private stock or securities convertible into voting stock of a reorganized insurer or an intermediate stock holding company, to any person other than the mutual holding company or an intermediate stock holding company, neither the reorganized insurer nor an intermediate stock holding company shall award any stock options or stock grants to persons who are officers or directors of the mutual holding company, the reorganized insurer or an intermediate stock holding company, except if a reorganized insurer or its intermediate stock holding company distributes stock purchase rights to the policyholders of a reorganized insurer in connection with a public offering of stock, then officers and directors who are policyholders of such reorganized insurer shall receive and may exercise such stock purchase rights on the same basis as all other such policyholders.

(2) Until two years after the end of the six-month period set forth in subdivision (1) of this subsection, no officer, director or outside director of the mutual holding company, intermediate stock holding company and reorganized insurer shall own beneficially, in the aggregate, more than five per cent of the voting stock of the intermediate stock holding company or reorganized insurer.

(3) After the two-year period set forth in subdivision (2) of this subsection, no officer or director of the mutual holding company, intermediate stock holding company or reorganized insurer shall own beneficially, in the aggregate, more than eighteen per cent of the voting stock of the intermediate stock holding company or reorganized insurer, except that the commissioner may find, in the event of a distress situation, that beneficial ownership of more than eighteen per cent in the aggregate by officers or directors is necessary and appropriate.

(4) No person shall, directly or indirectly, offer to acquire or acquire, in any manner, beneficial ownership of more than ten per cent of any class of voting stock of the reorganized insurer, an intermediate stock holding company or any other institution that owns, directly or indirectly, a majority of the voting stock of the reorganized insurer, without the prior approval of the commissioner.

(b) (1) If a mutual holding company elects to cause an intermediate stock holding company or a reorganized insurer to conduct an initial public offering, initial private equity placement or the first issuance of public or private stock or securities convertible into voting stock, such company shall, subject to any limitations under law applicable to particular classes of policyholders, cause each eligible person to receive stock purchase rights in connection with such initial offering or issuance, unless a committee consisting of such company's outside directors determines by an affirmative vote of two-thirds that such stock purchase right offering would not be in the best interests of the members of such company. Such determination shall be subject to approval by the commissioner.

(2) Except in the event of death or disability of such officer or director, no officer or director of a mutual holding company, intermediate stock holding company or reorganized insurer who holds voting stock or securities convertible into voting stock shall sell such stock or securities for a period of at least one year following the date of an initial offering or issuance of such stock or securities.

(c) (1) Nothing in sections 38a-156 to 38a-156m, inclusive, shall prevent a mutual holding company, an intermediate stock holding company or a reorganized insurer from issuing stock of the intermediate stock holding company or the reorganized insurer to a trust, qualified under the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, and established in connection with an employee stock ownership plan or other employee benefit plan for employees of the mutual holding company, intermediate stock holding company or reorganized insurer. The stock initially issued to such stock ownership or benefit plan shall not exceed, in the aggregate, five per cent of the stock initially issued.

(2) No individual shall receive more than twelve and one-half per cent of the stock. No director who is not an employee shall receive more than two and one-half per cent of the stock individually or more than fifteen per cent in the aggregate. In no event shall any individual exceed the ownership limitation set forth in subdivision (3) of subsection (a) of this section.

(d) Nothing in this section shall be deemed to prohibit: (1) The purchase for cash of voting stock issued by an intermediate stock holding company or a reorganized insurer by officers, directors, employees, employee stock ownership plans or employee benefit plans of a mutual holding company, an intermediate stock holding company or a reorganizing insurer, in accordance with reasonable classifications of such individuals and plans and at the same price offered to the public in any public offering; or (2) the establishment by a mutual holding company, an intermediate stock holding company or a reorganized insurer of stock option, incentive or share ownership plans customary for publicly traded companies, subject to the limitations set forth in this section.

(P.A. 14-123, S. 8.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-156h. Merger or consolidation of mutual holding companies. Effect on pending court action or proceeding. (a) Two or more mutual holding companies, at least one of which is a domestic company, may merge or consolidate under the laws of any state into a mutual holding company incorporated under the laws of such state. The resulting company may be a continuing company under the name of one or more of the merged or consolidated companies or a new company. If the continuing or new company is to be a domestic company: (1) It shall be subject to the provisions of sections 38a-156a to 38a-156m, inclusive; (2) its name shall be subject to approval by the commissioner; (3) the members of any mutual holding company whose existence will cease upon the effective date of such merger or consolidation shall become members of the continuing mutual holding company; and (4) all persons with equity rights in any mutual holding company whose existence will cease upon the effectiveness of such merger or consolidation shall have equity rights in the continuing mutual holding company.

(b) (1) Companies merging or consolidating under this section shall enter into a written agreement for such merger or consolidation prescribing the terms and conditions of such merger or consolidation. Such agreement shall be approved by a majority vote of the board of directors of each domestic company participating in such merger or consolidation and shall be subject to the written approval of the commissioner, who shall consider the fairness of the terms and conditions of the agreement, whether the interests of the members of each domestic mutual holding company that is a party to the agreement are protected and whether the proposed merger or consolidation is in the public interest.

(2) If the continuing or new mutual holding company is to be a domestic company, such agreement shall be (A) executed in duplicate by the president and secretary of each company under its corporate seal, (B) accompanied by copies of the resolutions of each company authorizing the merger or consolidation and the execution of the agreement attested by the recording officer of each company, and (C) submitted to the commissioner with the records required under this subdivision. If it appears to the commissioner that each company has complied with the requirements of this section, the commissioner may certify and approve the agreement. The commissioner shall file one of the duplicates of such agreement with the Secretary of the State, who shall record such agreement and issue a certificate of reincorporation to the continuing company or the new company with the powers retained and specified in the agreement. The commissioner shall retain the other duplicate. No such agreement shall take effect until the commissioner has filed such agreement with the Secretary of the State.

(3) If the continuing or new company is to be a foreign company, such agreement and such other information as the commissioner may require shall be filed with the commissioner and shall not be executed until approved by the commissioner. Upon the commissioner's approval, the new or continuing company shall file with the commissioner, in such form as the commissioner may require, documentary evidence showing the date when the merger or the consolidation becomes effective. If the commissioner finds that such agreement has been filed in accordance with this subdivision, the commissioner shall file with the Secretary of the State a certificate setting forth the merger or consolidation, including the effective date of the merger or consolidation. The corporate existence of the domestic mutual holding company shall cease on said effective date.

(4) The companies merging or consolidating shall each call a special members' meeting for the purpose of presenting and holding a vote on such agreement. Such companies shall provide notice of such meeting to members in a manner prescribed by the commissioner. Such agreement shall be approved by an affirmative vote of two-thirds of the members of each such company as are present and voting at such meeting.

(c) If the continuing or new company is a domestic company, upon such merger or consolidation all rights and properties of the several companies shall accrue to and become the rights and properties of the continuing or new company, which shall succeed to all the obligations and liabilities of the merged or consolidated companies in the same manner as if they had been incurred or contracted by such continuing or new company.

(d) No action or proceeding pending in any court of this state at the time of the merger or consolidation in which any such domestic company is or may be a party shall abate or be discontinued by reason of the merger or the consolidation, but may be prosecuted to final judgment in the same manner as if the merger or the consolidation had not taken place. The continuing or new company may be substituted in place of any such domestic company by order of the court in which the action or proceeding is pending.

(e) Nothing in this section shall authorize the merger or consolidation of stock companies with mutual holding companies.

(P.A. 14-123, S. 9.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-156i. Reorganization of domestic mutual insurer with existing domestic or foreign mutual holding company. (a) A domestic mutual insurer may reorganize with an existing domestic or foreign mutual holding company, in which case the plan of reorganization of the domestic mutual insurer shall provide that (1) the domestic mutual insurer will become a domestic stock insurer, (2) the members of the domestic mutual insurer will become members of the mutual holding company, (3) the members of the reorganizing insurer whose policies were in force on the effective date shall, as of the effective date, have equity rights in the mutual holding company, and (4) the mutual holding company will acquire, directly or through one or more intermediate stock holding companies, at least fifty-one per cent of the voting stock of the reorganized insurer.

(b) An existing domestic mutual holding company may, with the approval of the commissioner:

(1) Acquire direct or indirect ownership of a converting foreign mutual insurer that becomes a stock insurer in compliance with the laws of its state of domicile; and

(2) Grant membership interests and equity rights to the members or policyholders of a foreign mutual insurer that merges with a direct or indirect domestic or foreign subsidiary of the domestic mutual holding company. Such subsidiary of a domestic mutual holding company may merge with such a foreign mutual insurer pursuant to section 38a-153.

(c) In determining whether to approve such acquisition or grant, the commissioner may consider the fairness of the terms and conditions of the transaction, whether the interests of the members of each domestic mutual holding company that is a party to the transaction are protected and whether the proposed transaction is in the public interest.

(P.A. 14-123, S. 10.)

History: P.A. 14-123 effective June 6, 2014.

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Sec. 38a-156j. Conversion of domestic mutual holding company to domestic stock corporation. Plan of conversion. Approval. Prohibited fees, commission or other consideration. (a) A domestic mutual holding company may convert to a domestic stock corporation pursuant to a plan of conversion.

(b) (1) A domestic mutual holding company seeking such conversion shall propose a plan of conversion that includes the reasons for the proposed conversion and provisions for:

(A) Amending the mutual holding company's articles of incorporation to convert such company to a domestic stock corporation;

(B) Giving each person holding equity rights in the mutual holding company appropriate consideration in exchange for such rights. Such consideration shall be equal, in the aggregate, to the value of the entire capital and surplus of the mutual holding company, excluding any funds required to be held in segregated accounts by federal law and shall be determinable under a fair and reasonable formula approved by the commissioner.

(i) If the plan of conversion provides for the mutual holding company to continue as a surviving corporation after the conversion, then consideration to eligible policyholders shall be in the form of stock, cash or other form of compensation as approved by the commissioner. Distribution of all the stock of the converting company to eligible policyholders, or in the case of certain eligible policyholders other consideration of equivalent value, shall constitute appropriate consideration under this subparagraph.

(ii) If the plan of conversion does not provide for the mutual holding company to continue as a surviving corporation after the conversion, then consideration payable in such form as permitted under this section shall be distributed to eligible policyholders;

(C) Giving each person holding equity rights a preemptive right to acquire such person's proportionate part of all the proposed capital stock of the converted company and to apply, upon the purchase of such stock, the amount of such person's consideration as determined under subparagraph (B) of this subdivision.

(i) Such plan may provide that (I) such person may not purchase or receive stock pursuant to this section if such stock has an aggregate subscription price of two thousand dollars or less, and (II) such preemptive right shall not apply to such persons who reside in jurisdictions in which the issuance of stock is impossible, would involve unreasonable delay or would require the converting company to incur unreasonable costs, provided any such person shall receive such person's consideration in cash.

(ii) In the case of a plan of conversion in which the appropriate consideration received by persons under subparagraph (B) of this subdivision is stock of a corporation in a transaction authorized under this section, or other consideration as approved by the commissioner, the plan of conversion shall provide either (I) that no member or person holding equity rights in the converting company shall have any preemptive right to acquire any of the proposed capital stock of the converted company or of the proposed parent or other corporation, or (II) for preemptive rights on such other terms as approved by the commissioner;

(D) The offering of shares to persons holding equity rights in the mutual holding company, at a price not greater than that to be offered to others under such plan of conversion;

(E) The payment to each person holding equity rights in the mutual holding company of consideration, which may consist of cash, securities, a certificate of contribution, additional insurance under policies issued by a reorganized insurer or other consideration or any combination of such forms of consideration;

(F) Any proposed fees, commissions or other consideration to be paid to any person for aiding, promoting or assisting, in any manner, such conversion; and

(G) The effective date of such conversion.

(2) A plan of conversion may also include provisions restricting the ability of any person or persons acting in concert from directly or indirectly acquiring or offering to acquire the beneficial ownership of ten per cent or more of any class of voting stock of the converted company or any entity that directly or indirectly controls such company.

(3) Each person whose name appears in the converting company's records as a person holding equity rights on both the December thirty-first immediately preceding the effective date of such conversion and the date the converting company's board of directors first voted to convert shall be entitled to participate in the distribution of consideration and the purchasing of stock.

(4) The proposed plan of conversion shall be approved by an affirmative vote of three-fourths of the board of directors of the domestic mutual holding company.

(5) Upon approval by its board of directors, the domestic mutual holding company seeking such conversion shall submit the proposed plan of conversion to the Insurance Commissioner.

(c) (1) The commissioner shall hold a public hearing on the reasons for and purpose of such conversion, the fairness of the terms and conditions of the proposed plan of conversion and whether such conversion is in the best interest of the domestic mutual holding company, is fair and equitable to its members and is not detrimental to the insuring public.

(2) The converting company shall mail a notice of the public hearing to each member at such member's last known mailing address as shown in the company's records. The notice shall (A) be mailed at least sixty days prior to the date of the hearing, (B) include the date, time, place and purpose of the hearing, and (C) be accompanied or preceded by a true and complete copy of the proposed plan of conversion or a summary thereof approved by the commissioner and any other explanatory information or materials the commissioner may require. In addition, the converting company shall provide notice of the date, time, place and purpose of the hearing by publication in three newspapers having general circulation, one of which shall be in the county in which the principal office of the converting company is located, and two that shall be in other municipalities within or without the state and approved by the commissioner. Such notice shall be published not less than fifteen days and not more than sixty days prior to the hearing and shall be in a form approved by the commissioner. Any director, officer, employee or member of the converting company shall have the right to appear and be heard at the hearing.

(3) (A) The commissioner shall approve or disapprove the proposed plan of conversion, in writing, not later than sixty days after the conclusion of the public hearing held under subdivision (1) of this subsection. The commissioner shall approve the proposed plan of conversion if the commissioner finds that: (i) The proposed conversion is in the best interest of the converting company; (ii) the plan is fair and equitable to the members of the converting company; (iii) the plan will not substantially lessen competition in any line of insurance business; (iv) the plan provides for the enhancement of the operations of the converting company; (v) the plan complies with the provisions of this section; and (vi) the converting company has not, (I) through a reduction in volume of new business written, cancellations by a reorganized insurer or any other means, reduced, limited or affected or sought to reduce, limit or affect, the number or identity of the converting company's members or persons holding equity rights in such company that are entitled to participate in such plan, or (II) otherwise secured or attempted to secure any unfair advantage through such plan for individuals comprising the management of such company.

(B) If the commissioner disapproves the proposed plan of conversion, such disapproval shall be in writing and shall set forth the reasons for such disapproval. Within fifteen days after receipt of such disapproval, the converting company may request a hearing. The commissioner shall provide such hearing within fifteen days after such request.

(4) The commissioner may engage the services of private consulta

INSURERS

Table of Contents

PART I

IN GENERAL. COSTS

PART II*

FINANCIAL REQUIREMENTS

PART IIa

MANAGING GENERAL AGENTS AND CONTROLLED INSURERS.CAPTIVE INSURANCE COMPANIES

PART IIb

FINANCIAL GUARANTY INSURANCE ACT

PART III

INVESTMENTS

PART IV

INSIDER TRADING OF EQUITY SECURITIES

PART V

ACQUISITION OF CONTROLLING INTEREST

PART VI

MONOPOLIES. SALE OR EXCHANGE OF STOCK.MERGERS. CONVERSIONS. REORGANIZATIONS

MANAGING GENERAL AGENTS AND CONTROLLED INSURERS.
CAPTIVE INSURANCE COMPANIES

MONOPOLIES. SALE OR EXCHANGE OF STOCK.
MERGERS. CONVERSIONS. REORGANIZATIONS