As Reported by the Senate Insurance and Financial Institutions Committee

130th General Assembly
Regular Session
2013-2014
Sub. S. B. No. 140


Senator Bacon 

Cosponsor: Senator Kearney 



A BILL
To amend sections 1751.25, 3901.043, 3901.045, 1
3901.17, 3901.32, 3901.321, 3901.33, 3901.34, 2
3901.341, 3901.35, 3901.36, 3901.62, 3901.63, 3
3901.64, 3903.72, 3903.721, 3903.83, 3907.14, 4
3913.01, 3913.34, 3915.04, 3915.071, 3915.072, 5
3921.21, 3925.08, 3939.01, and 3953.15, to amend, 6
for the purpose of adopting new section numbers as 7
indicated in parentheses, sections 3903.72 8
(3903.723) and 3903.721 (3903.724), to enact new 9
sections 3903.72 and 3903.721 and sections 10
3901.351, 3901.371, 3901.372, 3901.373, 3901.374, 11
3901.375, 3901.376, 3901.377, 3901.378, 3901.41, 12
3901.621, 3901.631, 3903.722, 3903.725, 3903.726, 13
3903.727, 3903.728, 3903.729, 3903.7210, 14
3903.7211, 3906.01 to 3906.15, and 3937.19, and to 15
repeal sections 3907.09, 3907.10, 3907.11, and 16
3907.13 of the Revised Code to enact the Insurance 17
Regulatory Modernization Act to revise the 18
insurance laws regarding alternative investments, 19
holding company systems, risk management, reserves 20
kept for life insurance policies, automated 21
transactions, reinsurance, and mergers and 22
consolidations.23


BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

       Section 1.  That sections 1751.25, 3901.043, 3901.045, 24
3901.17, 3901.32, 3901.321, 3901.33, 3901.34, 3901.341, 3901.35, 25
3901.36, 3901.62, 3901.63, 3901.64, 3903.72, 3903.721, 3903.83, 26
3907.14, 3913.01, 3913.34, 3915.04, 3915.071, 3915.072, 3921.21, 27
3925.08, 3939.01, and 3953.15 be amended, sections 3903.72 28
(3903.723) and 3903.721 (3903.724) be amended for the purpose of 29
adopting new section numbers as indicated in parentheses, new 30
sections 3903.72 and 3903.721, and sections 3901.351, 3901.371, 31
3901.372, 3901.373, 3901.374, 3901.375, 3901.376, 3901.377, 32
3901.378, 3901.41, 3901.621, 3901.631, 3903.722, 3903.725, 33
3903.726, 3903.727, 3903.728, 3903.729, 3903.7210, 3903.7211, 34
3906.01, 3906.02, 3906.03, 3906.04, 3906.05, 3906.06, 3906.07, 35
3906.08, 3906.09, 3906.10, 3906.11, 3906.12, 3906.13, 3906.14, 36
3906.15, and 3937.19 of the Revised Code be enacted to read as 37
follows:38

       Sec. 1751.25. The(A) Except as provided in division (B) of 39
this section, the funds of a health insuring corporation shall be 40
invested only in securities or other investments or assets that 41
constitute permissible investments under section 1751.26 or 42
3925.08 of the Revised Code.43

       (B) A health insuring corporation may seek permission from 44
the superintendent of insurance to invest funds under Chapter 45
3906. of the Revised Code and may invest funds under that chapter 46
if such permission is granted.47

       Sec. 3901.043.  The superintendent of insurance may adopt 48
rules in accordance with Chapter 119. of the Revised Code to 49
establish reasonable fees for any service or transaction performed 50
by the department of insurance pursuant to section 1751.03, 51
3901.321, 3901.341, 3907.09, 3907.10, 3907.11, 3907.12, 3911.011, 52
3913.40, 3915.14, 3917.06, 3918.07, 3923.02, 3935.04, 3937.03, or 53
3953.28 of the Revised Code or any provision in sections 3913.01 54
to 3913.23 or in Chapter 3905. of the Revised Code, if no fee is 55
otherwise provided under Title XVII or XXXIX of the Revised Code 56
for such service or transaction. Any fee collected pursuant to 57
those rules shall be paid into the state treasury to the credit of 58
the department of insurance operating fund.59

       Sec. 3901.045. (A) The superintendent of insurance may 60
receive documents and information, including otherwise 61
confidential or privileged documents and information, from local, 62
state, federal, and international regulatory and law enforcement 63
agencies, from local, state, and federal prosecutors, and from the 64
national association of insurance commissioners and its affiliates 65
and subsidiaries, provided that the superintendent maintains as 66
confidential or privileged any document or information received 67
with notice or the understanding that the document or information 68
is confidential or privileged under the laws of the jurisdiction 69
that is the source of the document or information.70

       (B) The superintendent may also receive documents and 71
information, including otherwise confidential or privileged 72
documents and information, from the chief deputy rehabilitator, 73
the chief deputy liquidator, other deputy rehabilitators and 74
liquidators, and from any other person employed by, or acting on 75
behalf of, the superintendent pursuant to Chapter 3901. or 3903. 76
of the Revised Code, provided that the superintendent maintains as 77
confidential or privileged any document or information received 78
with the notice or understanding that the document or information 79
is confidential or privileged, except that the superintendent may 80
share and disclose such a document or information when authorized 81
by other sections of the Revised Code.82

       (C) The superintendent has the authority to maintain as 83
confidential or privileged the documents and information received 84
pursuant to this section.85

       (D) The superintendent's authority to receive documents and 86
information under this section, from the persons and subject to 87
the conditions listed in this section, is not limited in any way 88
by section 1751.19, 3901.36, 3901.44, 3901.48, 3901.70, 3903.11, 89
3903.723903.722, 3903.7211, 3903.88, 3905.492, 3905.50, 3922.21, 90
or 3999.36 of the Revised Code.91

       Sec. 3901.17.  (A) As used in this section:92

       (1) "Captive insurer" has the same meaning definedas in 93
section 3905.36 of the Revised Code.94

       (2) "Insurer" includes, but is not limited to, any person 95
that is an affiliate of or affiliated with the insurer, as defined 96
in division (A) of section 3901.32 of the Revised Code, and any 97
person that is a subsidiary of the insurer as defined in division 98
(F) of section 3901.32 of the Revised Code.99

       (3) "Laws of this state relating to insurance" has the same100
meaning defined in division (A)(1) ofas in section 3901.04 of the 101
Revised Code.102

       (4) "Person" has the same meaning defined in division (A) of103
as in section 3901.19 of the Revised Code.104

       (5) "Home state" has the same meaning as in section 3905.30 105
of the Revised Code.106

       (B) Any of the following acts in this state, effected by mail 107
or otherwise, by any foreign or alien insurer not authorized to 108
transact business within this state, any nonresident person acting 109
on behalf of an insurer, or any nonresident insurance agent 110
subjects the insurer, person, or agent to the exercise of personal 111
jurisdiction over the insurer, person, or agent to the extent 112
permitted by the constitutions of this state and of the United 113
States:114

       (1) Issuing or delivering contracts of insurance to residents 115
of this state or to corporations authorized to do business 116
therein;117

       (2) Making or proposing to make any insurance contracts;118

       (3) Soliciting, taking, or receiving any application for 119
insurance;120

       (4) Receiving or collecting any premium, commission, 121
membership fee, assessment, dues, or other consideration for any 122
insurance contract or any part thereof;123

       (5) Disseminating information as to coverage or rates, 124
forwarding applications, inspecting risks, fixing rates, 125
investigating or adjusting claims or losses, or transacting any 126
matters subsequent to effecting a contract of insurance and 127
arising out of it;128

       (6) Doing any kind of business recognized as constituting the 129
doing of an insurance business under Title XXXIX of the Revised 130
Code or subject to regulation by the superintendent of insurance 131
under the laws of this state relating to insurance.132

       Any such act shall be considered to be the doing of an 133
insurance business in this state by such insurer, person, or agent 134
and shall be its agreement that service of any lawful subpoena, 135
notice, order, or process is of the same legal force and validity 136
as personal service of the subpoena, notice, order, or process in 137
this state upon the insurer, person, or agent.138

       (C) Service of process in judicial proceedings shall be as 139
provided by the Rules of Civil Procedure. Service in or out of 140
this state of notice, orders, or subpoenas in administrative 141
proceedings before the superintendent shall be as provided in 142
section 3901.04 of the Revised Code.143

       (D) Service of any notice, order, subpoena, or process in any 144
such action, suit, or proceeding shall, in addition to the manner 145
provided in division (C) of this section, be valid if served upon 146
any person within this state who, in this state on behalf of such 147
insurer, person, or agent is or has been:148

       (1) Soliciting, procuring, effecting, or negotiating for 149
insurance;150

       (2) Making, issuing, or delivering any contract of insurance;151

       (3) Collecting or receiving any premium, membership fees, 152
assessment, dues, or other consideration for insurance;153

       (4) Disseminating information as to coverage or rates, 154
forwarding applications, inspecting risks, fixing rates, 155
investigating or adjusting claims or losses, or transacting any 156
matters subsequent to effecting a contract of insurance and 157
arising out of it.158

       (E) Nothing in this section shall limit or abridge the right 159
to serve any subpoena, order, process, notice, or demand upon any 160
insurer, person, or agent in any other manner permitted by law.161

       (F) Every person investigating or adjusting any loss or claim 162
under a policy of insurance not excepted under division (I) of 163
this section and issued by any such insurer and covering a subject 164
of insurance that was resident, located, or to be performed in 165
this state at the time of issuance shall immediately report the 166
policy to the superintendent.167

       (G) If this state is the home state of the insured, each such 168
insurer that does any of the acts set forth in division (B) of 169
this section shall be subject to the requirements of section 170
3905.36 of the Revised Code.171

       (H) No contract of insurance effected in this state by mail 172
or otherwise by any such insurer is enforceable by the insurer.173

       (I) This section does not apply to:174

       (1) Insurance obtained pursuant to sections 3905.30 to 175
3905.36 of the Revised Code;176

       (2) The transaction of reinsurance by insurers;177

        (3) Transactions in this state involving a policy of group 178
life or group accident and sickness insurance solicited, written, 179
and delivered outside this state;180

       (4) Transactions involving contracts of insurance 181
independently procured through negotiations occurring entirely 182
outside this state which are reported and the tax is paid in 183
accordance with section 3905.36 of the Revised Code;184

       (5) An attorney at law acting on behalf of the attorney's 185
clients in the adjustment of claims or losses;186

       (6) Ocean marine insurance;187

       (7) Transactions involving policies issued by a captive 188
insurer.189

       Sec. 3901.32.  As used in sections 3901.32 to 3901.37 of the 190
Revised Code:191

       (A) "Affiliate of" or "affiliated with" a specific person 192
means a person that, directly or indirectly, through one or more 193
intermediaries, controls, is controlled by, or is under common 194
control with, the person specified.195

       (B) "Control," including "controlling," "controlled by," and 196
"under common control with," means the possession, direct or 197
indirect, of the power to direct or cause the direction of the 198
management and policies of a person, whether through the ownership 199
of voting securities, by contract other than a commercial contract 200
for goods or nonmanagement services, or otherwise, unless the 201
power is the result of an official position with or corporate 202
office held by the person. Control shall be presumed to exist if 203
any person, directly or indirectly, owns, controls, holds with the 204
power to vote, or holds proxies representing, ten per cent or more 205
of the voting securities of any other person. This presumption may 206
be rebutted by a showing made in the manner provided in division 207
(J) of section 3901.33 of the Revised Code that control does not 208
exist in fact. The superintendent of insurance may determine, 209
after furnishing all persons in interest notice and opportunity to 210
be heard and making specific findings of fact to support such 211
determination, that control exists in fact, notwithstanding the 212
absence of a presumption to that effect.213

       (C) "Enterprise risk" means any activity, circumstance, 214
event, or series of events involving one or more affiliates of an 215
insurer that, if not remedied promptly, is likely to have a 216
materially adverse effect on the financial condition or liquidity 217
of the insurer or its insurance holding company system as a whole. 218
"Enterprise risk" includes anything that would cause the insurer's 219
risk-based capital to fall into company action level as set forth 220
in section 3903.83 of the Revised Code or would cause the insurer 221
to be in a hazardous financial condition.222

       (D) "Insurance holding company system" means two or more 223
affiliated persons, one or more of which is an insurer.224

       (D)(E) "Insurer" means any person engaged in the business of 225
insurance, guaranty, or membership, an inter-insurance exchange, a 226
mutual or fraternal benefit society, or a health insuring 227
corporation, excepting. "Insurer" does not include any agency, 228
authority, or instrumentality of the United States, its 229
possessions and territories, the Commonwealth of Puerto Rico, the 230
District of Columbia, or a state or political subdivision of a 231
state.232

       (E)(F) "Person" means an individual, a corporation, a 233
partnership, an association, a joint stock company, a trust, an 234
unincorporated organization, any similar entity, or any 235
combination of the foregoing acting in concert.236

       (F)(G) "Subsidiary" of a specified person is an affiliate 237
controlled by such person, directly or indirectly, through one or 238
more intermediaries.239

       (G)(H) "Voting security" includes any security convertible 240
into or evidencing a right to acquire a voting security.241

       Sec. 3901.321.  (A) For the purposes of this section:242

       (1) "Acquiring party" means any person by whom or on whose 243
behalf a merger or other acquisition of control is to be effected.244

       (2) "Domestic insurer" includes any person controlling a 245
domestic insurer unless the person, as determined by the 246
superintendent of insurance, is either directly or through its 247
affiliates primarily engaged in business other than the business 248
of insurance.249

       (3) "Person" does not include any securities broker holding, 250
in the usual and customary broker's function, less than twenty per 251
cent of the voting securities of an insurance company or of any 252
person that controls an insurance company.253

       (B)(1) Subject to compliance with division (B)(2) of this 254
section, no person other than the issuer shall do any of the 255
following if, as a result, the person would, directly or 256
indirectly, including by means of conversion or the exercise of 257
any right to acquire, be in control of a domestic insurer:258

       (a) Make a tender offer for any voting security of a domestic 259
insurer;260

       (b) Make a request or invitation for tenders of any voting 261
security of a domestic insurer;262

       (c) Enter into any agreement to exchange securities of a 263
domestic insurer;264

       (d) Seek to acquire or acquire, in the open market or 265
otherwise, any voting security of a domestic insurer;266

       (e) Enter into an agreement to merge with, or otherwise to 267
acquire control of, a domestic insurer.268

       (2)(a) No person shall engage in any transaction described in 269
division (B)(1) of this section, unless all of the following 270
conditions are met:271

       (i) The person has filed with the superintendent of insurance 272
a statement containing the information required by division (C) of 273
this section;274

       (ii) The person has sent the statement to the domestic 275
insurer;276

       (iii) The offer, request, invitation, agreement, or 277
acquisition has been approved by the superintendent in the manner 278
provided in division (F) of this section.279

       (b) The requirements of division (B)(2)(a) of this section 280
shall be met at the time any offer, request, or invitation is 281
made, or any agreement is entered into, or prior to the 282
acquisition of the securities if no offer or agreement is 283
involved.284

       (3) Any controlling person of a domestic insurer seeking to 285
divest its controlling interest in the domestic insurer shall file 286
a confidential notice of its proposed divestiture with the 287
superintendent at least thirty days prior to the cessation of 288
control, and provide a copy of the confidential notice to the 289
insurer. The superintendent may require the person seeking to 290
divest the controlling interest to file for and obtain approval of 291
the transaction. The information shall remain confidential until 292
the conclusion of the transaction unless the superintendent, in 293
the superintendent's discretion, determines that the confidential 294
treatment will interfere with enforcement of this section. If the 295
statement required by division (B)(2) of this section is otherwise 296
filed with the superintendent in relation to all parties that 297
acquire a controlling interest as a result of the divestiture, 298
this division shall not apply. 299

       (C) The statement required by division (B)(2) of this section 300
shall be made under oath or affirmation, and shall contain all of 301
the following information:302

       (1) The name and address of each acquiring party;303

       (2) If the acquiring party is an individual, the individual's 304
principal occupation and all offices and positions held during the 305
past five years, and any conviction of crimes other than minor 306
traffic violations during the past ten years;307

       (3) If the acquiring party is not an individual, a report of 308
the nature of its business operations during the past five years 309
or for such lesser period as the acquiring party and any of its 310
predecessors shall have been in existence; an informative 311
description of the business intended to be done by the acquiring 312
party and the acquiring party's subsidiaries; and a list of all 313
individuals who are or who have been selected to become directors 314
or executive officers of the acquiring party, who perform or will 315
perform functions appropriate to such positions. The list shall 316
include for each individual the information required by division 317
(C)(2) of this section.318

       (4) The source, nature, and amount of the consideration used 319
or to be used in effecting the merger or other acquisition of 320
control, a description of any transaction in which funds were or 321
are to be obtained for any such purpose, including any pledge of 322
the domestic insurer's stock, or the stock of any of its 323
subsidiaries or controlling affiliates, and the identity of 324
persons furnishing such consideration;325

       (5) Fully audited financial information as to the earnings 326
and financial condition of each acquiring party for its preceding 327
five fiscal years, or for such lesser period as the acquiring 328
party and any of its predecessors shall have been in existence, 329
and similar unaudited information as of a date not earlier than 330
ninety days prior to the filing of the statement;331

       (6) Any plans or proposals which each acquiring party may 332
have to liquidate such domestic insurer, to sell its assets or 333
merge or consolidate it with any person, or to make any other 334
material change in its business or corporate structure or 335
management;336

       (7) The number of shares of any security of such issuer or 337
such controlling person that each acquiring party proposes to 338
acquire, and the terms of the offer, request, invitation, 339
agreement, or acquisition, and a statement as to the method by 340
which the fairness of the proposal was determined;341

       (8) The amount of each class of any security of such issuer 342
or such controlling person which is beneficially owned or 343
concerning which there is a right to acquire beneficial ownership 344
by each acquiring party;345

       (9) A full description of any contracts, arrangements, or 346
understandings with respect to any security of such issuer or such 347
controlling person in which any acquiring party is involved, 348
including but not limited to transfer of any of the securities, 349
joint ventures, loan or option arrangements, puts or calls, 350
guarantees of loans, guarantees against loss or guarantees of 351
profits, division of losses or profits, or the giving or 352
withholding of proxies. The description shall identify the persons 353
with whom such contracts, arrangements, or understandings have 354
been made.355

       (10) A description of the purchase of any security of such 356
issuer or such controlling person during the year preceding the 357
filing of the statement, by any acquiring party, including the 358
dates of purchase, names of the purchasers, and consideration paid 359
or agreed to be paid therefor;360

       (11) A description of any recommendations to purchase any 361
security of such issuer or such controlling person made during the 362
year preceding the filing of the statement, by any acquiring 363
party, or by anyone based upon interviews or at the suggestion of 364
the acquiring party;365

       (12) Copies of all tender offers for, requests, or 366
invitations for tenders of, exchange offers for, and agreements to 367
acquire or exchange any securities of such issuer or such 368
controlling person, and, if distributed, of additional 369
solicitation material relating thereto;370

       (13) The terms of any agreement, contract, or understanding 371
made with or proposed to be made with any broker or dealer as to 372
solicitation of securities of such issuer or such controlling 373
person for tender, and the amount of any fees, commissions, or 374
other compensation to be paid to brokers or dealers with regard 375
thereto;376

       (14) With respect to proposed affiliations between depository 377
institutions or any affiliate thereof, within the meaning of Title 378
I, section 104(c) of the "Gramm-Leach-Bliley Act," Pub. L. No. 379
106-102, 113 Stat. 1338 (1999), and a domestic insurer, the 380
proposed effective date of the acquisition or change of control;381

       (15) An agreement by the person required to file the 382
statement required by division (B) of this section that the person 383
will provide the annual registration required by division (K) of 384
section 3901.33 of the Revised Code for so long as the person has 385
control of the domestic insurer;386

       (16) An acknowledgment by the person required to file the 387
statement required by division (B) of this section that the person 388
and all subsidiaries within the person's control in the insurance 389
holding company system will provide information to the 390
superintendent upon request as necessary to evaluate enterprise 391
risk to the insurer; 392

       (17) Such additional information as the superintendent may by 393
rule prescribe as necessary or appropriate for the protection of 394
policyholders of the domestic insurer or in the public interest.395

       (D)(1) If the person required to file the statement required 396
by division (B)(2) of this section is a partnership, limited 397
partnership, syndicate, or other group, the superintendent may 398
require that the information required by division (C) of this 399
section be furnished with respect to each partner of such 400
partnership or limited partnership, each member of such syndicate 401
or group, and each person that controls such partner or member. If 402
any such partner, member, or person is a corporation, or the 403
person required to file the statement is a corporation, the 404
superintendent may require that the information required by 405
division (C) of this section be furnished with respect to the 406
corporation, each officer and director of the corporation, and 407
each person that is directly or indirectly the beneficial owner of 408
more than ten per cent of the outstanding voting securities of the 409
corporation.410

       (2) If any material change occurs in the facts set forth in 411
the statement required by division (B)(2) of this section, an 412
amendment setting forth such change, together with copies of all 413
documents and other material relevant to the change, shall be 414
filed with the superintendent by the person subject to division 415
(B)(2) of this section and sent to the domestic insurer within two 416
business days after such person learns of the occurrence of the 417
material change.418

       (E) If any offer, request, invitation, agreement, or 419
acquisition described in division (B)(1) of this section is 420
proposed to be made by means of a registration statement under the 421
"Securities Act of 1933," 48 Stat. 74, 15 U.S.C.A. 78a, or in 422
circumstances requiring the disclosure of similar information 423
under the "Securities Exchange Act of 1934," 48 Stat. 881, 15 424
U.S.C.A. 78a, or under a state law requiring similar registration 425
or disclosure, the person required to file the statement required 426
by division (B)(2) of this section may use such documents in 427
furnishing the information required by that statement.428

       (F)(1) The superintendent shall approve any merger or other 429
acquisition of control described in division (B)(1) of this 430
section unless, after a public hearing, the superintendent finds 431
that any of the following apply:432

       (a) After the change of control, the domestic insurer would 433
not be able to satisfy the requirements for the issuance of a 434
license to write the line or lines of insurance for which it is 435
presently licensed;436

       (b) The effect of the merger or other acquisition of control 437
would be substantially to lessen competition in insurance in this 438
state or tend to create a monopoly;439

       (c) The financial condition of any acquiring party is such as 440
might jeopardize the financial stability of the domestic insurer, 441
or prejudice the interests of its policyholders;442

       (d) The plans or proposals that the acquiring party has to 443
liquidate the domestic insurer, sell its assets, or consolidate or 444
merge it with any person, or to make any other material change in 445
its business or corporate structure or management, are unfair and 446
unreasonable to policyholders of the domestic insurer and not in 447
the public interest;448

       (e) The competence, experience, and integrity of those 449
persons that would control the operation of the domestic insurer 450
are such that it would not be in the interest of policyholders of 451
the domestic insurer and of the public to permit the merger or 452
other acquisition of control;453

       (f) The acquisition is likely to be hazardous or prejudicial 454
to the insurance-buying public.455

       (2)(a) Chapter 119. of the Revised Code, except for section 456
119.09 of the Revised Code, applies to any hearing held under 457
division (F)(1) of this section, including the notice of the 458
hearing, the conduct of the hearing, the orders issued pursuant to 459
it, the review of the orders, and all other matters relating to 460
the holding of the hearing, but only to the extent that Chapter 461
119. of the Revised Code is not inconsistent or in conflict with 462
this section.463

       (b) The notice of a hearing required under this division 464
shall be transmitted by personal service, certified mail, e-mail, 465
or any other method designed to ensure and confirm receipt of the 466
notice, to the persons and addresses designated to receive notices 467
and correspondence in the information statement filed under 468
division (B)(2) of this section. Confirmation of receipt of the 469
notice, including electronic "Read Receipt" confirmation, shall 470
constitute evidence of compliance with the requirement of this 471
section. The notice of hearing shall include the reasons for the 472
proposed action and a statement informing the acquiring party that 473
the party is entitled to a hearing. The notice also shall inform 474
the acquiring party that at the hearing the acquiring party may 475
appear in person, by attorney, or by such other representative as 476
is permitted to practice before the superintendent, or that the 477
acquiring party may present its position, arguments, or 478
contentions in writing, and that at the hearing the acquiring 479
party may present evidence and examine witnesses appearing for and 480
against the acquiring party. A copy of the notice also shall be 481
transmitted to attorneys or other representatives of record 482
representing the acquiring party.483

       (c) The hearing shall be held at the offices of the 484
superintendent within ten calendar days, but not earlier than 485
seven calendar days, of the date of transmission of the notice of 486
hearing by any means, unless it is postponed or continued; but in 487
no event shall the hearing be held unless notice is received at 488
least three days prior to the hearing. The superintendent may 489
postpone or continue the hearing upon receipt of a written request 490
by an acquiring party, or upon the superintendent's motion, 491
provided, however, a hearing in connection with a proposed change 492
of control involving a depository institution or any affiliate 493
thereof, within the meaning of Title I, section 104(c) of the 494
"Gramm-Leach-Bliley Act," Pub. L. No. 106-102, 113 Stat. 1338 495
(1999), and a domestic insurer, may be postponed or continued only 496
upon the request of an acquiring party, or upon the 497
superintendent's motion when the acquiring party agrees in writing 498
to extend the sixty-day period provided for in section 104(c) of 499
the "Gramm-Leach-Bliley Act," by a number of days equal to the 500
number of days of such postponement or continuance.501

       (d) For the purpose of conducting any hearing held under this 502
section, the superintendent may require the attendance of such 503
witnesses and the production of such books, records, and papers as 504
the superintendent desires, and may take the depositions of 505
witnesses residing within or without the state in the same manner 506
as is prescribed by law for the taking of depositions in civil 507
actions in the court of common pleas, and for that purpose the 508
superintendent may, and upon the request of an acquiring party 509
shall, issue a subpoena for any witnesses or a subpoena duces 510
tecum to compel the production of any books, records, or papers, 511
directed to the sheriff of the county where such witness resides 512
or is found, which shall be served and returned in the same manner 513
as a subpoena in a criminal case is served and returned. The fees 514
of the sheriff shall be the same as that allowed in the court of 515
common pleas in criminal cases. Witnesses shall be paid the fees 516
and mileage provided for under section 119.094 of the Revised 517
Code. Fees and mileage shall be paid from the fund in the state 518
treasury for the use of the superintendent in the same manner as 519
other expenses of the superintendent are paid. In any case of 520
disobedience or neglect of any subpoena served on any person or 521
the refusal of any witness to testify in any matter regarding 522
which the witness may lawfully be interrogated, the court of 523
common pleas of any county where such disobedience, neglect, or 524
refusal occurs or any judge thereof, on application by the 525
superintendent, shall compel obedience by attachment proceedings 526
for contempt, as in the case of disobedience of the requirements 527
of a subpoena issued from the court or a refusal to testify 528
therein.529

       In any hearing held under this section, a record of the 530
testimony, as provided by stenographic means or by use of audio 531
electronic recording devices, as determined by the superintendent, 532
and other evidence submitted shall be taken at the expense of the 533
superintendent. The record shall include all of the testimony and 534
other evidence, and rulings on the admissibility thereof, 535
presented at the hearing.536

       The superintendent shall pass upon the admissibility of 537
evidence, but a party to the proceedings may at that time object 538
to the rulings of the superintendent, and if the superintendent 539
refuses to admit evidence, the party offering the evidence shall 540
proffer the evidence. The proffer shall be made a part of the 541
record of the hearing.542

       In any hearing held under this section, the superintendent 543
may call any person to testify under oath as upon 544
cross-examination. The superintendent, or any one delegated by the 545
superintendent to conduct a hearing, may administer oaths or 546
affirmations.547

       In any hearing under this section, the superintendent may 548
appoint a hearing officer to conduct the hearing; the hearing 549
officer has the same powers and authority in conducting the 550
hearing as is granted to the superintendent. The hearing officer 551
shall have been admitted to the practice of law in the state and 552
be possessed of any additional qualifications as the 553
superintendent requires. The hearing officer shall submit to the 554
superintendent a written report setting forth the hearing 555
officer's finding of fact and conclusions of law and a 556
recommendation of the action to be taken by the superintendent. A 557
copy of the written report and recommendation shall, within seven 558
days of the date of filing thereof, be served upon the acquiring 559
party or the acquiring party's attorney or other representative of 560
record, by personal service, certified mail, e-mailelectronic 561
mail, or any other method designed to ensure and confirm receipt 562
of the report. The acquiring party may, within three days of 563
receipt of the copy of the written report and recommendation, file 564
with the superintendent written objections to the report and 565
recommendation, which objections the superintendent shall consider 566
before approving, modifying, or disapproving the recommendation. 567
The superintendent may grant extensions of time to the acquiring 568
party within which to file such objections. No recommendation of 569
the hearing officer shall be approved, modified, or disapproved by 570
the superintendent until after three days following the service of 571
the report and recommendation as provided in this section. The 572
superintendent may order additional testimony to be taken or 573
permit the introduction of further documentary evidence. The 574
superintendent may approve, modify, or disapprove the 575
recommendation of the hearing officer, and the order of the 576
superintendent based on the report, recommendation, transcript of 577
testimony, and evidence, or the objections of the acquiring party, 578
and additional testimony and evidence shall have the same effect 579
as if the hearing had been conducted by the superintendent. No 580
such recommendation is final until confirmed and approved by the 581
superintendent as indicated by the order entered in the record of 582
proceedings, and if the superintendent modifies or disapproves the 583
recommendations of the hearing officer, the reasons for the 584
modification or disapproval shall be included in the record of 585
proceedings.586

       After the order is entered, the superintendent shall transmit 587
in the manner and by any of the methods set forth in division 588
(F)(2)(b) of this section a certified copy of the order and a 589
statement of the time and method by which an appeal may be 590
perfected. A copy of the order shall be mailed to the attorneys or 591
other representatives of record representing the acquiring party.592

       (e) An order of disapproval issued by the superintendent may 593
be appealed to the court of common pleas of Franklin county by 594
filing a notice of appeal with the superintendent and a copy of 595
the notice of appeal with the court, within fifteen calendar days 596
after the transmittal of the copy of the order of disapproval. The 597
notice of appeal shall set forth the order appealed from and the 598
grounds for appeal, in accordance with section 119.12 of the 599
Revised Code.600

       (3) The superintendent may retain at the acquiring party's 601
expense any attorneys, actuaries, accountants, and other experts 602
not otherwise a part of the superintendent's staff as may be 603
reasonably necessary to assist the superintendent in reviewing the 604
proposed acquisition of control.605

       (G) This section does not apply to either of the following:606

       (1) Any transaction that is subject to section 3907.09, 607
3907.10, 3907.11, or 3921.14, or sections 3925.27 to 3925.31, 608
3941.35 to 3941.46, or section 3953.19 of the Revised Code;609

       (2) Any offer, request, invitation, agreement, or acquisition 610
that the superintendent by order exempts from this section on 611
either of the following bases:612

       (a) It has not been made or entered into for the purpose and 613
does not have the effect of changing or influencing the control of 614
a domestic insurer;615

       (b) It is not otherwise comprehended within the purposes of 616
this section.617

       (H) Nothing in this section or in any other section of Title 618
XXXIX of the Revised Code shall be construed to impair the 619
authority of the attorney general to investigate or prosecute 620
actions under any state or federal antitrust law with respect to 621
any merger or other acquisition involving domestic insurers.622

       (I) In connection with a proposed change of control involving 623
a depository institution or any affiliate thereof, within the 624
meaning of Title I, section 104(c) of the "Gramm-Leach-Bliley 625
Act," Pub. L. No. 106-102, 113 Stat. 1338 (1999), and a domestic 626
insurer, not later than sixty days after the date of the 627
notification of the proposed change in control submitted pursuant 628
to division (B)(2) of this section, the superintendent shall make 629
any determination that the person acquiring control of the insurer 630
shall maintain or restore the capital of the insurer to the level 631
required by the laws and regulations of this state.632

       Sec. 3901.33.  (A) Every insurer that is authorized to do 633
business in this state and that is a member of an insurance 634
holding company system shall register with the superintendent of 635
insurance, except a foreign insurer subject to disclosure 636
requirements and standards adopted by statute or regulation in the 637
jurisdiction of its domicile that are substantially similar to 638
those contained in this section and section 3901.341 of the 639
Revised Code. Every insurer that is subject to registration under 640
this section shall register initially not later than December 31, 641
1971, or within thirty days after it becomes subject to 642
registration, whichever is later, unless the superintendent for 643
good cause shown extends the time for registration, and then 644
within the extended time, and every such insurer shall register 645
annually after its initial registration. The superintendent may 646
require any authorized insurer that is a member of a holding 647
company system that is not subject to registration under this 648
section to furnish a copy of the registration statement or other 649
information filed by the insurance company with the insurance 650
regulatory authority of domiciliary jurisdiction.651

       (B) Every insurer subject to registration shall file a 652
registration statement with the superintendent on a form and in a 653
format provided by the superintendent, which shall contain current 654
information about all of the following:655

       (1) The capital structure, general financial condition, 656
ownership, and management of the insurer and any person 657
controlling the insurer;658

       (2) The identity of every member of the insurance holding 659
company system;660

       (3) The following agreements in force, relationships 661
subsisting, and transactions currently outstanding between the 662
insurer and its affiliates:663

       (a) Loans, other investments, or purchases, sales or 664
exchanges of securities of the affiliates by the insurer or of the 665
insurer by its affiliates;666

       (b) Purchases, sales, or exchanges of assets;667

       (c) Transactions not in the ordinary course of business;668

       (d) Guarantees or undertakings for the benefit of an 669
affiliate that result in an actual contingent exposure of the 670
insurer's assets to liability, other than insurance contracts 671
entered into in the ordinary course of the insurer's business;672

       (e) All management and service contracts and all cost-sharing 673
arrangements;674

       (f) Reinsurance agreements;675

       (g) Dividends and other distributions to shareholders;676

       (h) Consolidated tax allocation agreements.677

       (4) Any pledge of the insurer's stock, including stock of any 678
subsidiary or controlling affiliate, for a loan made to any member 679
of the insurance holding company system;680

       (5) If requested by the superintendent, financial statements 681
of an insurance holding company system, including all affiliates. 682
Financial statements may include annual audited financial 683
statements filed with the United States securities and exchange 684
commission pursuant to the "Securities Act of 1933," 48 Stat. 74, 685
15 U.S.C. 77a, or the "Securities Exchange Act of 1934," 48 Stat. 686
881, 15 U.S.C. 78a. The insurer may satisfy the request by 687
providing the superintendent with the most recently filed parent 688
corporation financial statements that have been filed with the 689
securities and exchange commission.690

       (6) Other matters concerning transactions between registered 691
insurers and any affiliates as may be included from time to time 692
in any registration forms adopted or approved by the 693
superintendent;694

       (7) Statements that the insurer's or its ultimate controlling 695
person's board of directors oversees corporate governance and 696
internal controls and that the insurer's or its ultimate 697
controlling person's officers or senior management have approved, 698
implemented, and continue to maintain and monitor corporate 699
governance and internal control procedures;700

       (8) Any other information required by the superintendent by 701
rule or regulation.702

       (C) Each registration statement filed pursuant to division 703
(B) of this section shall summarize the information that has 704
changed from the prior registration statement filed pursuant to 705
that division.706

       (D) No information need be disclosed on the registration 707
statement filed pursuant to division (B) of this section if the 708
information is not material for the purposes of this section. 709
Unless the superintendent by rule, regulation, or order provides 710
otherwise, sales, purchases, exchanges, loans or extensions of 711
credit, or investments involving one-half of one per cent or less 712
of an insurer's admitted assets as of the thirty-first day of 713
December next preceding shall not be deemed material for the 714
purposes of this section.715

       (E) Each registered insurer shall keep current the 716
information required to be disclosed in its registration statement 717
by reporting all material changes or additions on amendment forms 718
provided by the superintendent within fifteen days after the end 719
of the month in which it learns of each change or addition.720

       (F) The superintendent shall terminate the registration of 721
any insurer that demonstrates that it no longer is a member of an 722
insurance holding company system.723

       (G) The superintendent may require or allow two or more 724
affiliated insurers subject to registration under this section to 725
file a consolidated registration statement or consolidated reports 726
amending their consolidated registration statement or their 727
individual registration statements.728

       (H) The superintendent may allow an insurer that is 729
authorized to do business in this state and that is part of an 730
insurance holding company system to register on behalf of any 731
affiliated insurer that is required to register under division (A) 732
of this section and to file all information and material required 733
to be filed under this section.734

       (I) This section does not apply to any insurer, information, 735
or transaction if and to the extent that the superintendent by 736
rule, regulation, or order exempts it from this section.737

       (J) Any person may file with the superintendent a disclaimer 738
of affiliation with any authorized insurer or such a disclaimer 739
may be filed by the insurer or any member of an insurance holding 740
company system. The disclaimer shall fully disclose all material 741
relationships and bases for affiliation between the person and the 742
insurer as well as the basis for disclaiming the affiliation. 743
After a disclaimer has been filed, the insurer shall be relieved 744
of any duty to register or report under this section which may 745
arise out of the insurer's relationship with the person unless and 746
until the superintendent disallows the disclaimer. The 747
superintendent shall disallow such a disclaimer only in the manner 748
provided in Chapter 119. of the Revised Code.749

       (K) The ultimate controlling person of every insurer subject 750
to registration under this section also shall file an annual 751
enterprise risk report. The report shall be appropriate to the 752
nature, scale, and complexity of the operations of the insurance 753
holding company system and shall, to the best of the ultimate 754
controlling person's knowledge and belief, identify the material 755
risks within the insurance holding company system that could pose 756
enterprise risk to the insurer. The ultimate controlling person 757
shall file the report with the lead state commissioner of the 758
insurance holding company system as determined by the procedures 759
within the financial analysis handbook adopted by the national 760
association of insurance commissioners.761

       (L) The failure to file any registration statement or any 762
amendment thereto or enterprise risk report required by this 763
section within the time specified for the filing is a violation of 764
this section.765

       Sec. 3901.34.  (A) Material transactions by registered 766
insurers with their affiliatesTransactions within an insurance 767
holding company system to which an insurer subject to registration 768
is a party shall be subject to the following standards:769

       (1) The terms shall be fair and reasonable.770

       (2) Charges or fees for services performed shall be 771
reasonable.772

       (3) Expenses incurred and payment received shall be allocated 773
to the insurer in conformity with customary insurance accounting 774
practices that are consistently applied.775

       (4) The books, accounts, and records of each party shall be 776
so maintained as to clearly and accurately disclose the precise 777
nature and details of the transactions including such accounting 778
information as is necessary to support the reasonableness of the 779
charges or fees to the respective parties.780

       (5) The insurer's surplus as regards policyholders following 781
any dividends or distributions to shareholder affiliates shall be 782
reasonable in relation to the insurer's outstanding liabilities 783
and adequate to its financial needs.784

       (6) Agreements for cost-sharing services and management 785
services shall include such provisions as required by the 786
superintendent of insurance in rule or regulation.787

       (B) For the purposes of this section, in determining whether 788
an insurer's surplus as regards policyholders is reasonable in 789
relation to the insurer's outstanding liabilities and adequate to 790
its financial needs, the following factors, among others, may be 791
considered:792

       (1) The size of the insurer as measured by its assets, 793
capital, surplus, reserves, premium writings, insurance in force, 794
and other appropriate criteria;795

       (2) The extent to which the insurer's business is diversified 796
among the several lines of insurance;797

       (3) The number and size of risks insured in each line of 798
business;799

       (4) The extent of the geographical dispersion of the 800
insurer's insured risks;801

       (5) The nature and extent of the insurer's reinsurance 802
program;803

       (6) The quality, diversification, and liquidity of the 804
insurer's investment portfolio;805

       (7) The recent past and projected future trend in the size of 806
the insurer's surplus as regards policyholders;807

       (8) The adequacy of the insurer's reserves;808

       (9) The quality and liquidity of investments in subsidiaries. 809
The superintendent may discount any such investment or treat any 810
investment as a nonadmitted asset for purposes of determining the 811
adequacy of surplus as regards policyholders whenever the 812
investment so warrants.813

       (10) The quality of the insurer's earnings and the extent to 814
which the reported earnings include extraordinary items;815

       (11) The surplus as regards policyholders maintained by other 816
comparable insurers in respect of the factors enumerated in this 817
division.818

       (C) No insurer subject to registration under section 3901.33 819
of the Revised Code shall pay any extraordinary dividend or make 820
any other extraordinary distribution to its shareholders and the 821
declaration of any such dividend or distribution shall be 822
conditional and shall confer no rights upon shareholders until 823
thirty days after the superintendent has received notice of the 824
declaration thereof and has not within the thirty-day period 825
disapproved the dividend or distribution, or the superintendent 826
has approved the dividend or distribution within the thirty-day 827
period.828

       Prior to paying any dividend or distribution, the insurer 829
shall notify the superintendent on a form provided by the 830
superintendent for informational purposes within five business 831
days following its declaration of any dividend or distribution and 832
at least ten calendar days prior to payment of such dividend or 833
distribution, such ten-calendar-day period to be measured from the 834
date of the superintendent's receipt of the notice.835

       For the purposes of this section, an extraordinary dividend 836
or distribution includes any dividend or distribution of cash or 837
other property, whose fair market value, together with that of 838
other dividends or distributions made within the preceding twelve 839
months, exceeds the greater of ten per cent of the insurer's 840
surplus as regards policyholders as of the thirty-first day of 841
December next preceding, or the net income of the insurer for the 842
twelve-month period ending the thirty-first day of December next 843
preceding, but shall not include pro rata distributions of any 844
class of the insurer's own securities.845

       Any dividend or distribution paid from other than earned 846
surplus shall be considered an extraordinary dividend or 847
extraordinary distribution. For the purposes of this section, 848
"earned surplus" means an amount equal to an insurer's unassigned 849
funds as set forth in its most recent statutory financial 850
statement submitted to the superintendent, including net 851
unrealized capital gains and losses or revaluation of assets.852

       Sec. 3901.341.  (A) No insurer subject to registration under 853
section 3901.33 of the Revised Code shall enter into any of the 854
following transactions with any person in its insurance holding 855
company system, including amendments or modifications of affiliate 856
agreements previously filed under this section that are subject to 857
the materiality standards contained in divisions (A)(1) to (5) of 858
this section, until thirty days after the superintendent of 859
insurance has received, for histhe superintendent's review, 860
written notice of the insurer's intention to enter into the 861
transaction and if, during that period, the superintendent has not 862
disapproved the proposed transaction. The notice for amendments or 863
modifications shall include the reasons for the change and the 864
financial impact on the domestic insurer. Informal notice shall be 865
reported to the superintendent within thirty days after 866
termination of a previously filed agreement. These requirements 867
shall apply to all of the following transactions:868

       (1) Any sale, purchase, exchange of assets, loan, extension 869
of credit, guarantee, or investment, if the transaction equals or 870
exceeds, with respect to insurers other than life insurers, the 871
lesser of three per cent of the insurer's admitted assets as of 872
the thirty-first day of December next preceding or twenty-five per 873
cent of the insurer's surplus as regards policyholders as of the 874
thirty-first day of December next preceding or, with respect to 875
life insurers, three per cent of the insurer's admitted assets as 876
of the thirty-first day of December next preceding;877

       (2) Any loan or extension of credit to any person that is not 878
an affiliate of the insurer, if both of the following apply:879

       (a) The loan or extension of credit equals or exceeds, with 880
respect to insurers other than life insurers, the lesser of three 881
per cent of the insurer's admitted assets as of the thirty-first 882
day of December next preceding or twenty-five per cent of the 883
insurer's surplus as regards policyholders as of the thirty-first 884
day of December next preceding or, with respect to life insurers, 885
three per cent of the insurer's admitted assets as of the 886
thirty-first day of December next preceding.887

       (b) The insurer makes the loan or extends the credit with an 888
agreement or understanding that the proceeds of the transaction, 889
in whole or in substantial part, are to be used to make loans or 890
extend credit to, to purchase assets of, or to make investments 891
in, any affiliate of the insurer.892

       (3) Reinsurance agreements or modifications of such 893
agreementsincluding all of the following:894

       (a) All new reinsurance pooling agreements;895

       (b) All reinsurance pooling agreements in which a domestic 896
company is newly added;897

       (c) Agreements in which the reinsurance premium or the change 898
in the insurer's liabilities, or the projected reinsurance premium 899
or a change in the insurer's liabilities in any of the next three 900
years, equals or exceeds five per cent of the insurer's surplus as 901
regards policyholders as of the thirty-first day of December next 902
preceding. Division903

       Division (A)(3) of this section also applies to reinsurance 904
agreements that may require as consideration the transfer of 905
assets from an insurer to a nonaffiliate, if the insurer and 906
nonaffiliate have an agreement or understanding that any portion 907
of the assets will be transferred to one or more affiliates of the 908
insurer.909

       (4) All management agreements, service contracts, tax 910
allocations agreements, and cost-sharing arrangements;911

       (5) Any other material transaction that the superintendent, 912
pursuant to rules adopted in accordance with Chapter 119. of the 913
Revised Code, determines may render the insurer's surplus as 914
regards policyholders unreasonable in relation to the insurer's 915
outstanding liabilities and inadequate to its financial needs.916

       (B) In reviewing transactions under division (A) of this 917
section, the superintendent shall consider whether the terms of 918
the transaction are fair and reasonable and whether the 919
transaction may adversely affect the interests of policyholders.920

       (C) Any transaction or agreement described in division (A) of 921
this section that is not disapproved by the superintendent in 922
accordance with that division is effective as of the effective 923
date set forth in the notice required under this section.924

       (D) The superintendent, pursuant to rules adopted in 925
accordance with Chapter 119. of the Revised Code, may designate 926
certain types of transactions that need not be submitted for 927
review under division (A) of this section, if those transactions 928
would not have a significant impact on the financial condition of 929
an insurer.930

       (E) A domestic insurer shall not enter into any transaction 931
described in division (A) of this section with members of its 932
insurance holding company system if the transaction is part of a 933
plan or series of similar transactions and if the purpose of 934
entering into the separate transactions is to avoid the review 935
required under division (A) of this section that would otherwise 936
occur. If the superintendent determines that the insurer, within a 937
twelve-month period, entered into those separate transactions for 938
that purpose, hethe superintendent may take any action authorized 939
by section 3901.37 of the Revised Code.940

       (F) A domestic insurer shall give written notice to the 941
superintendent, within thirty days after making an investment, if 942
the investment is made in a corporation and the total investment 943
in the corporation by the insurance holding company system exceeds 944
ten per cent of the voting securities of the corporation.945

       (G) Nothing in division (A) of this section shall be 946
construed to authorize or permit any transaction that would 947
otherwise be contrary to law.948

       Sec. 3901.35.  (A)(1) In addition to the powers whichthat949
the superintendent has under sections 3901.01 to 3901.31, 950
inclusive, of the Revised Code, relating to the examination of 951
insurers, the superintendent of insurance, subject to sections 952
119.01 to 119.13, inclusive, of the Revised Code, shall also have 953
the power to orderexamine any insurer registered under section 954
3901.33 of the Revised Code and its affiliates to ascertain the 955
financial condition of the insurer, including the enterprise risk 956
to the insurer by the ultimate controlling party, or by any entity 957
or combination of entities within the insurance holding company 958
system, or by the insurance holding company system on a 959
consolidated basis.960

       (2) The superintendent of insurance may order any insurer 961
registered under section 3901.33 of the Revised Code to produce 962
for examination such records, books, or other information papers 963
in the possession of the insurer and its affiliates as may be 964
reasonably necessary to ascertain the financial condition or 965
legality of conduct of such insurer, but only if the 966
superintendent finds that an examination of such insurer pursuant 967
to sections 3901.01 to 3901.31, inclusive, of the Revised Code, 968
would be inadequate or the interests of the policyholders of such 969
insurer may be adversely affected. In the event such insurer fails 970
to comply with such order, the superintendent shall have the power 971
to examine such affiliates to obtain such informationdetermine 972
compliance with sections 3901.32 to 3901.37 of the Revised Code.973

       (3) To determine compliance with sections 3901.32 to 3901.37 974
of the Revised Code, the superintendent may order any insurer 975
registered under section 3901.33 of the Revised Code to produce 976
information not in the possession of the insurer if the insurer 977
can obtain access to such information pursuant to a contractual 978
relationship, statutory obligation, or other method. If the 979
insurer cannot obtain the information requested by the 980
superintendent, the insurer shall provide the superintendent a 981
detailed explanation of the reason that the insurer cannot obtain 982
the information and the identity of the holder of information. 983
Whenever it appears to the superintendent that the detailed 984
explanation is without merit, the superintendent may require, 985
after notice and hearing, that the insurer pay a penalty of up to 986
five hundred dollars per day, or the superintendent may suspend or 987
revoke the insurer's license.988

       (B) The superintendent may retain at the registered insurer's 989
expense such attorneys, actuaries, accountants, and other experts 990
not otherwise a part of the superintendent's staff as shall be 991
reasonably necessary to assist in the conduct of the examination 992
under division (A) of this section. Any persons so retained shall 993
be under the direction and control of the superintendent and shall 994
act in a purely advisory capacity.995

       (C) Each registered insurer producing for examination 996
records, books, and papers pursuant to division (A) of this 997
section shall be liable for and shall pay the expense of such 998
examination in accordance with section 3901.07 of the Revised 999
Code.1000

       (D) If the insurer fails to comply with an order issued 1001
pursuant to this section, the superintendent may examine the 1002
affiliates to obtain the information. The superintendent also may 1003
issue subpoenas, administer oaths, and examine under oath any 1004
person for purposes of determining compliance with this section. 1005
Upon the failure or refusal of any person to obey a subpoena, the 1006
superintendent may petition the court of common pleas of Franklin 1007
county for an order compelling the witness to appear and testify 1008
or produce documentary evidence. Failure to obey the court order 1009
shall be punishable as contempt of court. A person who receives a 1010
subpoena issued pursuant to this division shall appear as a 1011
witness at the place specified in the subpoena within the state. 1012
The person is entitled to the same fees and mileage as a witness 1013
in a civil action in the court of common pleas. Any fees, mileage, 1014
or actual expenses necessarily incurred in securing the attendance 1015
of a witness and their testimony shall be itemized and charged 1016
against the insurer being examined.1017

       Sec. 3901.351. (A) With respect to any insurer registered 1018
under section 3901.33 of the Revised Code and in accordance with 1019
division (C) of this section, the superintendent of insurance may 1020
participate in a supervisory college for any domestic insurer that 1021
is part of an insurance holding company system with international 1022
operations in order to determine compliance by the insurer with 1023
sections 3901.32 to 3901.37 of the Revised Code. In participating, 1024
the superintendent may do all of the following:1025

        (1) Initiate the establishment of a supervisory college;1026

        (2) Clarify the membership and participation of other 1027
supervisors in the supervisory college;1028

        (3) Clarify the functions of the supervisory college and the 1029
role of other regulators, including the establishment of a 1030
group-wide supervisor;1031

        (4) Coordinate the ongoing activities of the supervisory 1032
college, including planning meetings, supervisory activities, and 1033
processes for information sharing;1034

        (5) Establish a crisis management plan.1035

        (B) Each registered insurer subject to this section shall be 1036
liable for and shall pay the reasonable expenses of the 1037
superintendent's participation in a supervisory college in 1038
accordance with division (C) of this section, including reasonable 1039
travel expenses. The superintendent may establish a regular 1040
assessment to the insurer for the payment of these expenses. A 1041
supervisory college may be convened as either a temporary or 1042
permanent forum for communication and cooperation between the 1043
regulators charged with the supervision of the insurer or its 1044
affiliates.1045

        (C) In order to assess the business strategy, financial 1046
position, legal and regulatory position, risk exposure, risk 1047
management, and governance processes, and as part of the 1048
examination of individual insurers in accordance with section 1049
3901.35 of the Revised Code, the superintendent may participate in 1050
a supervisory college with other regulators charged with 1051
supervision of the insurer or its affiliates, including other 1052
state, federal, and international regulatory agencies. The 1053
superintendent may enter into agreements in accordance with 1054
section 3901.36 of the Revised Code that provide the basis for 1055
cooperation between the superintendent and the other regulatory 1056
agencies, and the activities of the supervisory college.1057

        (D) Nothing in this section shall delegate to the supervisory 1058
college the authority of the superintendent to regulate or 1059
supervise the insurer or its affiliates within its jurisdiction.1060

       (E) As used in this section, "supervisory college" means a 1061
forum for cooperation and communication between the involved 1062
supervisors established for the fundamental purpose of 1063
facilitating all of the following:1064

        (1) The effectiveness of supervision of entities that belong 1065
to an insurance group;1066

        (2) The supervision of the insurance group as a whole on a 1067
group-wide basis;1068

        (3) Improving the legal entity supervision of the entities 1069
within the insurance group.1070

       Sec. 3901.36. (A) All information, documents, and copies 1071
thereofDocuments, materials, or other information in the 1072
possession or control of the department of insurance that are1073
obtained by or disclosed to the superintendent of insurance or any 1074
other person in the course of an examination or investigation made 1075
pursuant to section 3901.35 of the Revised Code and all 1076
information reported pursuant to section 3901.33 of the Revised 1077
Code shall be given confidential and privileged treatment and 1078
shall not be subject to section 149.43 of the Revised Code,1079
subpoena, or be made public by the superintendent or any other 1080
person.1081

       (B) Notwithstanding division (A) of this section, the1082
discovery, and shall not be admissible in evidence in any private 1083
civil action. The superintendent may do any of the following:1084

       (1) Disclose documents and information that are the subject 1085
of this section upon obtainingshall not make the documents, 1086
materials, or other information public unless one of the following 1087
applies:1088

        (1) The superintendent uses the documents, materials, or 1089
other information in furtherance of any regulatory or legal action 1090
brought as a part of the superintendent's official duties.1091

        (2) The superintendent has obtained the prior written consent 1092
fromof the insurer to whichpertaining to the disclosure of the 1093
documents and, materials, or other information pertain;of the 1094
insurer.1095

       (2) Disclose documents and information that are the subject 1096
of this section in such a manner as the superintendent considers 1097
appropriate(3) The superintendent, after giving the insurer and 1098
those affiliates that are the subject of the documents and, 1099
materials, or other information notice and an opportunity to be 1100
heard in accordance with Chapter 119. of the Revised Code, if the 1101
superintendent determines that the interests of policyholders, 1102
shareholders, or the public will be served by the disclosure;1103

       (3) Share documents and information that are the subject of 1104
this section with the chief deputy rehabilitator, the chief deputy 1105
liquidator, other deputy rehabilitators and liquidators, and any 1106
other person employed by, or acting on behalf of, the 1107
superintendent pursuant to Chapter 3901. or 3903. of the Revised 1108
Code, in which case the superintendent may make disclosures as the 1109
superintendent considers appropriate.1110

       (B) Neither the superintendent nor any person who receives 1111
documents, materials, or other information while acting under the 1112
authority of the superintendent or with whom such documents, 1113
materials, or other information are shared pursuant to this 1114
section shall be permitted or required to testify in any private 1115
civil action concerning any confidential documents, materials, or 1116
information subject to division (A) of this section.1117

       (C) In order to assist in the performance of the 1118
superintendent's duties under this section, the superintendent may 1119
do either of the following:1120

       (1) Share documents, materials, or other information, 1121
including the confidential and privileged documents, materials, or 1122
other information subject to division (A) of this section with 1123
other local, state, federal, and international regulatory and law 1124
enforcement agencies, with local, state, and federal prosecutors, 1125
and with the national association of insurance commissioners and 1126
its affiliates and subsidiaries, and with members of any 1127
supervisory college described in section 3901.351 of the Revised 1128
Code, provided that the recipient agrees to maintain the 1129
confidential or privileged status of the confidential or 1130
privileged documentdocuments, materials, or other information and 1131
has verified in writing the legal authority to do so;1132

       (4) Disclose documents and information that are the subject 1133
of this section in the furtherance of any regulatory or legal 1134
action brought by or on behalf of the superintendent or the state, 1135
resulting from the exercise of the superintendent's official 1136
duties.1137

       (C) Notwithstanding divisions (A) and (B) of this section, 1138
the superintendent may authorize the national association of 1139
insurance commissioners and its affiliates and subsidiaries by 1140
agreement to share confidential or privileged documents or 1141
information received pursuant to division (B)(3) of this section 1142
with local, state, federal, and international regulatory and law 1143
enforcement agencies and with local, state, and federal 1144
prosecutors, provided that the recipient agrees to maintain the 1145
confidential or privileged status of the confidential or 1146
privileged document or information and has authority to do so.1147

       (D) Notwithstanding divisions (A) and (B) of this section, 1148
the chief deputy rehabilitator, the chief deputy liquidator, and 1149
other deputy rehabilitators and liquidators may disclose documents 1150
and information that are the subject of this section in the 1151
furtherance of any regulatory or legal action brought by or on 1152
behalf of the superintendent, the rehabilitator, the liquidator, 1153
or the state resulting from the exercise of the superintendent's 1154
official duties in any capacity.1155

       (E) Nothing in this section shall prohibit the superintendent 1156
from receiving documents and information in accordance with 1157
section 3901.045 of the Revised Code. The superintendent may share 1158
confidential and privileged documents, materials, or other 1159
information reported pursuant to section 3901.33 of the Revised 1160
Code only with superintendents of states having statutes or 1161
regulations substantially similar to division (A) of this section 1162
and who have agreed in writing not to disclose such information.1163

       (2) Receive documents, materials, or information, including 1164
otherwise confidential and privileged documents, materials, or 1165
information from the national association of insurance 1166
commissioners and its affiliates and subsidiaries and from 1167
regulatory and law enforcement officials of other foreign or 1168
domestic jurisdictions. The superintendent shall maintain as 1169
confidential or privileged any such document, material, or 1170
information received with notice or the understanding that it is 1171
confidential or privileged under the laws of the jurisdiction that 1172
is the source of the document, material, or information.1173

       (D) The superintendent shall enter into written agreements 1174
with the national association of insurance commissioners governing 1175
sharing and use of information provided pursuant to sections 1176
3901.32 to 3901.37 of the Revised Code consistent with division 1177
(C) of this section. The written agreements shall do all of the 1178
following:1179

       (1) Specify procedures and protocols regarding the 1180
confidentiality and security of information shared with the 1181
national association of insurance commissioners and its affiliates 1182
and subsidiaries pursuant to sections 3901.32 to 3901.37 of the 1183
Revised Code, including procedures and protocols for sharing by 1184
the national association of insurance commissioners with other 1185
state, federal, or international regulators;1186

       (2) Specify that ownership of information shared with the 1187
national association of insurance commissioners and its affiliates 1188
and subsidiaries pursuant to sections 3901.32 to 3901.37 of the 1189
Revised Code remains with the superintendent and the national 1190
association of insurance commissioners' use of the information is 1191
subject to the direction of the superintendent;1192

       (3) Require prompt notice to be given to an insurer whose 1193
confidential information is in the possession of the national 1194
association of insurance commissioners or its affiliates or 1195
subsidiaries and is subject to a request or subpoena for 1196
disclosure or production; 1197

       (4) Require the national association of insurance 1198
commissioners and its affiliates and subsidiaries to consent to 1199
intervention by an insurer in any judicial or administrative 1200
action in which the national association of insurance 1201
commissioners and its affiliates and subsidiaries may be required 1202
to disclose confidential information about the insurer shared with 1203
the national association of insurance commissioners and its 1204
affiliates and subsidiaries pursuant to sections 3901.32 to 1205
3901.37 of the Revised Code.1206

       (E) The sharing of information by the superintendent pursuant 1207
to sections 3901.32 to 3901.37 of the Revised Code shall not 1208
constitute a delegation of regulatory or rule-making authority. 1209
The superintendent is solely responsible for the administration, 1210
execution, and enforcement of the provisions of sections 3901.32 1211
to 3901.37 of the Revised Code.1212

       (F) The superintendent may enter into agreements governing 1213
the sharing and use of documents and information consistent with 1214
the requirements of this section.1215

       (G)(1) No waiver of any applicable privilege or claim of 1216
confidentiality in the documents and, materials, or other1217
information described in this section shall occur as a result of 1218
sharing or receiving documents and information as authorized in 1219
divisions (B)(3),division (C), and (E) of this section.1220

       (2) The disclosure of a document or information in connection 1221
with a regulatory or legal action pursuant to divisions (B)(4) and 1222
(D) of this section does not prohibit an insurer or any other 1223
person from taking steps to limit the dissemination of the 1224
document or information to persons not involved in or the subject 1225
of the regulatory or legal action on the basis of any recognized 1226
privilege arising under any other section of the Revised Code or 1227
the common law.(G) Documents, materials, or other information in 1228
the possession or control of the national association of insurance 1229
commissioners pursuant to this section shall be given confidential 1230
and privileged treatment and shall not be subject to section 1231
149.43 of the Revised Code, subpoena, or discovery, and shall not 1232
be admissible in evidence in any private civil action.1233

       Sec. 3901.371.  The purpose of sections 3901.371 to 3901.378 1234
of the Revised Code is to provide the requirements for maintaining 1235
a risk management framework and completing an own risk and 1236
solvency assessment, and to provide guidance and instructions for 1237
filing an own risk and solvency assessment summary report with the 1238
superintendent of insurance. The requirements of these sections 1239
shall apply to all insurers domiciled in this state unless exempt 1240
pursuant to section 3901.376 of the Revised Code.1241

       The general assembly finds and declares that the own risk and 1242
solvency assessment summary report will contain confidential and 1243
sensitive information related to an insurer or insurance group's 1244
identification of risks material and relevant to the insurer or 1245
insurance group filing the report. This information will include 1246
proprietary and trade secret information that has the potential 1247
for harm and competitive disadvantage to the insurer or insurance 1248
group if the information is made public. It is the intent of the 1249
general assembly that the own risk and solvency assessment summary 1250
report shall be a confidential document filed with the 1251
superintendent, that the own risk and solvency assessment summary 1252
report will be shared only as stated in sections 3901.371 to 1253
3901.378 of the Revised Code to assist the superintendent of 1254
insurance in the performance of the superintendent's duties, and 1255
that in no event shall the own risk and solvency assessment 1256
summary report be subject to public disclosure.1257

       Sec. 3901.372.  For the purposes of sections 3901.371 to 1258
3907.378 of the Revised Code:1259

       (A) "Insurance group" means those insurers and affiliates 1260
included within an insurance holding company system as defined in 1261
section 3901.32 of the Revised Code.1262

       (B) "Insurer" has the same meaning as set forth in section 1263
3901.32 of the Revised Code.1264

       (C) "Own risk and solvency assessment" means a confidential 1265
internal assessment, appropriate to the nature, scale, and 1266
complexity of an insurer or insurance group, conducted by that 1267
insurer or insurance group of the material and relevant risks 1268
associated with the insurer or insurance group's current business 1269
plan, and the sufficiency of capital resources to support those 1270
risks.1271

       (D) "Own risk and solvency assessment guidance manual" means 1272
the current version of the own risk and solvency assessment 1273
guidance manual developed and adopted by the national association 1274
of insurance commissioners and as amended from time to time. A 1275
change in the own risk and solvency assessment guidance manual 1276
shall be effective on the first day of January following the 1277
calendar year in which the changes have been adopted by the 1278
national association of insurance commissioners.1279

       (E) "Own risk and solvency assessment summary report" means a 1280
confidential high-level summary of an insurer or insurance group's 1281
own risk and solvency assessment.1282

       Sec. 3901.373.  An insurer shall maintain a risk management 1283
framework to assist the insurer with identifying, assessing, 1284
monitoring, managing, and reporting on its material and relevant 1285
risks. This requirement may be satisfied if the insurance group of 1286
which the insurer is a member maintains a risk management 1287
framework applicable to the operations of the insurer.1288

       Sec. 3901.374.  Unless exempted by section 3901.376 of the 1289
Revised Code, an insurer, or the insurance group of which the 1290
insurer is a member, shall regularly conduct an own risk and 1291
solvency assessment consistent with a process comparable to the 1292
own risk and solvency assessment guidance manual. The own risk and 1293
solvency assessment shall be conducted not less than annually, but 1294
also at any time when there are significant changes to the risk 1295
profile of the insurer or the insurance group of which the insurer 1296
is a member.1297

       Sec. 3901.375.  (A)(1) Upon the request of the superintendent 1298
of insurance, and not more than once annually, an insurer shall 1299
submit to the superintendent an own risk and solvency assessment 1300
summary report, or any combination of reports that together 1301
contain the information described in the own risk and solvency 1302
assessment guidance manual, applicable to the insurer or the 1303
insurance group of which it is a member.1304

       (2) Notwithstanding any request from the superintendent, if 1305
the insurer is a member of an insurance group, the insurer shall 1306
submit the report required by division (A)(1) of this section if 1307
the superintendent is the lead state commissioner of the insurance 1308
group as determined by the procedures within the financial 1309
analysis handbook adopted by the national association of insurance 1310
commissioners.1311

       (B) The report shall include a signature of the insurer or 1312
insurance group's chief risk officer, or other executive having 1313
responsibility for the oversight of the insurer's enterprise risk 1314
management process, attesting to the best of the officer's or 1315
executive's belief and knowledge that the insurer applies the 1316
enterprise risk management process described in the own risk and 1317
solvency assessment summary report, and that a copy of the report 1318
has been provided to the insurer's board of directors or the 1319
appropriate committee thereof.1320

       (C) An insurer may comply with division (A) of this section 1321
by providing the most recent and substantially similar report 1322
provided by the insurer or another member of an insurance group of 1323
which the insurer is a member to the commissioner of another state 1324
or to a supervisor or regulator of a foreign jurisdiction, if that 1325
report provides information that is comparable to the information 1326
described in the own risk and solvency assessment guidance manual. 1327
Any such report in a language other than English must be 1328
accompanied by a translation of that report into the English 1329
language.1330

       Sec. 3901.376.  (A)(1) An insurer shall be exempt from the 1331
requirements of sections 3901.371 to 3901.378 of the Revised Code 1332
if both of the following apply:1333

       (a) The insurer has annual direct written and unaffiliated 1334
assumed premium, including international direct and assumed 1335
premium, less than five hundred million dollars.1336

       (b) The insurance group of which the insurer is a member has 1337
annual direct written and unaffiliated assumed premium, including 1338
international direct and assumed premium, less than one billion 1339
dollars.1340

       (2) The annual direct written and unaffiliated assumed 1341
premium described in divisions (A)(1)(a) and (b) of this section 1342
does not include premiums reinsured with the federal crop 1343
insurance corporation and federal flood program.1344

       (B) If an insurer qualifies for exemption pursuant to 1345
division (A)(1)(a) of this section, but the insurance group of 1346
which the insurer is a member does not qualify for exemption 1347
pursuant to division (A)(1)(b) of this section, and if an own risk 1348
and solvency assessment summary report is required pursuant to 1349
division (E) of this section, then the summary report shall 1350
include every insurer within the insurance group. This requirement 1351
may be satisfied if the insurer submits more than one own risk and 1352
solvency assessment summary report for any combination of insurers 1353
provided the combination of reports includes every insurer within 1354
the insurance group.1355

       (C) If an insurer does not qualify for exemption pursuant to 1356
division (A)(1)(a) of this section, but the insurance group of 1357
which it is a member qualifies for exemption pursuant to division 1358
(A)(1)(b) of this section, then the insurer shall only file an own 1359
risk and solvency assessment summary report if required pursuant 1360
to division (E) of this section. 1361

       (D)(1) An insurer that does not qualify for exemption 1362
pursuant to division (A) of this section may apply to the 1363
superintendent of insurance for a waiver from the requirements of 1364
sections 3901.371 to 3901.378 of the Revised Code based upon 1365
unique circumstances. In deciding whether to grant the insurer's 1366
request for waiver, the superintendent may consider any of the 1367
following:1368

       (a) The type and volume of business written;1369

       (b) The ownership and organizational structure of the insurer 1370
or insurance group of which the insurer is a member;1371

       (c) Any other factor the superintendent considers relevant to 1372
the insurer or insurance group of which the insurer is a member. 1373

       (2) If the insurer is part of an insurance group with 1374
insurers domiciled in more than one state, the superintendent 1375
shall coordinate with the lead state commissioner and with the 1376
other domiciliary commissioners in considering whether to grant 1377
the insurer's request for a waiver.1378

       (E) Notwithstanding the exemptions stated in this section, 1379
the superintendent may require that an insurer maintain a risk 1380
management framework, conduct an own risk and solvency assessment, 1381
and file an own risk and solvency assessment summary report in any 1382
of the following circumstances:1383

       (1) Based on unique circumstances, including the type and 1384
volume of business written and the ownership and organizational 1385
structure of the insurer or insurance group of which the insurer 1386
is a member;1387

       (2) At the request of a federal agency;1388

       (3) At the request of an international supervisor;1389

       (4) If the insurer has risk-based capital for a company 1390
action level event as set forth in section 3903.83 of the Revised 1391
Code, meets one or more of the standards set out in section 1392
3903.09 or 3903.71 of the Revised Code, or otherwise exhibits 1393
qualities of a troubled insurer as determined by the 1394
superintendent.1395

       (F) If an insurer that qualifies for an exemption pursuant to 1396
division (A) of this section subsequently no longer qualifies for 1397
that exemption due to changes in premium as reflected in the 1398
insurer's most recent annual statement, or in the most recent 1399
annual statements of the insurers within the insurance group of 1400
which the insurer is a member, the insurer shall have one year 1401
after the year the threshold is exceeded to comply with the 1402
requirements of sections 3901.371 to 3901.378 of the Revised Code.1403

       Sec. 3901.377.  (A) The own risk and solvency assessment 1404
summary report shall be prepared consistent with the own risk and 1405
solvency assessment guidance manual, subject to the requirements 1406
of division (B) of this section, and all documentation and 1407
supporting information shall be maintained and made available for 1408
examination upon request of the superintendent of insurance.1409

       (B) The superintendent's review of the own risk and solvency 1410
assessment summary report, and any additional requests for 1411
information, shall be made using similar procedures used in the 1412
analysis and examination of multi-state or global insurers and 1413
insurance groups.1414

       Sec. 3901.378.  (A) Documents, materials, or other 1415
information, including the own risk and solvency assessment 1416
summary report, in the possession or control of the department of 1417
insurance that are obtained by, created by, or disclosed to the 1418
superintendent of insurance, or any other person under sections 1419
3901.371 to 3901.378 of the Revised Code, are recognized by this 1420
state as being proprietary and to contain trade secrets.1421

       (B) The documents described in division (A) of this section 1422
shall be confidential by law and privileged, and shall not be 1423
admissible into evidence in any private civil action or subject to 1424
section 149.43 of the Revised Code, subpoena, or discovery. 1425

       (C)(1) Notwithstanding division (B) of this section, the 1426
superintendent may use the documents, materials, or other 1427
information in furtherance of any regulatory or legal action 1428
brought as a part of the superintendent's official duties. 1429

       (2) The superintendent shall not otherwise make the 1430
documents, materials, or other information public without the 1431
prior written consent of the insurer.1432

       (D) Neither the superintendent nor any person who receives 1433
documents, materials, or other own risk and solvency assessment 1434
related information, through examination or otherwise, while 1435
acting under the authority of the superintendent or with whom such 1436
documents, materials, or other information are shared pursuant to 1437
sections 3901.371 to 3901.378 of the Revised Code shall be 1438
permitted or required to testify in any private civil action 1439
concerning any confidential documents, materials, or information 1440
subject to division (A) of this section.1441

       (E)(1) In order to assist in the performance of the 1442
superintendent's regulatory duties, the superintendent may do 1443
either of the following:1444

       (a) Upon request, share documents, materials, or other own 1445
risk and solvency assessment related information, including 1446
confidential and privileged documents, materials, or information 1447
subject to division (A) of this section, and proprietary and trade 1448
secret documents, with other state, federal and international 1449
financial regulatory agencies, members of any supervisory college 1450
as described in section 3901.351 of the Revised Code, the national 1451
association of insurance commissioners, or any third-party 1452
consultant designated by the superintendent;1453

       (b) Receive documents, materials, or other own risk and 1454
solvency assessment related information, including confidential 1455
and privileged documents, materials, or information subject to 1456
division (A) of this section, and proprietary and trade secret 1457
documents, from regulatory officials of other foreign or domestic 1458
jurisdictions, including members of any supervisory college as 1459
described in section 3901.351 of the Revised Code, and from the 1460
national association of insurance commissioners.1461

       (2) The recipient of any information pursuant to division 1462
(E)(1)(a) of this section shall agree in writing to maintain the 1463
confidentiality and privileged status of the documents, materials, 1464
or other information and verify in writing their legal authority 1465
to maintain confidentiality. If the superintendent receives any 1466
information pursuant to division (E)(1)(b) of this section, the 1467
superintendent shall maintain as confidential or privileged any 1468
documents, materials, or information received with notice or the 1469
understanding that it is confidential or privileged under the laws 1470
of the jurisdiction that is the source of the document, material, 1471
or information.1472

       (3) The superintendent shall enter into a written agreement 1473
with the national association of insurance commissioners or a 1474
third-party consultant governing sharing and use of information 1475
provided pursuant to sections 3901.371 to 3901.378 of the Revised 1476
Code. The written agreement shall do the all of the following:1477

       (a) Specify procedures and protocols regarding the 1478
confidentiality and security of information shared with the 1479
national association of insurance commissioners or a third-party 1480
consultant pursuant to sections 3901.371 to 3901.378 of the 1481
Revised Code, including procedures and protocols for sharing by 1482
the national association of insurance commissioners with other 1483
state regulators from states in which the insurance group has 1484
domiciled insurers;1485

       (b) Provide that the recipient of information agrees in 1486
writing to maintain the confidentiality and privileged status of 1487
the own risk and solvency assessment related documents, materials, 1488
or other information obtained pursuant to sections 3901.371 to 1489
3901.378 of the Revised Code, and has verified in writing the 1490
legal authority to maintain confidentiality;1491

       (c) Specify that ownership of information shared with the 1492
national association of insurance commissioners or a third-party 1493
consultant pursuant to sections 3901.371 to 3901.378 of the 1494
Revised Code remains with the superintendent and the national 1495
association of insurance commissioners' or a third-party 1496
consultant's use of the information is subject to the direction of 1497
the superintendent;1498

       (d) Prohibit the national association of insurance 1499
commissioners or a third-party consultant from storing the 1500
information obtained pursuant to sections 3901.371 to 3901.378 of 1501
the Revised Code in a permanent database after the underlying 1502
analysis is completed;1503

       (e) Require prompt notice to be given to an insurer whose 1504
confidential information in the possession of the national 1505
association of insurance commissioners or a third-party consultant 1506
pursuant to sections 3901.371 to 3901.378 of the Revised Code is 1507
subject to a request or subpoena for disclosure or production of 1508
the information;1509

       (f) Require the national association of insurance 1510
commissioners or a third-party consultant to consent to 1511
intervention by an insurer in any judicial or administrative 1512
action in which the national association of insurance 1513
commissioners or a third-party consultant may be required to 1514
disclose confidential information about the insurer that was 1515
obtained pursuant to sections 3901.371 to 3901.378 of the Revised 1516
Code;1517

       (g) Require the national association of insurance 1518
commissioners or a third-party consultant to use documents, 1519
materials, or other information, including the own risk solvency 1520
assessment summary report, for the specific purposes as directed 1521
by the superintendent;1522

        (h) Prohibit the national association of insurance 1523
commissioners or a third-party consultant from using, sharing, or 1524
disclosing any documents, materials, or other information, 1525
including the own risk and solvency assessment summary report, 1526
beyond the scope of the responsibilities outlined by the 1527
superintendent;1528

        (i) Provide for the insurer's written consent in the case of 1529
an agreement involving a third-party consultant.1530

       (F) The sharing of information, materials, and documents by 1531
the superintendent pursuant to sections 3901.371 to 3901.378 of 1532
the Revised Code shall not constitute a delegation of regulatory 1533
or rule-making authority, and the superintendent is solely 1534
responsible for the administration, execution, and enforcement of 1535
sections 3901.371 to 3901.378 of the Revised Code.1536

       (G) No waiver of any applicable privilege or claim of 1537
confidentiality in the documents, proprietary and trade-secret 1538
materials, or other own risk and solvency assessment related 1539
information shall occur as a result of disclosure of such own risk 1540
and solvency assessment related information, materials, or 1541
documents to the superintendent as a result of sharing authorized 1542
in sections 3901.371 to 3901.378 of the Revised Code.1543

       (H) Documents, materials, or other information in the 1544
possession or control of the national association of insurance 1545
commissioners or a third-party consultant pursuant to sections 1546
3901.371 to 3901.378 of the Revised Code shall be confidential by 1547
law and privileged, and shall not be subject to section 149.43 of 1548
the Revised Code, subpoena, discovery, or admissible in evidence 1549
in any private civil action.1550

       Sec. 3901.41.  (A) As used in this section:1551

       (1) "Automated transaction" has the same meaning as in 1552
section 1306.01 of the Revised Code, and includes electronic 1553
transactions between two or more persons conducting business 1554
pursuant to the laws of this state relating to insurance.1555

       (2) "Contact point" means any electronic identification to 1556
which messages can be sent, including, but not limited to, any of 1557
the following:1558

       (a) An electronic mail address;1559

       (b) An instant message identity;1560

       (c) A wireless telephone number, or any other personal 1561
electronic communication device;1562

       (d) A facsimile number.1563

       (3) "Insured" means a certificate holder, contract owner, 1564
customer, policyholder, or subscriber as those terms are used in 1565
the laws of this state relating to insurance.1566

       (4) "Insurer" has the same meaning as in section 3901.32 of 1567
the Revised Code.1568

       (5) "Laws of this state relating to insurance" has the same 1569
meaning as in section 3901.04 of the Revised Code.1570

       (6) "Personally identifiable information" means any 1571
individually identifiable information gathered in connection with 1572
an insurance transaction, including a person's name, address, 1573
social security number, and banking information.1574

       (7) "Secure web site" means a web site that meets both of the 1575
following criteria:1576

       (a) The web site uses the hypertext transfer protocol secure 1577
communication protocol or other equally secure communication 1578
protocol.1579

       (b) The web site requires a person to enter a unique user 1580
credential to access personally identifiable information for which 1581
the person has the legal right to access. 1582

       (B) Notwithstanding any laws of this state relating to 1583
insurance, sections 1306.01 to 1306.23 of the Revised Code, the 1584
"Uniform Electronics Transactions Act," apply to the business of 1585
insurance in this state.1586

       (C)(1) If an insured agrees to conduct the business of 1587
insurance via an automated transaction, any information issued or 1588
delivered in writing may be issued or delivered electronically to 1589
a contact point provided by the insured, as long as both of the 1590
following apply:1591

       (a) The transmission of information is in compliance with 1592
sections 1306.07 and 1306.14 of the Revised Code.1593

       (b) The details of the automated transaction are fully 1594
disclosed to the insured in the application, policy, certificate, 1595
contract of insurance, or by another method that ensures notice to 1596
the insured. An insurer's form used only to notify an insured of 1597
and obtain consent for an automated transaction does not need to 1598
be approved or accepted by the superintendent of insurance.1599

       (2)(a) Except for notices of cancellation, nonrenewal, or 1600
termination, an insurer may deliver information via a secure web 1601
site if the insurer sends an electronic notice to a contact point 1602
and the electronic notice includes a hyperlink to the secure web 1603
site.1604

       (b) If an insurer uses a secure web site to deliver changes 1605
in terms or conditions in an insured's policy, certificate, or 1606
contract of insurance, including any endorsements or amendments, 1607
the electronic notice to the insured's contact point shall include 1608
all of the following:1609

       (i) A list or summary of the changes; 1610

       (ii) A link to the complete document located on the insurer's 1611
secure web site; 1612

       (iii) The following or substantially similar statement 1613
displayed in a prominent manner: 1614

       "There are changes in the terms or conditions of your policy, 1615
certificate, or contract of insurance."1616

       (3) At a minimum, the details of the automated transaction 1617
shall include all of the following:1618

       (a) A clear and conspicuous statement informing the insured 1619
of any right or option of the insured to receive a record on 1620
paper;1621

       (b) The right of the insured to withdraw the insured's 1622
consent, and any consequences or fees if the insured withdraws 1623
consent;1624

       (c) A description of the procedures the insured must use to 1625
withdraw consent and to update the insured's contact point.1626

       (4) Agreement to participate in a part of an automated 1627
transaction shall not be used to confirm the insured's consent to 1628
transact the entire business of insurance pursuant to this 1629
section.1630

       (5) A withdrawal of consent by an insured shall be effective 1631
within a reasonable time period, not to exceed ten business days 1632
after the receipt of the withdrawal by the insurer. 1633

       (D) The insurer shall send all notices of cancellation, 1634
nonrenewal, termination, or changes in the terms or conditions of 1635
the policy, certificate, or contract of insurance to the last 1636
known contact point supplied by the insured. If the insurer has 1637
knowledge that the insured's contact point is no longer valid, the 1638
insurer shall send the information via regular mail to the last 1639
known address furnished to the insurer by the insured.1640

       (E) Any insurer conducting the business of insurance via an 1641
automated transaction shall allow the insurer's insureds who agree 1642
to participate in an automated transaction the option to withdraw 1643
consent from participating in the automated transaction.1644

       (F) Notwithstanding any laws or regulations of this state 1645
relating to insurance, any policy, certificate, or contract of 1646
insurance, including any endorsements or amendments, that do not 1647
contain personally identifiable information may be posted to the 1648
insurer's web site in lieu of any other method of delivery. If the 1649
insurer elects to post any policy, certificate, or contract of 1650
insurance to the insurer's web site, all of the following shall 1651
apply:1652

       (1) The policy, certificate, or contract of insurance is 1653
readily accessible by the insured and, once the policy, 1654
certificate, or contract of insurance is no longer used by the 1655
insurer in this state, it is stored in a readily accessible 1656
archive;1657

       (2) The policy, certificate, or contract of insurance is 1658
posted in such a manner that the insured can easily identify the 1659
insured's applicable policy, certificate, or contract and print or 1660
download the insured's documents without charge and without the 1661
use of any special program or application that is not readily 1662
available to the public without charge;1663

       (3) The insurer provides written notice at the time of 1664
issuance of the initial policy, certificate, contract, or any 1665
renewal forms of a method by which the insured may obtain upon 1666
request a paper or electronic copy of their policy, certificate, 1667
or contract without charge;1668

       (4) The insurer clearly identifies the applicable policy, 1669
endorsements, amendments, certificate, or contract of insurance 1670
purchased by the insured on any declaration page, certificate of 1671
insurance, summary of benefits, or other evidence of coverage 1672
issued to the insured;1673

       (5) The insurer gives notice, in the manner it customarily 1674
communicates with an insured, of any changes to the policy, 1675
certificate, or contract of insurance, including any endorsements 1676
or amendments, and of the insured's right to obtain upon request a 1677
paper or electronic copy of the policy, endorsements, or 1678
amendments without charge.1679

       (G) Notwithstanding any other section of Title XXXIX or 1680
Chapters 1739. or 1751. of the Revised Code or rules adopted 1681
thereunder to the contrary, an insurer may deliver any notices, 1682
documents, or information to an insured via an automated 1683
transaction pursuant to this section.1684

       (H) This section does not supersede any time periods, filing 1685
requirements, or content of notices, documents, notices to 1686
insureds' agents required pursuant to sections 3937.25, 3937.26, 1687
and 3937.27 of the Revised Code, or information otherwise required 1688
by a law other than this section relating to insurance. This 1689
section does not apply to disclosures through electronic media of 1690
certificates, explanation of benefit statements, and other 1691
mandated materials under the "Employee Retirement Income Security 1692
Act of 1974," 88 Stat. 829, 29 U.S.C. 1001, as amended, and any 1693
regulation adopted thereunder.1694

       (I) If the consent of an insured to receive certain notices, 1695
documents, or information in an electronic form is on file with an 1696
insurer before the effective date of this section, if the consent 1697
was not accompanied by the details of the automated transaction 1698
described in division (C)(3) of this section, and if, pursuant to 1699
this section, an insurer intends to deliver additional notices, 1700
documents, or information to that insured in an electronic form, 1701
then, prior to delivering or at the time of delivering such 1702
additional notice, documents, or information electronically, the 1703
insurer shall notify the insured of the details of the automated 1704
transaction in compliance with division (C)(3) of this section. 1705

       (J) The superintendent of insurance may adopt rules in 1706
accordance with Chapter 119. of the Revised Code as the 1707
superintendent considers necessary to carry out the purposes of 1708
this section.1709

       Sec. 3901.62.  (A) Except as provided in sections 3901.63 and 1710
3901.64 of the Revised Code, a domestic ceding insurer that is 1711
authorized to do any insurance business in this state may take 1712
credit for any reinsurance ceded as either an asset or a reduction 1713
of liability only if one of the following applies:1714

       (1) The reinsurance is ceded to an assuming insurer that is 1715
authorized to do any insurance or reinsurance business in this 1716
state.1717

       (2) The reinsurance is ceded to an assuming insurer that is 1718
accredited by the superintendent of insurance as a reinsurer in 1719
this state in accordance with division (B) of this section.1720

       (3) The reinsurance is ceded to an assuming insurer that is 1721
not authorized to do any insurance or reinsurance business in this 1722
state, provided the reinsurance is ceded to a reinsurance pool or 1723
other risk-sharing entity in which participation is required by 1724
law, rule, or regulation of the jurisdiction in which the pool or 1725
entity is located.1726

       (3)(4) The reinsurance is ceded to an assuming insurer that 1727
maintains a trust fund in a qualified United States financial 1728
institution, as defined in division (B)(2) of section 3901.63 of 1729
the Revised Code, for the payment of the valid claims of its 1730
United States policyholders and ceding insurers, and their assigns 1731
and successors in interest in accordance with division (C) of this 1732
section.1733

       (5) The reinsurance is ceded to an assuming insurer that has 1734
been certified by the superintendent as a reinsurer in this state 1735
and that secures its obligations in accordance with division (D) 1736
of this section. 1737

       (B)(1) In order to be eligible for accreditation under 1738
division (A)(2) of this section, the assuming insurer shall do all 1739
of the following:1740

       (a) File with the superintendent evidence of its submission 1741
to this state's jurisdiction;1742

       (b) Submit to this state's authority to examine its books and 1743
records;1744

       (c) Maintain a license to transact insurance or reinsurance 1745
in at least one state or, in the case of a United States branch of 1746
a foreign or alien assuming insurer, be entered through and 1747
licensed to transact insurance or reinsurance in at least one 1748
state;1749

       (d) File annually with the superintendent a copy of its 1750
annual statement filed with the insurance department of its state 1751
of domicile, and a copy of its most recent audited financial 1752
statement; 1753

       (e) Demonstrate to the satisfaction of the superintendent 1754
that it has adequate financial capacity to meet its reinsurance 1755
obligations and is otherwise qualified to assume reinsurance from 1756
domestic insurers. 1757

       (2) An assuming insurer is considered to meet the requirement 1758
of division (B)(1)(e) of this section as of the time of its 1759
application to the superintendent for accreditation if it 1760
maintains a surplus with regard to policyholders in an amount not 1761
less than twenty million dollars, and the superintendent has not 1762
denied its accreditation within ninety days after submission of 1763
its application. 1764

       (C)(1) A trust maintained by an assuming insurer under 1765
division (A)(3)(4) of this section shall meet the following 1766
requirements:1767

       (1)(a) In the case of a single assuming insurer, the trust 1768
shall consist of a trusteed account representing the assuming 1769
insurer's liabilities attributable to business underwritten in the 1770
United States. A trusteed surplus of not less than twenty million 1771
dollars shall be maintained by the assuming insurer, except that 1772
at any time after the assuming insurer has permanently 1773
discontinued underwriting new business secured by the trust for at 1774
least three full years, the superintendent with principal 1775
regulatory oversight of the trust may authorize a reduction in the 1776
required trusteed surplus, but only after a finding, based on an 1777
assessment of the risk, that the new required surplus level is 1778
adequate for the protection of ceding insurers within the United 1779
States, policyholders, and claimants in light of reasonably 1780
foreseeable adverse loss development. 1781

       The risk assessment may involve an actuarial review, 1782
including an independent analysis of reserves and cash flows, and 1783
shall consider all material risk factors, including when 1784
applicable the lines of business involved, the stability of the 1785
incurred loss estimates, and the effect of the surplus 1786
requirements on the assuming insurer's liquidity or solvency. 1787

       The minimum required trusteed surplus shall not be reduced to 1788
an amount less than thirty per cent of the assuming insurer's 1789
liabilities attributable to reinsurance ceded by ceding insurers 1790
within the United States covered by the trust.1791

       (2)(b) In the case of a group of assuming insurers, including 1792
incorporated and individual unincorporated underwriters, the trust 1793
shall consist of a trusteed account representing the group's 1794
liabilities attributable to business written in the United States. 1795
A trusteed surplus shall be maintained by the group, of which 1796
surplus one hundred million dollars shall be held jointly for the 1797
benefit of the United States ceding insurers of any member of the 1798
group. The following requirements apply to the group of assuming 1799
insurers:1800

       (a)(i) The incorporated members of the group shall not engage 1801
in any business other than underwriting as a member of the group, 1802
and shall be subject to the same level of solvency regulation and 1803
control by the group's domiciliary regulator as are the 1804
unincorporated members.1805

       (b)(ii) The group shall make available to the superintendent 1806
of insurance an annual certification of the solvency of each 1807
underwriter in the group. The certification shall be provided by 1808
the group's domiciliary regulator and its independent public 1809
accountants.1810

       (3)(c) In the case of a group of incorporated insurers under 1811
common administration with aggregate policyholders' surplus of ten 1812
billion dollars that has continuously transacted an insurance 1813
business outside the United States for at least three years 1814
immediately prior to assuming reinsurance, the trust shall be in 1815
an amount equal to the group's several liabilities attributable to 1816
business ceded by United States ceding insurers to any member of 1817
the group pursuant to reinsurance contracts issued in the name of 1818
the group. A joint trusteed surplus shall be maintained by the 1819
group, of which surplus one hundred million dollars shall be held 1820
jointly for the benefit of United States ceding insurers of any 1821
member of the group as additional security for any such 1822
liabilities. The following requirements apply to the group of 1823
incorporated insurers:1824

       (a)(i) The group shall comply with all filing requirements 1825
contained in this section.1826

       (b)(ii) The books and records of the group shall be subject 1827
to examination by the superintendent in the same manner as the 1828
books and records of insurers are subject to examination by the 1829
superintendent in accordance with section 3901.07 of the Revised 1830
Code. The group shall bear the expenses of these examinations in 1831
the manner provided by that section.1832

       (c)(iii) Each member of the group shall make available to the 1833
superintendent an annual certification of the member's solvency by 1834
the member's domiciliary regulator and an independent public 1835
accountant.1836

       (C)(2) A trust maintained by an assuming insurer under 1837
division (A)(3)(4) of this section shall remain in effect for as 1838
long as the assuming insurer has outstanding obligations due under 1839
the reinsurance agreements subject to the trust. The trust shall 1840
be in a form approved by the superintendent and shall include the 1841
following:1842

       (1)(a) The trust instrument shall provide that contested 1843
claims are valid and enforceable upon the final order of any court 1844
of competent jurisdiction in the United States.1845

       (2)(b) The trust shall vest legal title to its assets in the 1846
trustees of the trust for its United States policyholders and 1847
ceding insurers, and their assigns and successors in interest.1848

       (3)(c) The trust, and the assuming insurer maintaining the 1849
trust, shall allow the superintendent to conduct examinations in 1850
the same manner as the superintendent conducts examinations of 1851
insurers under section 3901.07 of the Revised Code.1852

       (D)(3) No later than the last day of February of each year, 1853
the trustees of a trust maintained by an assuming insurer under 1854
division (A)(3)(4) of this section shall provide the 1855
superintendent with a written report setting forth the balance of 1856
the trust and listing the trust's investments as of the preceding 1857
thirty-first day of December. The trustees shall certify the date 1858
of the termination of the trust, if termination of the trust is 1859
planned, or shall certify that the trust does not expire prior to 1860
the following thirty-first day of December.1861

       (E)(4) To enable the superintendent to determine the 1862
sufficiency of a trust maintained by an assuming insurer under 1863
division (A)(3)(4) of this section, the assuming insurer shall 1864
annually report information on the trust to the superintendent 1865
that is substantially the same as that information licensed 1866
insurers are required to report under sections 3907.19, 3909.06, 1867
and 3929.30 of the Revised Code on forms adopted under section 1868
3901.77 of the Revised Code.1869

       (D)(1) In order to be eligible for certification under 1870
division (A)(5) of this section, the assuming insurer shall do all 1871
of the following:1872

       (a) Be domiciled and licensed to transact insurance or 1873
reinsurance in a qualified jurisdiction as determined by the 1874
superintendent pursuant to division (D)(3) of this section;1875

       (b) Maintain minimum capital and surplus, or its equivalent, 1876
in an amount to be determined by the superintendent in rule or 1877
regulation;1878

       (c) Maintain financial strength ratings from two or more 1879
rating agencies that meet criteria the superintendent sets forth 1880
in rule or regulation;1881

       (d) Agree to submit to the jurisdiction of this state, 1882
appoint the superintendent as its agent for service of process in 1883
this state, and agree to provide security for one hundred per cent 1884
of the assuming insurer's liabilities attributable to reinsurance 1885
ceded by ceding insurers in the United States if it resists 1886
enforcement of a final judgment from the United States;1887

       (e) Agree to meet applicable information filing requirements 1888
as determined by the superintendent with respect to an initial 1889
application for certification and on an ongoing basis; 1890

       (f) Satisfy any other requirements for certification 1891
considered relevant by the superintendent.1892

       (2) An association, including incorporated and individual 1893
unincorporated underwriters, may be a certified reinsurer. In 1894
order to be eligible for certification, an association, in 1895
addition to satisfying the requirements of division (D)(1) of this 1896
section, shall also meet the following requirements:1897

       (a) The association shall satisfy its minimum capital and 1898
surplus requirements through the capital and surplus equivalents 1899
(net of liabilities), or the net liabilities, of the association 1900
and its members which shall include a joint central fund that may 1901
be applied to any unsatisfied obligation of the association or any 1902
of its members, in an amount determined by the superintendent in 1903
order to provide adequate protection.1904

       (b) The incorporated members of the association shall not be 1905
engaged in any business other than underwriting as a member of the 1906
association, and shall be subject to the same level of regulation 1907
and solvency control by the association's domiciliary regulator as 1908
the unincorporated members.1909

       (c) The association shall provide the superintendent an 1910
annual certification by the association's domiciliary regulator of 1911
the solvency of each underwriter member within ninety days after 1912
its financial statements are due to be filed with the 1913
association's domiciliary regulator. If a certification is 1914
unavailable, the association shall provide the superintendent with 1915
financial statements prepared by independent public accountants of 1916
each underwriter member of the association. 1917

       (3) The superintendent shall create and publish a list of 1918
qualified jurisdictions under which an assuming insurer licensed 1919
and domiciled in such jurisdiction is eligible to be considered by 1920
the superintendent for certification as a certified reinsurer. 1921

       (a) The superintendent shall consider the list of qualified 1922
jurisdictions published through the national association of 1923
insurance commissioner's committee process in determining 1924
qualified jurisdictions. If the superintendent approves a 1925
jurisdiction as qualified that does not appear on the list, the 1926
superintendent shall provide justification in accordance with 1927
criteria to be developed by the superintendent under rule or 1928
regulation.1929

       (b) Jurisdictions within the United States that meet the 1930
requirement for accreditation under the national association of 1931
insurance commissioner's financial standards and accreditation 1932
program shall be recognized as qualified. 1933

       (c) To determine if a domiciliary jurisdiction not located 1934
within the United States is eligible to be recognized as a 1935
qualified jurisdiction, the superintendent shall evaluate the 1936
appropriateness and effectiveness of the reinsurance supervisory 1937
system of the jurisdiction, both initially and on an ongoing 1938
basis, and consider the rights, benefits, and the extent of 1939
reciprocal recognition afforded by the jurisdiction to reinsurers 1940
licensed and domiciled in the United States. 1941

       (d) A qualified jurisdiction shall agree to share information 1942
and cooperate with the superintendent with respect to all 1943
certified reinsurers domiciled within that jurisdiction. 1944

       (e) A jurisdiction shall not be recognized as a qualified 1945
jurisdiction if the superintendent has determined that the 1946
jurisdiction does not adequately and promptly enforce final 1947
judgments and arbitration awards from the United States. 1948

       (f) If a certified reinsurer's domiciliary jurisdiction 1949
ceases to be a qualified jurisdiction, the superintendent may 1950
revoke the reinsurer's certification or suspend the reinsurer's 1951
certification indefinitely.1952

       (g) The superintendent may consider additional factors as the 1953
superintendent considers appropriate. 1954

       (4) The superintendent shall assign a rating to each 1955
certified reinsurer giving due consideration to the financial 1956
strength ratings assigned by rating agencies pursuant to division 1957
(D)(1)(c) of this section. The superintendent shall publish a list 1958
of all certified reinsurers and their ratings.1959

       (5) A certified reinsurer shall secure obligations assumed 1960
from a ceding insurer within the United States at a level 1961
consistent with its rating as specified by the superintendent in 1962
rule or regulation.1963

       (a) Except as otherwise provided in division (D)(5) of this 1964
section, a certified reinsurer shall maintain security in a form 1965
acceptable to the superintendent and consistent with section 1966
3901.63 of the Revised Code, or in a multibeneficiary trust on 1967
behalf of the ceding insurer in accordance with division (A)(4) of 1968
this section, in order for a domestic ceding insurer to qualify 1969
for full financial statement credit for reinsurance ceded to a 1970
certified reinsurer. 1971

       (b) If a certified reinsurer chooses to secure its 1972
obligations incurred as a certified reinsurer in the form of a 1973
multibeneficiary trust for the benefit of the ceding insurer, the 1974
certified reinsurer shall maintain separate trust accounts for its 1975
obligations incurred under reinsurance agreements issued or 1976
renewed as a certified reinsurer with reduced security as 1977
permitted by this division or comparable laws of other 1978
jurisdictions within the United States, and for its obligations 1979
subject to division (A)(4) of this section. 1980

       (c) Upon termination of any such trust account described in 1981
division (A)(4) of this section, a certified reinsurer shall be 1982
bound by the language of the trust and agreement with the 1983
superintendent that has principal regulatory oversight of each 1984
trust account to fund any deficiency of any other trust account 1985
out of the remaining surplus of such trust as a condition to 1986
certification under division (D)(1) of this section. 1987

       (d) The minimum trusteed surplus requirements provided in 1988
division (C) of this section are not applicable with respect to a 1989
multibeneficiary trust maintained by a certified reinsurer for the 1990
purpose of securing obligations incurred under division (A)(5) of 1991
this section, except that such trust shall maintain a minimum 1992
trusteed surplus of ten million dollars.1993

       (e) With respect to obligations incurred by a certified 1994
reinsurer under division (A)(5) of this section, if the security 1995
is insufficient, the superintendent shall reduce the allowable 1996
credit by an amount proportionate to the deficiency, and the 1997
superintendent may impose further reductions in allowable credit 1998
upon finding that there is a material risk that the certified 1999
reinsurer's obligations will not be paid in full when due.2000

       (f) Except as otherwise provided in division (D)(5) of this 2001
section, a reinsurer whose certification has been terminated for 2002
any reason shall be treated under this section as a certified 2003
reinsurer required to secure one hundred per cent of its 2004
obligations. The superintendent may continue to assign a higher 2005
rating to the reinsurer if the reinsurer is in inactive status or 2006
the reinsurer's certification has been suspended. As used in 2007
division (D)(5)(f) of this section, "terminated" means revocation, 2008
suspension, voluntary surrender, or inactive status.2009

       (6) If an applicant for certification has been certified as a 2010
reinsurer in a national association of insurance commissioners 2011
accredited jurisdiction, the superintendent may defer to that 2012
jurisdiction's certification and rating assignment, and the 2013
assuming insurer shall be considered to be a certified reinsurer 2014
in this state.2015

       (7) A certified reinsurer that ceases to assume new business 2016
in this state may request to maintain its certification in 2017
inactive status in order to continue to qualify for a reduction in 2018
security for its in-force business. An inactive certified 2019
reinsurer shall continue to comply with all applicable 2020
requirements of division (A)(5) of this section, and the 2021
superintendent shall assign a rating that takes into account, if 2022
relevant, the reasons why the reinsurer is not assuming new 2023
business.2024

       (F)(E) An assuming insurer shall file a written instrument 2025
appointing an attorney as its agent in this state upon whom all 2026
service of process may be served. Service of process upon this 2027
agent shall bring the assuming insurer within the jurisdiction of 2028
the courts of this state as if served upon an agent pursuant to 2029
section 3927.03 of the Revised Code.2030

       (F) Nothing in this section shall prohibit the parties to a 2031
reinsurance agreement from agreeing to provisions in the agreement 2032
establishing security requirements that exceed the minimum 2033
security requirements established for certified reinsurers under 2034
this section.2035

       (G)(1) In order to facilitate the prompt payment of claims, 2036
the superintendent may permit a certified reinsurer to defer the 2037
posting of security for catastrophe recoverables for a period of 2038
up to one year from the date of the first instance of a liability 2039
reserve entry by the ceding insurer as a result of a loss from a 2040
catastrophic occurrence.2041

       (2) Upon notice by the ceding insurer to the superintendent 2042
that the certified reinsurer has failed to pay claims owed under a 2043
reinsurance agreement in a timely manner, the superintendent shall 2044
notify the certified reinsurer that it is no longer permitted to 2045
defer the posting of security for catastrophe recoverables. 2046

       (3) Reinsurance recoverables for only the following lines of 2047
business, as reported on the national association of insurance 2048
commissioners' annual financial statement related specifically to 2049
the catastrophic occurrence, shall be included in the deferral:2050

       (a) Fire; 2051

       (b) Allied lines; 2052

       (c) Farmowner's multiple peril;2053

       (d) Homeowners multiple peril; 2054

       (e) Commercial multiple peril; 2055

       (f) Inland marine; 2056

       (g) Earthquake; 2057

       (h) Auto physical damage. 2058

       (4) The superintendent may adopt rules in accordance with 2059
Chapter 119. of the Revised Code to establish the process for a 2060
certified reinsurer to seek a deferral of posting of security for 2061
catastrophe recoverables.2062

       Sec. 3901.621.  (A) If a reinsurer accredited pursuant to 2063
division (B)(1) of section 3901.62 of the Revised Code or 2064
certified pursuant to division (D)(1) of that section ceases to 2065
meet the requirements for accreditation or certification, the 2066
superintendent may suspend or revoke the reinsurer's accreditation 2067
or certification after a hearing held pursuant to Chapter 119. of 2068
the Revised Code. The suspension or revocation shall not take 2069
effect until after the superintendent's order or hearing, unless 2070
one of the following applies:2071

       (1) The reinsurer waives its right to a hearing.2072

       (2) The superintendent's order is based on regulatory action 2073
by the reinsurer's domiciliary jurisdiction or the voluntary 2074
surrender or termination of the reinsurer's eligibility to 2075
transact insurance or reinsurance business in its domiciliary 2076
jurisdiction or in the primary certifying state of the reinsurer 2077
under division (D)(6) of section 3901.62 of the Revised Code.2078

       (3) The superintendent finds that an emergency requires 2079
immediate action, and a court of competent jurisdiction has not 2080
stayed the superintendent's action.2081

       (B) While a reinsurer's accreditation or certification is 2082
suspended, no reinsurance contract issued or renewed after the 2083
effective date of the suspension qualifies for credit except to 2084
the extent that the reinsurer's obligations under the contract are 2085
secured in accordance with section 3901.63 of the Revised Code. 2086

       (C) If the superintendent revokes a reinsurer's accreditation 2087
or certification, no credit for reinsurance may be granted under 2088
section 3901.62 or 3901.63 of the Revised Code after the effective 2089
date of the revocation except to the extent that the reinsurer's 2090
obligations under the contract are secured in accordance with 2091
division (D)(5) of section 3901.62 or section 3901.63 of the 2092
Revised Code.2093

       Sec. 3901.63.  (A) If section 3901.62 of the Revised Code 2094
does not apply to the reinsurance ceded to an assuming insurer by 2095
a domestic ceding insurer that is authorized to do any insurance 2096
business in this state, the ceding insurer may take credit for the 2097
reinsurance ceded as a reduction of liability in an amount not 2098
exceeding the liabilities carried by the ceding insurer, if the 2099
ceding insurer complies with section 3901.64 of the Revised Code, 2100
and if funds are held directly by the ceding insurer or in trust 2101
on behalf of the ceding insurer, in accordance with this section, 2102
as security for the payment of obligations under the reinsurance 2103
contract with the assuming insurer.2104

       (B)(1) If the funds are held directly by the ceding insurer 2105
under division (A) of this section, the funds shall be held in the 2106
United States and shall be under the exclusive control of, and 2107
subject to withdrawal solely by, the ceding insurer. If the funds 2108
are held in trust on behalf of the ceding insurer under division 2109
(A) of this section, the funds shall be held in the United States 2110
in a qualified United States financial institution.2111

       (2) For the purposes of division (B)(1) of this section, a 2112
"United States financial institution" is qualified if both of the 2113
following apply:2114

       (a) The institution is organized under or, in the case of a 2115
United States branch or agency office of a foreign banking 2116
organization, is chartered under the laws of the United States or 2117
any state thereof and has been granted authority to operate with 2118
fiduciary powers.2119

       (b) The institution is regulated, supervised, and examined by 2120
federal or state officials that have regulatory authority over 2121
banks and trust companies.2122

       (C) The funds held directly by the ceding insurer or in trust 2123
on behalf of the ceding insurer shall be in any of the following 2124
forms:2125

       (1) Cash;2126

       (2) Securities that are listed by the securities valuation 2127
office of the national association of insurance commissioners, 2128
including those considered exempt from filing as defined by the 2129
purposes and procedures manual of the securities valuation office,2130
and that qualify as admitted assets;2131

       (3) Irrevocable, unconditional, and automatically renewable 2132
letters of credit that are issued or confirmed by a qualified 2133
United States financial institution. For purposes of division 2134
(C)(3) of this section, a United States financial institution is 2135
qualified if all of the following apply:2136

       (a) It is organized under or, in the case of a United States 2137
branch or agency office of a foreign banking organization, is 2138
chartered under the laws of the United States or any state 2139
thereof.2140

       (b) It is regulated, supervised, and examined by federal or 2141
state officials that have regulatory authority over banks and 2142
trust companies.2143

       (c) The superintendent of insurance or the securities 2144
valuation office of the national association of insurance 2145
commissioners has determined that it meets such standards of 2146
financial condition and standing as are considered necessary and 2147
appropriate for purposes of ensuring that its letters of credit 2148
will be of a quality that is acceptable to the superintendent.2149

       (4) Any other form of security the superintendent determines 2150
to be acceptable.2151

       (D) Notwithstanding any subsequent failure of an issuing or 2152
confirming financial institution to meet the standards of issuer 2153
acceptability set forth in division (C)(3) of this section, a 2154
letter of credit issued or confirmed by a financial institution 2155
that meets those standards on the date of the issuance or 2156
confirmation shall continue to be acceptable as security until its 2157
expiration, extension, renewal, modification, or amendment, 2158
whichever occurs first.2159

       Sec. 3901.631.  (A) A domestic ceding insurer shall take 2160
steps to manage its reinsurance recoverables proportionate to its 2161
own book of business. 2162

       (1) A domestic ceding insurer shall notify the superintendent 2163
within thirty days after reinsurance recoverables from any single 2164
assuming insurer, or group of affiliated assuming insurers, exceed 2165
fifty per cent of the domestic ceding insurer's last reported 2166
surplus to policyholders, or after it has determined that 2167
reinsurance recoverables from any single assuming insurer, or 2168
group of affiliated assuming insurers, are likely to exceed this 2169
limit.2170

       (2) The notification required in division (A)(1) of this 2171
section shall demonstrate that the exposure is safely managed by 2172
the domestic ceding insurer. 2173

       (B) A domestic ceding insurer shall take steps to diversify 2174
its reinsurance program. 2175

       (1) A domestic ceding insurer shall notify the superintendent 2176
within thirty days after ceding to any single assuming insurer, or 2177
group of affiliated assuming insurers, more than twenty per cent 2178
of the ceding insurer's gross written premium in the prior 2179
calendar year, or after it has determined that the reinsurance 2180
ceded to any single assuming insurer, or group of affiliated 2181
assuming insurers, is likely to exceed this limit. 2182

       (2) The notification required in division (B)(1) of this 2183
section shall demonstrate that the exposure is safely managed by 2184
the domestic ceding insurer.2185

       Sec. 3901.64.  (A) A domestic ceding insurer may take credit 2186
for any reinsurance ceded as provided in sections 3901.61 to 2187
3901.63 of the Revised Code only if the reinsurance agreement 2188
contained in the reinsurance contract, and any agreement that 2189
provides security for the payment of the obligations under the 2190
reinsurance agreement, including any trust agreement, provide, in 2191
substance, for the following:2192

       (1) In the event of the insolvency of the ceding insurer, the 2193
reinsurance, whether paid directly or from trust assets securing 2194
the reinsurance agreement, shall be payable by the assuming 2195
insurer on the basis of the liability of the ceding insurer under 2196
the policy or contract reinsured, without any diminution because 2197
the ceding insurer is insolvent or because the liquidator or 2198
statutory receiver has failed to pay all or any portion of any 2199
claims;2200

       (2) The reinsurance payments, whether paid directly or from 2201
trust assets securing the reinsurance agreement, shall be made by 2202
the assuming insurer directly to the ceding insurer, or in the 2203
event of its insolvency or liquidation, to its liquidator or 2204
statutory receiver except where the reinsurance contract or other 2205
written agreement specifically provides for direct payment of the 2206
reinsurance to the insured or beneficiary of the insurance policy 2207
in the event of the insolvency of the ceding insurer.2208

       (B)(1) The reinsurance agreement may provide that the 2209
domiciliary liquidator or statutory receiver shall give written 2210
notice to the assuming insurer that a claim is pending against the 2211
ceding insurer on the policy or contract reinsured. The notice 2212
shall be given within a reasonable amount of time after the claim 2213
is filed with the liquidator or statutory receiver. During the 2214
pendency of the claim, any assuming insurer may investigate the 2215
claim and interpose, at its own expense, in the proceeding where 2216
the claim is to be adjudicated any defenses which it deems to be 2217
available to the ceding insurer or its liquidator.2218

       (2) The expense may be filed as a claim against the insolvent 2219
ceding insurer to the extent of a proportionate share of the 2220
benefit that may accrue to the ceding insurer solely as a result 2221
of the defense undertaken by the assuming insurer. Where two or 2222
more assuming insurers are involved in the same claim and a 2223
majority in interest elect to interpose a defense to the claim, 2224
the expense shall be apportioned in accordance with the terms of 2225
the reinsurance agreement as though the expense had been incurred 2226
by the ceding insurer.2227

       (C) If the assuming insurer is not licensed, or accredited or 2228
certified to transact insurance or reinsurance in this state, the 2229
credit permitted by division (A)(4) of section 3901.62 of the 2230
Revised Code shall not be allowed unless the assuming insurer 2231
agrees to do both of the following in the reinsurance agreements: 2232

       (1)(a) If the assuming insurer fails to perform its 2233
obligations under the terms of the reinsurance agreement, at the 2234
request of the ceding insurer, the assuming insurer shall submit 2235
to the jurisdiction of any court of competent jurisdiction in any 2236
state within the United States, comply with all requirements 2237
necessary to give the court jurisdiction, and abide by the final 2238
decision of the court or of any appellate court in the event of an 2239
appeal.2240

       (b) The assuming insurer shall designate the superintendent 2241
or a designated attorney as its true and lawful attorney upon whom 2242
may be served any lawful process in any action, suit, or 2243
proceeding instituted by or on behalf of the ceding insurer. 2244

       (2) This division is not intended to conflict with or 2245
override the obligation of the parties to a reinsurance agreement 2246
to arbitrate their disputes, if this obligation is created in the 2247
agreement. 2248

       (D) If the assuming insurer does not meet the requirements of 2249
division (A)(1), (2), or (3) of section 3901.62 of the Revised 2250
Code, the credit permitted by divisions (A)(4) and (5) of that 2251
section shall not be allowed unless the assuming insurer agrees in 2252
the trust agreements to the following conditions: 2253

       (1) Notwithstanding any other provisions in the trust 2254
instrument, if the trust fund is inadequate because it contains an 2255
amount less than the amount required by division (C)(1) of section 2256
3901.62 of the Revised Code, or if the grantor of the trust has 2257
been declared insolvent or placed into receivership, 2258
rehabilitation, liquidation, or similar proceedings under the laws 2259
of its state or country of domicile, the trustee shall comply with 2260
an order of the superintendent with regulatory oversight over the 2261
trust or with an order of a court of competent jurisdiction 2262
directing the trustee to transfer to the superintendent with 2263
regulatory oversight all of the assets of the trust fund.2264

       (2) The assets shall be distributed by, and claims shall be 2265
filed with and valued by, the superintendent with regulatory 2266
oversight in accordance with the laws of the state, in which the 2267
trust is domiciled, that are applicable to the liquidation of 2268
domestic insurance companies.2269

       (3) If the superintendent with regulatory oversight 2270
determines that the assets of the trust fund, or any part thereof, 2271
are not necessary to satisfy the claims of the ceding insurers 2272
within the United States or the grantor of the trust, the 2273
superintendent with regulatory oversight shall return the assets 2274
or part thereof to the trustee for distribution in accordance with 2275
the trust agreement.2276

       (4) The grantor shall waive any right otherwise available to 2277
it under the laws of the United States that are inconsistent with 2278
this division.2279

       Sec. 3903.72.  (A) The definitions provided in division (B) 2280
of this section shall apply after the operative date of the 2281
valuation manual. 2282

       (B) As used in sections 3903.72 to 3903.7211 of the Revised 2283
Code:2284

       (1) "Accident and health insurance" means a contract that 2285
incorporates morbidity risk and provides protection against 2286
economic loss resulting from accident, sickness, or medical 2287
conditions and as may be specified in the valuation manual.2288

       (2) "Appointed actuary" means a qualified actuary who is 2289
appointed in accordance with the valuation manual to prepare the 2290
actuarial opinion required in section 3903.722 of the Revised 2291
Code.2292

       (3) "Company" means an entity that meets either of the 2293
following criteria:2294

       (a) The entity has written, issued, or reinsured life 2295
insurance contracts, accident and health insurance contracts, or 2296
deposit-type contracts in this state and has at least one such 2297
policy in force or on claim. 2298

       (b) The entity has written, issued, or reinsured life 2299
insurance contracts, accident and health insurance contracts, or 2300
deposit-type contracts in any state and is required to hold a 2301
certificate of authority to write life insurance, accident and 2302
health insurance, or deposit-type contracts in this state.2303

       (4) "Deposit-type contract" means a contract that does not 2304
incorporate mortality or morbidity risks and as may be specified 2305
in the valuation manual.2306

       (5) "Life insurance" means a contract that incorporates 2307
mortality risk, including an annuity and pure endowment contract, 2308
and as may be specified in the valuation manual.2309

       (6) "Operative date of the valuation manual" means the date 2310
specified in division (B) of section 3903.728 of the Revised Code.2311

       (7) "Policyholder behavior" means any action a policyholder, 2312
contract holder, or any other person with the right to elect 2313
options under a policy or contract, such as a certificate holder, 2314
may take under a policy or contract subject to this section 2315
including lapse, withdrawal, transfer, deposit, premium payment, 2316
loan, annuitization, or benefit elections prescribed by the policy 2317
or contract. "Policyholder behavior" does not include events of 2318
mortality or morbidity that result in benefits prescribed in the 2319
terms of the policy or contract.2320

       (8) "Principle-based valuation" means a reserve valuation 2321
that uses one or more methods or one or more assumptions 2322
determined by the insurer and that is required to comply with 2323
section 3903.729 of the Revised Code. 2324

       (9) "Qualified actuary" means an individual who is qualified 2325
to sign a statement of actuarial opinion in accordance with the 2326
American academy of actuaries qualification standards for 2327
actuaries signing such statements and who meets the requirements 2328
specified in the valuation manual.2329

       (10) "Superintendent" means superintendent of insurance.2330

       (11) "Tail risk" means a risk that occurs either when the 2331
frequency of low probability events is higher than expected under 2332
a normal probability distribution or when there are observed 2333
events of very significant size or magnitude.2334

       (12) "Valuation manual" means the manual of valuation 2335
instructions adopted by the national association of insurance 2336
commissioners or as subsequently amended. 2337

       Sec. 3903.721.  (A)(1) The superintendent shall annually 2338
value, or cause to be valued, the reserve liabilities, referred to 2339
as reserves, for all outstanding life insurance policies and 2340
annuity and pure endowment contracts of every life insurance 2341
company doing business in this state issued prior to the operative 2342
date of the valuation manual. 2343

       In calculating reserves, the superintendent may use group 2344
methods and approximate averages for fractions of a year or 2345
otherwise. The valuation of the reserves of a company organized 2346
under the laws of a foreign government shall be limited to its 2347
United States business.2348

       In lieu of the valuation of the reserves required of a 2349
foreign or alien company, the superintendent may accept a 2350
valuation made, or caused to be made, by the insurance supervisory 2351
official of any state or other jurisdiction when the valuation 2352
complies with the minimum standard provided in sections 3903.72 to 2353
3903.7211 of the Revised Code.2354

       (2) The provisions set forth in sections 3903.723, 3903.724, 2355
3903.725, and 3903.727 of the Revised Code shall apply to all 2356
policies and contracts, as appropriate, issued on or after January 2357
1, 1989, and prior to the operative date of the valuation manual. 2358
The provisions set forth in sections 3903.726, 3903.728, and 2359
3903.729 of the Revised Code shall not apply to any such policies 2360
and contracts. 2361

       (3) The minimum standard for the valuation of policies and 2362
contracts issued prior to January 1, 1989, shall be that provided 2363
by the laws in effect immediately prior to that date.2364

       (B)(1) For all outstanding life insurance contracts, annuity 2365
and pure endowment contracts, deposit-type contracts, and accident 2366
and health contracts of every company issued on or after the 2367
operative date of the valuation manual, the superintendent shall 2368
annually value, or cause to be valued, the reserve liabilities for 2369
such contracts according to sections 3903.727, 3903.728, and 2370
3903.729 of the Revised Code. The valuation of the reserves of a 2371
company organized under the laws of a foreign government shall be 2372
limited to its United States business.2373

       In lieu of the valuation of the reserves required of a 2374
foreign or alien company, the superintendent may accept a 2375
valuation made, or caused to be made, by the insurance supervisory 2376
official of any state or other jurisdiction when the valuation 2377
complies with the minimum standard provided in sections 3903.72 to 2378
3903.7211 of the Revised Code.2379

       (2) The provisions set forth in sections 3903.728 and 2380
3903.729 of the Revised Code shall apply to all policies and 2381
contracts issued on or after the operative date of the valuation 2382
manual.2383

       Sec. 3903.722. (A) This section shall apply prior to the 2384
operative date of the valuation manual.2385

       (B) Every life insurance company doing business in this state 2386
shall annually submit to the superintendent the opinion of a 2387
qualified actuary as to whether the reserves and related actuarial 2388
items held in support of the policies and contracts specified by 2389
rule by the superintendent are computed appropriately, are based 2390
on assumptions that satisfy contractual provisions, are consistent 2391
with prior reported amounts, and comply with the applicable laws 2392
of this state. The superintendent shall adopt rules establishing 2393
the form and content of this opinion, and may require the life 2394
insurance company to supply information in addition to that 2395
contained in the actuarial opinion.2396

       (C)(1) Every life insurance company, except as exempted by 2397
rule adopted by the superintendent, shall also include in the 2398
annual opinion required by division (B) of this section an opinion 2399
of the same qualified actuary as to whether the reserves and 2400
related actuarial items held in support of the policies and 2401
contracts specified by rule by the superintendent, when considered 2402
in light of the assets held by the company with respect to the 2403
reserves and related actuarial items, including the investment 2404
earnings on the assets and the considerations anticipated to be 2405
received and retained under the policies and contracts, make 2406
adequate provision for the company's obligations under the 2407
policies and contracts, including the benefits under and the 2408
expenses associated with the policies and contracts.2409

       (2) The superintendent may provide by rule for a transition 2410
period for establishing any higher reserves that the qualified 2411
actuary may consider necessary to render the opinion required by 2412
division (C) of this section.2413

       (D) Each opinion required by division (C)(1) of this section 2414
shall be governed by the following provisions:2415

       (1) The opinion shall be supported by a memorandum prepared 2416
in a form and contain content as specified by rule by the 2417
superintendent.2418

       (2) If a life insurance company fails to provide a supporting 2419
memorandum within the period of time specified by rule by the 2420
superintendent, or if the superintendent determines that a 2421
supporting memorandum fails to meet the standards set out in the 2422
rule, or is otherwise unacceptable to the superintendent, the 2423
superintendent may employ, at the expense of the insurance 2424
company, a qualified actuary to review the opinion and the basis 2425
for the opinion and prepare such supporting memorandum as is 2426
required by the superintendent.2427

       (E) Every opinion required by this section is governed by the 2428
following:2429

       (1) The opinion shall be submitted with the annual statement 2430
reflecting the valuation of the reserve liabilities for each year 2431
ending on or after December 31, 2012.2432

       (2) The opinion shall apply to all business in force 2433
including individual and group health insurance plans in form and 2434
substance as specified in rules adopted by the superintendent.2435

       (3) The opinion shall be based on standards adopted from time 2436
to time by the actuarial standards board of the American academy 2437
of actuaries and on such additional standards as the 2438
superintendent may prescribe by rule.2439

       (4) In the case of an opinion required to be submitted by a 2440
foreign or alien life insurance company, the superintendent may 2441
accept the opinion filed by that company with the insurance 2442
regulatory authority of another state if the superintendent 2443
determines that the opinion reasonably meets the requirements 2444
applicable to a company domiciled in this state.2445

       (5) Except in cases of fraud or willful misconduct, the 2446
qualified actuary is not liable for damages in any civil action to 2447
any person, other than the insurance company and the 2448
superintendent, for any act, error, omission, decision, or conduct 2449
with respect to the actuary's opinion.2450

       (6) The superintendent shall establish by rule penalties for 2451
an insurance company's or qualified actuary's failure to comply 2452
with this section.2453

       (7) Except as provided in divisions (E)(9) and (F) of this 2454
section, documents, materials, or other information in the 2455
possession or control of the department of insurance that are a 2456
memorandum in support of the opinion or other material provided by 2457
the insurance company to the superintendent in connection with the 2458
memorandum shall be confidential by law and privileged, is not a 2459
public record under section 149.43 of the Revised Code, shall not 2460
be subject to subpoena, and shall not be subject to discovery or 2461
admissible in evidence in any private civil action. 2462

       (8) Neither the superintendent nor any person who received 2463
documents, materials, or other information while acting under the 2464
authority of the superintendent shall be permitted or required to 2465
testify in any private civil action concerning any confidential 2466
documents, materials, or information subject to division (F) of 2467
this section.2468

       (9) A memorandum in support of the opinion, and any other 2469
associated material, may be subject to subpoena for the purpose of 2470
defending an action seeking damages from the actuary submitting 2471
the memorandum by reason of an action required by this section or 2472
by rules adopted by the superintendent.2473

       (10) If any portion of a confidential and privileged 2474
memorandum is cited by the company in its marketing, is cited 2475
before any governmental agency other than a state insurance 2476
regulatory authority, or is released by the company to the news 2477
media, the entire memorandum shall no longer be confidential and 2478
privileged.2479

       (F) Notwithstanding division (E) of this section, the 2480
superintendent may do any of the following:2481

       (1) Disclose memoranda and other materials described in this 2482
section upon obtaining prior written consent from the insurer to 2483
which the memorandum or other materials pertain;2484

       (2) Disclose memoranda and other materials described in this 2485
section to the American academy of actuaries upon receipt of a 2486
written request from the academy stating that a memorandum or 2487
other material is required for the purpose of professional 2488
disciplinary proceedings. A request from the American academy of 2489
actuaries shall set forth the procedures to be used by the academy 2490
for preserving the confidential and privileged status of the 2491
memorandum or other material. If the procedures set forth are not 2492
satisfactory to the superintendent, the superintendent shall not 2493
release the memorandum or other material to the academy.2494

       (3) Share documents and materials or other information, 2495
including the confidential and privileged documents, materials, or 2496
information subject to division (E) of this section, with other 2497
state, federal, and international regulatory agencies and law 2498
enforcement officials and with the national association of 2499
insurance commissioners and its affiliates and subsidiaries, 2500
provided that the recipient agrees to maintain the confidential or 2501
privileged status of any confidential or privileged memorandum or 2502
other material and has the legal authority to do so;2503

       (4) Use memoranda and other materials described in this 2504
section in the furtherance of any regulatory or legal action 2505
brought by or on behalf of the superintendent or the state, 2506
resulting from the exercise of the superintendent's official 2507
duties.2508

       (G) Notwithstanding divisions (E) and (F) of this section, 2509
the superintendent may authorize the national association of 2510
insurance commissioners and its affiliates and subsidiaries by 2511
agreement to share confidential or privileged memoranda and other 2512
material received pursuant to division (F)(3) of this section with 2513
local, state, federal, and international regulatory and law 2514
enforcement agencies and with local, state, and federal 2515
prosecutors, provided that the recipient agrees to maintain the 2516
confidential or privileged status of the confidential or 2517
privileged memorandum or other material and has authority to do 2518
so.2519

       (H) Nothing in this section shall prohibit the superintendent 2520
from receiving memoranda and other material in accordance with 2521
section 3901.045 of the Revised Code.2522

       (I) The superintendent may enter into agreements governing 2523
the sharing and use of memoranda and materials consistent with the 2524
requirements of this section.2525

       (J) No waiver of any applicable privilege or claim of 2526
confidentiality in the memoranda and materials described in this 2527
section shall occur as a result of sharing or receiving memoranda 2528
and material as authorized in divisions (F)(2) and (3), (G), and 2529
(H) of this section.2530

       Sec. 3903.72.        Sec. 3903.723.  (A) The superintendent of insurance 2531
shall annually value, or cause to be valued, the reserve 2532
liabilities, referred to in this section as reserves, for all 2533
outstanding life insurance policies and annuity and pure endowment 2534
contracts of every life insurance company doing business in this 2535
state. The superintendent may certify the amount of such reserves, 2536
specifying the mortality tables, rates of interest, and net level 2537
premium method and other methods used to calculate reserves. In 2538
calculating reserves, the superintendent may use group methods and 2539
approximate averages for fractions of a year or otherwise. The 2540
valuation of the reserves of a company organized under the laws of 2541
a foreign government shall be limited to its United States 2542
business.2543

       In lieu of a valuation of the reserves of a foreign company, 2544
the superintendent may accept the valuation made, or caused to be 2545
made, by the insurance supervisory official of any state or other 2546
jurisdiction when such valuation complies with the minimum 2547
standards required by this section, provided such official accepts 2548
the certificate of valuation of the superintendent when such 2549
certificate states that the valuation was made in a specified 2550
manner and when such valuation complies with the minimum standards 2551
required by the law of that state or jurisdiction.2552

       A company, which adopts a standard of valuation producing 2553
aggregate reserves greater than those required by this section, 2554
may adopt a lower standard of valuation with the approval of the 2555
superintendent, but not lower than the minimum provided by this 2556
section. However, the holding of additional reserves previously 2557
determined by a qualified actuary to be necessary for the actuary 2558
to render the opinions required by divisions (B)(1) and (2) of 2559
this section shall not be deemed to be the adoption of a higher 2560
standard of valuation.2561

       (B)(1) Every life insurance company doing business in this 2562
state shall annually submit to the superintendent the opinion of a 2563
qualified actuary as to whether the reserves and related actuarial 2564
items held in support of the policies and contracts specified by 2565
rule by the superintendent are computed appropriately, are based 2566
on assumptions that satisfy contractual provisions, and are 2567
consistent with prior reported amounts. The opinion shall be 2568
submitted no later than March 1, 1996, and no later than the first 2569
day of March of each year thereafter. The superintendent shall 2570
adopt rules establishing the form and content of this opinion, and 2571
may require the life insurance company to supply information in 2572
addition to that contained in the actuarial opinion.2573

       As used in this section, a "qualified actuary" means a person 2574
who is a member in good standing of the American academy of 2575
actuaries and who meets the requirements set by rule by the 2576
superintendent.2577

       (2)(a) Every life insurance company, except as exempted by 2578
rule adopted by the superintendent, shall also include in the 2579
annual opinion required by division (B)(1) of this section an 2580
opinion of the same qualified actuary as to whether the reserves 2581
and related actuarial items held in support of the policies and 2582
contracts specified by rule by the superintendent, when considered 2583
in light of the assets held by the company with respect to the 2584
reserves and related actuarial items, including, but not limited 2585
to, the investment earnings on the assets and the considerations 2586
anticipated to be received and retained under the policies and 2587
contracts, make adequate provision for the company's obligations 2588
under the policies and contracts, including, but not limited to, 2589
the benefits under and the expenses associated with the policies 2590
and contracts.2591

       (b) The superintendent may provide by rule for a transition 2592
period for establishing any higher reserves that the qualified 2593
actuary may consider necessary to render the opinion required by 2594
division (B) of this section.2595

       (c) Each opinion required by division (B) of this section 2596
shall be supported by a memorandum prepared in form and content as 2597
specified by rule by the superintendent.2598

       (d) If a life insurance company fails to provide a supporting 2599
memorandum within the period of time specified by rule by the 2600
superintendent, or if the superintendent determines that a 2601
supporting memorandum fails to meet the standards set out in the 2602
rule, or is otherwise unacceptable to the superintendent, the 2603
superintendent may employ, at the expense of the insurance 2604
company, a qualified actuary to review the opinion and the basis 2605
for the opinion and prepare such supporting memorandum as is 2606
required by the superintendent.2607

       (3) Every opinion required by division (B) of this section is 2608
governed by the following:2609

       (a) The opinion shall be submitted with the annual statement 2610
reflecting the valuation of the reserve liabilities.2611

       (b) The opinion shall apply to all business in force 2612
including individual and group health insurance plans.2613

       (c) The opinion shall be based on standards adopted from time 2614
to time by the actuarial standards board of the American academy 2615
of actuaries and on such additional standards as the 2616
superintendent may prescribe by rule.2617

       (d) In the case of an opinion required to be submitted by a 2618
foreign or alien life insurance company, the superintendent may 2619
accept the opinion filed by that company with the insurance 2620
regulatory authority of another state if the superintendent 2621
determines that the opinion reasonably meets the requirements 2622
applicable to a company domiciled in this state.2623

       (e) Except in cases of fraud or willful misconduct, the 2624
qualified actuary is not liable for damages in any civil action to 2625
any person, other than the insurance company and the 2626
superintendent, for any act, error, omission, decision, or conduct 2627
with respect to the actuary's opinion.2628

       (f) The superintendent shall establish by rule penalties for 2629
an insurance company's or qualified actuary's failure to comply 2630
with this section.2631

       (g) The superintendent shall keep as confidential and 2632
privileged any memorandum received in support of a qualified 2633
actuary's opinion and also any other material provided by the 2634
insurance company to the superintendent in connection with the 2635
opinion. The memorandum and other materials shall not be made 2636
public, and shall not be subject to subpoena other than for the 2637
purpose of defending an action required by this section or rules 2638
adopted under this section. However, if any portion of a 2639
confidential and privileged memorandum is cited by the company in 2640
its marketing, is cited before any governmental agency other than 2641
a state insurance regulatory authority, or is released by the 2642
company to the news media, the entire memorandum shall no longer 2643
be confidential and privileged.2644

       (h) Notwithstanding division (B)(3)(g) of this section, the 2645
superintendent may do any of the following:2646

       (i) Disclose memoranda and other materials described in this 2647
section upon obtaining prior written consent from the insurer to 2648
which the memorandum or other materials pertain;2649

       (ii) Disclose memoranda and other materials described in this 2650
section to the American academy of actuaries upon receipt of a 2651
written request from the academy stating that a memorandum or 2652
other material is required for the purpose of professional 2653
disciplinary proceedings. A request from the American academy of 2654
actuaries shall set forth the procedures to be used by the academy 2655
for preserving the confidential and privileged status of the 2656
memorandum or other material. If the procedures set forth are not 2657
satisfactory to the superintendent, the superintendent shall not 2658
release the memorandum or other material to the academy.2659

       (iii) Share memoranda and other materials described in this 2660
section with the chief deputy rehabilitator, the chief deputy 2661
liquidator, other deputy rehabilitators and liquidators, and any 2662
other person employed by, or acting on behalf of, the 2663
superintendent pursuant to Chapter 3901. or 3903. of the Revised 2664
Code, with other local, state, federal, and international 2665
regulatory and law enforcement agencies, with local, state, and 2666
federal prosecutors, and with the national association of 2667
insurance commissioners and its affiliates and subsidiaries, 2668
provided that the recipient agrees to maintain the confidential or 2669
privileged status of any confidential or privileged memorandum or 2670
other material and has authority to do so;2671

       (iv) Disclose memoranda and other materials described in this 2672
section in the furtherance of any regulatory or legal action 2673
brought by or on behalf of the superintendent or the state, 2674
resulting from the exercise of the superintendent's official 2675
duties.2676

       (i) Notwithstanding divisions (B)(3)(g) and (h) of this 2677
section, the superintendent may authorize the national association 2678
of insurance commissioners and its affiliates and subsidiaries by 2679
agreement to share confidential or privileged memoranda and other 2680
material received pursuant to division (B)(3)(h)(iii) of this 2681
section with local, state, federal, and international regulatory 2682
and law enforcement agencies and with local, state, and federal 2683
prosecutors, provided that the recipient agrees to maintain the 2684
confidential or privileged status of the confidential or 2685
privileged memorandum or other material and has authority to do 2686
so.2687

       (j) Notwithstanding divisions (B)(3)(g) and (h) of this 2688
section, the chief deputy rehabilitator, the chief deputy 2689
liquidator, and other deputy rehabilitators and liquidators may 2690
disclose memoranda and other material described in this section in 2691
the furtherance of any regulatory or legal action brought by or on 2692
behalf of the superintendent, the rehabilitator, the liquidator, 2693
or the state resulting from the exercise of the superintendent's 2694
official duties in any capacity.2695

       (k) Nothing in this section shall prohibit the superintendent 2696
from receiving memoranda and other material in accordance with 2697
section 3901.045 of the Revised Code.2698

       (l) The superintendent may enter into agreements governing 2699
the sharing and use of memoranda and materials consistent with the 2700
requirements of this section.2701

       (m)(i) No waiver of any applicable privilege or claim of 2702
confidentiality in the memoranda and materials described in this 2703
section shall occur as a result of sharing or receiving memoranda 2704
and material as authorized in divisions (B)(3)(h)(ii) and (iii), 2705
(B)(3)(i), and (B)(3)(k) of this section.2706

       (ii) The disclosure of any memorandum or material in 2707
connection with a regulatory or legal action pursuant to divisions 2708
(B)(3)(h)(iv) and (B)(3)(j) of this section does not prohibit an 2709
insurer or any other person from taking steps to limit the 2710
dissemination of the memorandum or material to persons not 2711
involved in or the subject of the regulatory or legal action on 2712
the basis of any recognized privilege arising under any other 2713
section of the Revised Code or the common law.2714

       (C) Except in the case of policies and contracts to which 2715
division (D) of this section applies, the minimum standard for the 2716
valuation of reserves shall be the method set forth in section 2717
3915.04 of the Revised Code, using four per cent interest and the 2718
American experience table of mortality; provided that in no event 2719
shall a company's aggregate reserves for policies and contracts 2720
which guarantee nonforfeiture benefits be less than the aggregate 2721
reserves calculated in accordance with the standard used in 2722
calculating nonforfeiture benefits for such policies and 2723
contracts.2724

       Reserves for such policies and contracts may be calculated 2725
according to standards which produce aggregate reserves greater 2726
than the minimum reserves required by this division.2727

       (D) This division applies to all life insurance policies and 2728
annuity and pure endowment contracts issued on and after November 2729
5, 1959, or each earlier date not before July 17, 1947, elected by 2730
the company for one or more of such policies or contracts as the 2731
date on which it would comply with the provisions of the 2732
nonforfeiture law for life insurance provided in section 3915.07 2733
of the Revised Code or with the provisions of this division. The 2734
minimum standard for the valuation of all such policies and 2735
contracts shall be the commissioners reserve valuation method 2736
defined in division (E), (F), (H), or (K) of this section and the 2737
following tables and interest rates:2738

       (1)Using the mortality, morbidity, and interest rates as 2739
provided in divisions (B) to (H) of this section and in sections 2740
3903.724, 3903.725, and 3903.727 of the Revised Code, the minimum 2741
standard for the valuation of policies and contracts shall be 2742
derived according to the commissioners reserve valuation methods 2743
defined in divisions (I) to (L) and (O) of this section and 2744
section 3903.727 of the Revised Code for policies and contracts 2745
issued on or after January 1, 1989.2746

       (B) For ordinary life insurance policies, excluding 2747
disability and accidental death benefits, issued on the standard 2748
basis:2749

       (a) On and after November 5, 1959, or an earlier date, not 2750
before July 17, 1947, specified in a written notice by the company 2751
to the superintendent of its election to use this table and before 2752
division (D)(1)(b) of this section became operative for subsequent 2753
policy issues, the commissioners 1941 standard ordinary mortality 2754
table and three and one-half per cent interest;2755

       (b) On and after January 1, 1966, or an earlier date, not 2756
before November 5, 1959, specified in a written notice by the 2757
company to the superintendent of its election to use this table 2758
and before division (D)(1)(c) of this section becomes operative 2759
for subsequent policy issues, the commissioners 1958 standard 2760
ordinary mortality table and three and one-half per cent interest 2761
before January 1, 1975; four per cent interest on and after 2762
January 1, 1975 and before January 1, 1979; and four and one-half 2763
per cent interest on and after January 1, 1979; provided that 2764
modified premiums and present values for female risks may be 2765
calculated at an age three years younger than the actual age of 2766
the insured for policies issued before January 1, 1979, and at an 2767
age six years younger for policies issued on and after January 1, 2768
1979.2769

       (c) On and after January 1, 1989, or an earlier date, not 2770
before January 1, 1983, specified in a written notice by the 2771
company to the superintendent of its election to use this table, 2772
the commissioners 1980 standard ordinary mortality table and the 2773
applicable valuation interest rate as defined in section 3903.721 2774
of the Revised Code. The company may elect to use the 2775
commissioners 1980 standard ordinary mortality table with ten-year 2776
select mortality factors for any specified plan of life insurance. 2777
The superintendent may approve the use of any ordinary mortality 2778
table adopted after 1980 by the national association of insurance 2779
commissioners for determining the minimum standard for the 2780
valuation of such policies.2781

       (2)on or after January 1, 1989, the minimum standard for the 2782
valuation of policies and contracts shall be derived from the 2783
following:2784

       (1) The commissioners 1980 standard ordinary mortality table; 2785

       (2) At the election of the company for any one or more 2786
specified plans of life insurance, the commissioners 1980 standard 2787
ordinary mortality table with ten-year select mortality factors; 2788

       (3) Any ordinary mortality table, adopted after 1980 by the 2789
national association of insurance commissioners, that is approved 2790
by rules adopted by the department of insurance for use in 2791
determining the minimum standard of valuation for such policies.2792

       (C) For industrial life insurance policies, excluding 2793
disability and accidental death benefits, issued on the standard 2794
basis:2795

       (a) On and after November 5, 1959, or an earlier date, not 2796
before July 17, 1947, specified in a written notice by the company 2797
to the superintendent of its election to use this table and before 2798
division (D)(2)(b) of this section became operative for subsequent 2799
policy issues, the 1941 standard industrial mortality table and 2800
three and one-half per cent interest;2801

       (b) On and after January 1, 1968, or an earlier date, not 2802
before September 2, 1963, specified in a written notice by the 2803
company to the superintendent of its election to use this table2804
on or after January 1, 1989, the minimum standard for the 2805
valuation of policies shall be derived from the commissioners 1961 2806
standard industrial mortality table and three and one-half per 2807
cent interest before January 1, 1975; four per cent interest on 2808
and after January 1, 1975 and before January 1, 1979; four and 2809
one-half per cent interest on and after January 1, 1979 and before 2810
January 1, 1989, or before an earlier date, not before January 1, 2811
1983, specified in a written notice by the company to the 2812
superintendent of its election to issue such policies pursuant to 2813
the provisions of the nonforfeiture law for life insurance 2814
provided in section 3915.071 of the Revised Code. On and after 2815
January 1, 1989, or such earlier date, the interest rate to be 2816
used in calculating the minimum reserve for such policies is the 2817
applicable valuation interest rate as defined in section 3903.721 2818
of the Revised Code. The superintendent may approve the use of any 2819
industrial mortality table adopted after 1980 by the national 2820
association of insurance commissioners for determining the minimum 2821
standard for the valuation of such policiesor any industrial 2822
mortality table adopted after 1980 by the national association of 2823
insurance commissioners that is approved by rules adopted by the 2824
superintendent for use in determining the minimum standard of 2825
valuation for the policies.2826

       (3)(D) For all individual annuity and pure endowment 2827
contracts, excluding disability and accidental death benefits, 2828
issued:2829

       (a) On and after November 5, 1959, or an earlier date, not 2830
before July 17, 1947, as of which the company elected to comply 2831
with this division (D)(3)(a) and before division (D)(3)(b) of this 2832
section became operative for subsequent contract issues, the 1937 2833
standard annuity mortality table, or, at the option of the 2834
company, the annuity mortality table for 1949, ultimate, or any 2835
modification of either table approved by the superintendent and 2836
three and one-half per cent interest;2837

       (b) On and after January 1, 1979, or an earlier date, not 2838
before January 1, 1975, specified by the company in a written 2839
notice to the superintendent of its election to use this table, 2840
theissued on or after January 1, 1989, the minimum standard for 2841
the valuation of contracts shall be derived from both of the 2842
following:2843

        (1) The valuation interest rates as defined in section 2844
3903.724 of the Revised Code; 2845

       (2) The 1971 individual annuity mortality table or any 2846
modification of that table approved by the superintendent and four 2847
per cent interest on and after January 1, 1975 and before January 2848
1, 1979; four and one-half per cent interest on and after January 2849
1, 1979, and before January 1, 1983; and the valuation interest 2850
rate as defined in section 3903.721 of the Revised Code on and 2851
after January 1, 1983, except that on and after January 1, 1975, 2852
and before January 1, 1979, the interest rate is six per cent for 2853
single premium immediate contracts and on and after January 1, 2854
1979, and before January 1, 1983, the interest rate is five and 2855
one-half per cent for single premium deferred contracts and seven 2856
and one-half per cent for single premium immediate contracts. The 2857
superintendent may approve the use of any individual annuity 2858
mortality table adopted after 1980 by the national association of 2859
insurance commissioners, either as adopted or as modified by the 2860
superintendent, for determining the minimum standard for the 2861
valuation of such contracts.2862

       (4)(E) For allgroup annuity and pure endowment contracts, 2863
excluding disability and accidental death benefits, purchased 2864
under group annuity and pure endowment contracts:2865

       (a) On and after November 5, 1959, or an earlier date, not 2866
before July 17, 1947, as of which the company elected to comply 2867
with this division (D)(4)(a) and before division (D)(4)(b) of this 2868
section became operative for subsequent contract purchasesin the 2869
policies issued on or after January 1, 1989, the group annuity 2870
mortality table for 1951, any modification of this table approved 2871
by the superintendent, or either of the tables, or modification of 2872
either of them, specified in division (D)(3)(a) of this section 2873
for individual annuity and pure endowment contracts and three and 2874
one-half per cent interest;2875

       (b) On and after January 1, 1979, or an earlier date, not 2876
before January 1, 1975, specified by the company in a written 2877
notice to the superintendent of its election to use this table,2878
the minimum standard for the valuation of contracts shall be 2879
derived from both of the following:2880

       (1) The valuation interest rates as defined in section 2881
3903.724 of the Revised Code;2882

       (2) The 1971 group annuity mortality table, or any 2883
modification of that table approved by the superintendent, and six 2884
per cent interest on and after January 1, 1975, and before January 2885
1, 1979; seven and one-half per cent interest on and after January 2886
1, 1979, and before January 1, 1983, and the valuation interest 2887
rate as defined in section 3903.721 of the Revised Code on and 2888
after January 1, 1983. The superintendent may approve the use of 2889
any group annuity mortality table adopted after 1980 by the 2890
national association of insurance commissioners, either as adopted 2891
or as modified by the superintendent, for determining the minimum 2892
standard for the valuation of such contracts.2893

       (5)(F) For total and permanent disability benefits in or 2894
supplementary to ordinary policies and contracts issued:2895

       (a) On and after July 17, 1947, and before January 1, 1961, 2896
the class (3) disability table (1926) and three and one-half per 2897
cent interest. This table, for active lives, shall be combined 2898
with a mortality table permitted for calculating the reserves for 2899
life insurance policies.2900

       (b)(1) On and after January 1, 19611989, the minimum 2901
standard for the valuation of policies and contracts shall be 2902
derived from the tables of period 2 disablement rates and the 1930 2903
to 1950 termination rates of the 1952 disability study of the 2904
society of actuaries, with due regard for the type of benefit; 2905
except that a company may, at its option, use the class (3) 2906
disability table (1926) for policies and contracts issued on and 2907
after January 1, 1961, and before January 1, 1966. Any such table, 2908
for active lives, shall be combined with a mortality table 2909
permitted for calculating the reserves for life insurance 2910
policies. The interest rate to be used in calculating minimum 2911
reserves for such benefits may not exceed the applicable rate 2912
specified in division (D)(1) of this section for ordinary life 2913
insurance policies. The superintendent may approve the use ofor2914
any other table of disablement rates and termination rates adopted 2915
after 1980 by the national association of insurance commissioners 2916
for use in determining the minimum standard for the valuation of 2917
such total and permanent benefitsthose policies.2918

       Any such table shall, for active lives, be combined with a 2919
mortality table permitted for calculating the reserves for life 2920
insurance policies.2921

       (2) The interest rate to be used in calculating minimum 2922
reserves for such benefits shall not exceed the applicable rate 2923
specified in section 3903.724 of the Revised Code for ordinary 2924
life insurance policies.2925

       (6)(G) For accidental death benefits in or supplementary to 2926
policies issued:2927

       (a) On and after July 17, 1947, and before January 1, 1961, 2928
the inter-company double indemnity mortality table and three and 2929
one-half per cent interest. This table shall be combined with a 2930
mortality table permitted for calculating the reserves for life 2931
insurance policies.2932

       (b)(1) On and after January 1, 19611989, the minimum 2933
standard for the valuation of policies shall be derived from the 2934
1959 accidental death benefits table; except that a company may, 2935
at its option, use the inter-company double indemnity mortality 2936
table for policies issued on and after January 1, 1961, and before 2937
January 1, 1966. Either table shall be combined with a mortality 2938
table permitted for calculating the reserves for life insurance 2939
policies. The interest rate to be used in calculating the minimum 2940
reserves for such benefits may not exceed the applicable rate 2941
specified in division (D)(1) of this section for ordinary life 2942
insurance policies. The superintendent may approve the use ofor2943
any accidental death benefits table adopted after 1980 by the 2944
national association of insurance commissioners for use in2945
determining the minimum standard for the valuation of such 2946
accidental death benefits that is approved in rules adopted by the 2947
superintendent.2948

       The table used shall be combined with a mortality table for 2949
calculating the reserves for life insurance policies.2950

       (2) The interest rate to be used in calculating minimum 2951
reserves for such benefits shall not exceed the applicable rate 2952
specified in section 3903.724 of the Revised Code for ordinary 2953
life insurance policies.2954

       (7)(H) For group life insurance, life insurance issued on the 2955
substandard basis and all other special benefits, such tables as 2956
may be approved by the superintendent and interest not to exceed 2957
the applicable rate used in division (D)(1) of this section for 2958
ordinary life insurance policies.2959

       (E) This division defines the(I) Except as otherwise 2960
provided in divisions (L) and (O) of this section and in section 2961
3903.727 of the Revised Code, reserves according to the2962
commissioners reserve valuation method for all policies, riders, 2963
and supplemental policy provisions, withthe life insurance orand2964
endowment benefits, or both,of policies providing for a uniform 2965
amountsamount of life insurance and requiring the payment of2966
uniform premiums. Reserves for such policies, riders, and 2967
provisions, except as otherwise provided in divisions (F) and (K) 2968
of this section, shall be the excess, if any, of the present value 2969
on the valuation date of the future guaranteed benefits over the 2970
then present value on that date of theany future modified net 2971
premiums therefor. The modified net premium is apremiums for a 2972
policy shall be the uniform percentage of eachthe respective2973
contract premium specifiedpremiums for the guaranteed benefits 2974
such that the present value, at the date of issue of the policy, 2975
of all modified net premiums shall be equal to the sum of the then2976
present value, on the date of issue, of the future guaranteed2977
benefits plus the excessprovided for by the policy and the excess2978
of division (E)(I)(1) over division (E)(I)(2) of this section, as 2979
follows:2980

       (1) A net level annual premium equal to the present value, at 2981
the date of issue, of such benefits provided for after the first 2982
policy year, divided by the present value, at the date of issue, 2983
of an annuity of one per annum payable on the first and each 2984
subsequent anniversary of the policy on which a premium falls due; 2985
provided that such. However, the net level annual premium shall 2986
not exceed the net level annual premium on the nineteen-year 2987
premium whole life plan for insurance of the same amount at an age 2988
one year higher than the age at issue of the policy.2989

       (2) A net one-year term premium for such benefits provided 2990
for in the first policy year.2991

       (F)(J) This division defines the commissioners reserve 2992
valuation method for all life insurance policies issued on or 2993
after January 1, 1989, that have a first year premium in excess of 2994
the premium for the second policy year and for which excess no 2995
comparable benefit is provided in the first year and that provide 2996
either an endowment benefit or cash surrender value, or botha 2997
combination, in an amount greater than the excess premium. 2998
Reserves for such policies before the assumed ending date shall be 2999
the greater of the amount calculated in accordance with division 3000
(E) of this section and the reserve calculated in accordance with 3001
that division but with the following changesThe reserve according 3002
to the commissioners reserve valuation method as of any policy 3003
anniversary occurring on or before the assumed ending date defined 3004
herein as the first policy anniversary on which the sum of any 3005
endowment benefit and any cash surrender value then available is 3006
greater than the excess premium shall, except as otherwise 3007
provided in division (O) of this section, be the greater of either 3008
of the following:3009

       (1) The reserve as of the policy anniversary, with the policy 3010
anniversary being calculated as described in division (I) of this 3011
section; 3012

       (2) The reserve as of the policy anniversary calculated as 3013
described in division (I) of this section, but with:3014

       (1)(a) The value defined in division (E)(I)(1) of this 3015
section shall bebeing reduced by fifteen per cent of the amount 3016
of such excess first-year premium;3017

       (2)(b) All present values of benefits and premiums shall be3018
being determined without reference to premiums and benefits 3019
provided for by the policy after the assumed ending date;3020

       (3)(c) The policy shall bebeing assumed to mature on the 3021
assumed ending date in the amount of itsas an endowment benefits 3022
and cash surrender value. The assumed ending date is the first 3023
policy anniversary on which the sum of any endowment benefit and 3024
any cash surrender value then available is greater than such 3025
excess first-year premium.3026

       On and after the assumed ending date, the reserve for such 3027
policies shall be calculated in accordance with division (E) of 3028
this section;3029

       (d) The cash surrender value provided on the assumed ending 3030
date being considered as an endowment benefit.3031

       In making the above comparison, the mortality and interest 3032
bases stated in this section and in section 3903.724 of the 3033
Revised Code shall be used. 3034

       (G)(K) Reserves according to the commissioners reserve 3035
valuation method shall be calculated by a method consistent with 3036
the principles of divisions (I) and (J) of this section for:3037

       (1) AllLife insurance policies, riders, and supplemental 3038
policy provisions providing for a varying amountsamount of life 3039
insurance or requiring payment of varying premiums;3040

       (2) Group annuity and pure endowment contracts purchased 3041
under a retirement plan or plan of deferred compensation, 3042
established or maintained by an employer, including a partnership 3043
or sole proprietorship, or by an employee organization, or by 3044
both, other than a plan providing individual retirement accounts 3045
or individual retirement annuities under section 408 of the 3046
Internal Revenue Code of 1954, as amended;3047

       (3) Disability and accidental death benefits in all policies 3048
and contracts; and3049

       (4) All other benefits, except life insurance and endowment 3050
benefits in life insurance policies and benefits provided by all 3051
other annuity and pure endowment contracts, shall be calculated by 3052
a method consistent with the principles of division (E) of this 3053
section.3054

       Extra premiums charged because of impairments or special 3055
hazards shall be disregarded in determining modified net premiums.3056

       (H)(L)(1) This division defines the commissioners annuity 3057
reserve valuation method for all annuity and pure endowment 3058
contracts other than group annuity and pure endowment contracts 3059
purchased under a retirement plan or plan of deferred 3060
compensation, established or maintained by an employer, including 3061
a partnership or sole proprietorship, or by an employee 3062
organization, or by both, other than a plan providing individual 3063
retirement accounts or individual retirement annuities under 3064
section 408 of the Internal Revenue Code of 1954, as amended.3065

       (2) Reserves for benefits under such contracts, excluding 3066
disability and accidental death benefits, shall be the greatest of 3067
the respective excesses of the present values, at the date of 3068
valuation, of the future guaranteed benefits, including guaranteed 3069
nonforfeiture benefits, provided for by such contract at the end 3070
of each respective contract year, over the present value, at the 3071
date of valuation, of any future valuation considerations derived 3072
from future gross considerations required by the terms of the 3073
contract that become payable prior to the end of each such 3074
respective contract year. The future guaranteed benefits shall be 3075
determined by using the mortality table, if any, and the interest 3076
rate, or rates, specified in such contracts for determining 3077
guaranteed benefits. The valuation considerations are the portions 3078
of the respective gross considerations applied under the terms of 3079
such contracts to determine nonforfeiture values.3080

       (I)(M)(1) In no event shall a company's aggregate reserves 3081
for all life insurance policies, to which division (D) of this 3082
section applies, excluding disability and accidental death 3083
benefits issued on or after January 1, 1989, be less than the 3084
aggregate reserves calculated in accordance with the method set 3085
forth in divisions (E), (F), (G)(I), (K)(J), and(K), (L), (O), 3086
and (P) of this section and the mortality table or tables and rate 3087
or rates of interest used in calculating nonforfeiture benefits 3088
for such policies.3089

       (2) In no event shall the aggregate reserves for all 3090
policies, contracts, and benefits be less than the aggregate 3091
reserves determined by the qualifiedappointed actuary to be 3092
necessary to render the opinion required by division (B) of this3093
section 3903.722 of the Revised Code.3094

       (J)(N)(1) Reserves for policies and contracts issued prior to 3095
January 1, 1989, may be calculated, at the option of the company, 3096
according to any standards that produce greater aggregate reserves 3097
for all such policies and contracts than the minimum reserves 3098
required by the laws in effect immediately prior to that date.3099

       (2) Reserves for any category of policies, contracts, or 3100
benefits as established by the superintendent, issued on or after 3101
January 1, 1989, may be calculated, at the option of the company, 3102
according to any standards whichthat produce aggregate reserves 3103
for such category greater than those calculated according to the 3104
minimum standards provided in this section, but the rate or rates 3105
of interest used for policies and contracts, other than annuity 3106
and pure endowment contracts, shall not be higher than the 3107
corresponding rate or rates of interest used in calculating any 3108
nonforfeiture benefits provided for in such standards.3109

       (K)(3) A company, which adopts at any time a standard of 3110
valuation producing greater aggregate reserves than those 3111
calculated according to the minimum standard provided under 3112
sections 3903.72 to 3903.7211 of the Revised Code, may adopt a 3113
lower standard of valuation with the approval of the 3114
superintendent, but not lower than the minimum provided in these 3115
sections. However, for the purposes of this division, the holding 3116
of additional reserves previously determined by the appointed 3117
actuary to be necessary to render the opinion required by sections 3118
3903.722 and 3903.726 of the Revised Code shall not be considered 3119
to be the adoption of a higher standard of valuation.3120

       (O) If in any contract year the gross premium charged by a 3121
company on a policy or contract is less than the valuation net 3122
premium calculated by the method used in calculating the reserve 3123
for a policy or contract but using the minimum valuation standards 3124
of mortality and rate of interest is more than the gross premium 3125
for such policy or contract, the minimum reserve required for such 3126
policy or contract shall be the greater of either the reserve 3127
calculated according to the mortality table, rate of interest, and 3128
method actually used for such policy or contract, or the reserve 3129
calculated by such method but using the minimum valuation 3130
standards of mortality and rate of interest and replacing the 3131
valuation net premium by the actual gross premium in each contract 3132
year for which the valuation net premium exceeds the actual gross 3133
premium. The minimum valuation standards of mortality and rate of 3134
interest referred to in this division are those required by3135
division (D)divisions (A) to (H) of this section and section 3136
3903.724 of the Revised Code.3137

       For the purposes of this division, the minimum reserve for 3138
any policy to which the provisions of division (F) of this section 3139
apply shall be calculatedFor a life insurance policy issued on or 3140
after January 1, 1987, for which the gross premium in the first 3141
policy year exceeds that of the second year and for which no 3142
comparable additional benefit is provided in the first year for 3143
the excess and that provides an endowment benefit or a cash 3144
surrender value or a combination in an amount greater than the 3145
excess premium, the provisions of this division shall be applied3146
as if the method used in calculating the reserve for such policy 3147
were the method defined in division (E)(I) of this section. The 3148
minimum reserve for such policy, at each policy anniversary, shall 3149
be the greater of the minimum reserve calculated in accordance 3150
with division (F)(J) of this section and in accordance with this 3151
division.3152

       (L) Methods for determining the reserves for plans of(P) In 3153
the case of a plan of life insurance that provides for future 3154
premium determination, the amounts of which are to be determined 3155
by the insurance company based on then estimates of future 3156
experience, or in the case of a life insurance or annuity which 3157
arethat is of such a nature that the minimum reserves cannot be 3158
determined by the methods described in divisions (I), (J), (K), 3159
(L), and (O) of this section shall be promulgated by rule adopted 3160
by the superintendent. The, the reserves to be held under such 3161
plans mustthe plan shall be appropriate in relation to the 3162
benefits and the pattern of premiums for eachthat plan and must3163
shall be computed by methods which area method that is consistent 3164
with the principles of this section as determined by rules adopted 3165
by the superintendent. This division applies to any plan of life 3166
insurance which provides for future premium determination, the 3167
amounts of which are to be determined by the company on the basis 3168
of an estimate of future experience made at the time of any such 3169
determination.3170

       (M)(Q) The superintendent shall adopt rules specifying 3171
minimum reserve standards for the valuation of individual and 3172
group health plans.3173

       Sec. 3903.721.        Sec. 3903.724.  (A) TheThis section shall determine 3174
the calendar year statutory valuation interest raterates (VIR)3175
required by division (D) of section 3903.72 of the Revised Code is 3176
determinedused in determining the minimum standard for the 3177
valuation of all of the following:3178

       (1) Life insurance policies issued on or after January 1, 3179
1989;3180

       (2) Individual annuity and pure endowment contracts issued on 3181
or after January 1, 1989;3182

       (3) Annuities and pure endowments purchased on or after 3183
January 1, 1989, under group annuity and pure endowment contracts; 3184

       (4) The net increase, if any, in amounts held under a 3185
guaranteed interest contact in a calendar year after January 1, 3186
1989. 3187

       (B) The calendar year statutory valuation interest rates 3188
shall be calculated as follows and the results rounded to the 3189
nearest one-quarter of one per cent:3190

       (1)(a) For all life insurance policies, by adding three per 3191
cent to the result of multiplying W (the applicable weighting 3192
factor) by R(sub-1) minus three per cent (where R(sub-1) is the 3193
lesser of the reference interest rate and nine per cent) and also 3194
adding the result of multiplying one-half of the weighting factor 3195
by R(sub-2) minus nine per cent (where R(sub-2) is the greater of 3196
the reference interest rate and nine per cent), expressed as 3197
follows:3198

VIR = .03 + W (R(sub-1) - .03) + W/2(R(sub-2) - .09).
3199

       (b) Provided that if the calendar year statutory valuation 3200
interest rate for policiesa life insurance policy issued in any 3201
calendar year determined in accordance with this division does not 3202
differ from the calendar year valuation interest rate for similar 3203
policies issued in the preceding calendar year by at least 3204
one-half of one per cent, the calendar year valuation interest 3205
rate for such policiesthe policy shall be equal to the calendar 3206
year valuation interest rate for the preceding calendar year. For 3207
any calendar year theThe calendar year statutory valuation 3208
interest rate isshall be determined for each preceding calendar 3209
year starting with 1980 and for each subsequent year prior to the 3210
operative date of the valuation manual.3211

       (2) For all annuity and guaranteed interest contractssingle 3212
premium immediate annuities and for annuity benefits involving 3213
life contingencies arising from other annuities with cash 3214
settlement options and from guaranteed interest contracts with 3215
cash settlement options by adding to three per cent the result of 3216
multiplying W (the applicable weighting factor) by R minus three 3217
per cent (where R is the reference interest rate), expressed as 3218
follows:3219

VIR = .03 + W (R -.03).
3220

Provided that 3221

       (3) Except as provided in division (B)(2) of this section, 3222
for other annuities with cash settlement options and guaranteed 3223
interest contracts with cash settlement options, valued on an 3224
issue year basis, the life insurance formula stated in division3225
(A)(B)(1) of this section shall apply to all annuity and 3226
guaranteed interest contracts with cash settlement options valued 3227
on an issue year basis and with guarantee durations in excess of 3228
ten years other than single premium immediate annuities and 3229
annuity benefits involving life contingencies arising from other 3230
annuity and guaranteed interest contracts.3231

       (3) The results obtained under divisions (A)(1) and (2) of 3232
this section shall be rounded to the nearer one-quarter of one per 3233
cent.3234

       (B) The weighting factors forand the formula for single 3235
premium immediate annuities stated in division (B)(2) of this 3236
section shall apply to annuities and guaranteed interest contracts 3237
with guarantee duration of ten years or less. 3238

       (4) For other annuities with no cash settlement options and 3239
for guaranteed interest contracts with no cash settlement options, 3240
the formula for single premium immediate annuities stated in 3241
division (B)(2) of this section shall apply. 3242

       (5) For other annuities with cash settlement options and 3243
guaranteed interest contracts with cash settlement options, valued 3244
on a change in fund basis, the formula for single premium 3245
immediate annuities stated in division (B)(2) of this section 3246
shall apply.3247

       (C) For life insurance policies change with the guarantee 3248
duration of the plan of insurance. The, the guarantee duration is 3249
the maximum number of years the life insurance can remain in force 3250
on a basis guaranteed in the policy or under an option to convert 3251
to a plan of life insurance with premium rates or nonforfeiture 3252
values, or both, guaranteed in the policy. The3253

       (D) The weighting factors for the formulas prescribed in 3254
division (B) of this section are shown in the following table:3255

Weighting Factors for Life Insurance
3256

Guarantee Duration Weighting 3257
(Years) Factors 3258

10 or less .50 3259
More than 10, but not more than 20 .45 3260
More than 20 .35 3261

       (C)(E) The weighting factor for single premium immediate 3262
annuities and for annuity benefits involving life contingencies 3263
arising from other annuity and guaranteed interest contracts with 3264
cash settlement options is eighty-hundredths.80.3265

       (D)(F) Weighting factors for all other annuity and guaranteed 3266
interest contracts vary with the type of plan and guarantee 3267
duration. The types of plans are as follows:3268

       (1) A plan type A is one in which funds may not be withdrawn 3269
or may be withdrawn in only one of three ways:3270

       (a) With an adjustment to reflect changes in interest rates 3271
or asset values since receipt of the funds by the company;3272

       (b) Without such adjustment but in installments over five or 3273
more years;3274

       (c) As an immediate life annuity.3275

       (2) A plan type B is one in which the funds may not be 3276
withdrawn before the expiration of the interest rate guarantee 3277
unless an adjustment is made to reflect changes in interest rates 3278
or asset values since receipt of the funds by the company or 3279
unless they are withdrawn in installments over five or more years. 3280
At the end of the interest rate guarantee, funds may be withdrawn 3281
in a single sum or in installments over less than five years 3282
without adjustment.3283

       (3) A plan type C is one in which the funds may be withdrawn 3284
before the end of the interest rate guarantee in a single sum or 3285
in installments over less than five years without adjustment to 3286
reflect changes in interest rates or asset values since receipt of 3287
the funds by the company or subject only to a fixed surrender 3288
charge stipulated in the contract as a percentage of the fund.3289

       (4) The guarantee duration for an annuity or guaranteed 3290
interest contract with cash settlement options is the number of 3291
years for which the contract guarantees interest rates in excess 3292
of the calendar year valuation interest rate for life insurance 3293
policies with guarantee duration in excess of twenty years. The 3294
guarantee duration for annuity and guaranteed interest contracts 3295
without cash settlement options is the number of years from the 3296
date of issue or date of purchase to the date annuity benefits are 3297
scheduled to commence.3298

       (5) Annuity and guaranteed interest contracts with cash 3299
settlement options may be valued on an issue year basis or on a 3300
change in fund basis. If valued on an issue year basis, the 3301
interest rate used to determine the minimum valuation standard for 3302
the entire duration is the valuation interest rate for the year of 3303
issue or purchase. If valued on a change in fund basis, the 3304
interest rate used to determine the minimum valuation standard 3305
applicable to each change in the fund held under the contract is 3306
the valuation interest rate for the year of change in the fund.3307
Annuity and guaranteed interest contracts without cash settlement 3308
options must be valued on an issue year basis. As used in this 3309
division, an issue year basis of valuation refers to a valuation 3310
basis under which the interest rate used to determine the minimum 3311
valuation standard for the entire duration of the annuity or 3312
guaranteed interest contract is the calendar year valuation 3313
interest rate for the year of issue or year of purchase of the 3314
annuity or guaranteed interest contract, and the change in fund 3315
basis of valuation refers to a valuation basis under which the 3316
interest rate used to determine the minimum valuation standard 3317
applicable to each change in the fund held under the annuity or 3318
guaranteed interest contract is the calendar year valuation 3319
interest rate for the year of the change in the fund. 3320

       (6) These weightingWeighting factors for other annuities and 3321
for guaranteed interest contracts, except as stated in division 3322
(E) of this section, are specified in the applicable table shown3323
below. Table I applies to3324

       (a) For annuity and guaranteed interest contracts valued on 3325
an issue year basis that either guarantee interest on 3326
considerations received more than one year after issue or purchase 3327
or that have no cash settlement options. Table II applies to 3328
annuity and guaranteed interest contracts with cash settlement 3329
options valued on an issue year basis that do not guarantee 3330
interest on considerations received more than one year after issue 3331
or purchase. Tables III and IV are for contracts similar to those 3332
in tables I and II, respectively, except that they are valued on a 3333
change in fund basis and the one-year guarantee refers to one year 3334
following the valuation date.:3335

Weighting Factors for Annuities and Guaranteed
3336

Interest Contracts
3337

Table I
3338

Issue Year Basis - Interest on Considerations After First Year
3339

Guaranteed Or No Cash Settlement Options
3340

Weighting Factor for 3341
Plan Type 3342
Guarantee Duration (Years) A B C 3343
5 or less .80 .60 .50 3344
More than 5, but not more than 10 .75 .60 .50 3345
More than 10, but not more than 20 .65 .50 .45 3346
More than 20 .45 .35 .35 3347

Table II
3348

Issue Year Basis - Interest on Considerations After First Year
3349

NOT Guaranteed And Cash Settlement Options
3350

Weighting Factor for 3351
Plan Type 3352
Guarantee Duration (Years) A B C 3353
5 or less .85 .65 .55 3354
More than 5, but not more than 10 .80 .65 .55 3355
More than 10, but not more than 20 .70 .55 .50 3356
More than 20 .50 .40 .40 3357

Table III
3358

Change in Fund Basis - Interest on Considerations Guaranteed
3359

More Than Twelve Months After Valuation Date
3360

Weighting Factor for 3361
Plan Type 3362
Guarantee Duration (Years) A B C 3363
5 or less .95 .85 .55 3364
More than 5, but not more than 10 .90 .85 .55 3365
More than 10, but not more than 20 .80 .75 .50 3366
More than 20 .60 .60 .40 3367

Table IV
3368

Change in Fund Basis - Interest on Considerations NOT
3369

Guaranteed More Than Twelve Months After Valuation Date
3370

Weighting Factor for 3371
Plan Type 3372
Guarantee Duration (Years) A B C 3373
5 or less 1.00 .90 .60 3374
More than 5, but not more than 10 .95 .90 .90 3375
More than 10, but not more than 20 .85 .80 .55 3376
More than 20 .65 .65 .45 3377

       (E)(b) For annuities and guaranteed interest contracts valued 3378
on a change in fund basis, the factors shown in division (F)(6)(a) 3379
of this section increased by the following amounts:3380

       (i) For plan type A, .15; 3381

       (ii) For plan type B, .25;3382

       (iii) For plan type C, .05.3383

       (c) For annuities and guaranteed interest contracts valued on 3384
an issue year basis, other than those with no cash settlement 3385
options, that do not guarantee interest on considerations received 3386
more than one year after issue or purchase and for annuities and 3387
guaranteed interest contracts valued on a change in fund basis 3388
that do not guarantee interest rates on considerations received 3389
more than twelve months beyond the valuation date, the factors 3390
shown in item (F)(6)(a) or derived in item (F)(6)(b) increased by 3391
.05 for all plan types.3392

       (G) The reference interest rate is determined by taking3393
comparing the monthly average forof the applicable period of time 3394
of Moody's corporate bond yield average - monthly average 3395
corporatescomposite yield of the monthly average on seasoned 3396
corporate bonds, as published by Moody's investors service, inc. 3397
for the applicable time period, as prescribed below:3398

       (1) The reference interest rate for all life insurance is the 3399
lesser of such average over the thirty-six month period and such 3400
average over the twelve-month period ending on the thirtieth day 3401
of June of the calendar year preceding the year of issue.3402

       (2) The reference interest rate for annuity and guaranteed 3403
interest contracts with cash settlement options, except single 3404
premium immediate annuities and annuity benefits involving life 3405
contingencies arising from other annuity and guaranteed interest 3406
contracts with cash settlement options, valued on an issue year 3407
basis with guarantee durations in excess of ten years, is the 3408
lesser of such average over the thirty-six month period and such 3409
average over the twelve-month period ending on the thirtieth day 3410
of June of the calendar year of issue or purchase.3411

       (3) The reference interest rate for other annuities with cash 3412
settlement options and guaranteed interest contracts with cash 3413
settlement options, valued on a year of issue basis, except as 3414
stated in division (G)(6) of this section, with guarantee duration 3415
of ten years or less, such average over the twelve-month period 3416
ending on the thirtieth day of June of the calendar year of issue 3417
or purchase.3418

       (4) The reference interest rate for other annuities with no 3419
cash settlement options and for guaranteed interest contracts with 3420
no cash settlement options, such average over the twelve-month 3421
period ending on the thirtieth day of June of the calendar year of 3422
issue or purchase.3423

       (5) The reference interest rate for all other annuity and 3424
guaranteed interest contracts with cash settlement options valued 3425
on a change in fund basis is such average over the twelve-month 3426
period ending on the thirtieth day of June of the calendar year in 3427
which a change in the fund occurs.3428

       (4)(6) The reference interest rate for all single premium 3429
immediate annuities,and annuity benefits involving life 3430
contingencies arising from other annuity and guaranteed interest 3431
contracts with cash settlement options, and all other annuity and 3432
guaranteed interest contracts is such average over the 3433
twelve-month period ending on the thirtieth day of June of the 3434
calendar year of issue or purchase.3435

       (5)(7) If such corporate bond rate average is no longer 3436
published or the national association of insurance commissioners 3437
determines that such average is no longer appropriate, the 3438
superintendent may by rule approve the use of any alternative 3439
method for the determination of the reference interest rate 3440
adopted by the commissioners.3441

       Sec. 3903.725.  For individual annuity and pure endowment 3442
contracts issued on or after January 1, 1989, and for annuities 3443
and pure endowments purchased on or after January 1, 1989, under 3444
group annuity and pure endowment contracts, the minimum standard 3445
of valuation shall be the commissioners reserve valuation methods 3446
defined in divisions (I), (J), (K), and (L) of section 3903.723 of 3447
the Revised Code, interest rates defined in section 3903.724 of 3448
the Revised Code, and the following tables:3449

       (A) For individual single premium immediate annuity contracts 3450
issued on or after January 1, 1989, excluding any disability and 3451
accidental death benefits in those contracts, the 1971 individual 3452
annuity mortality table or any individual annuity mortality table 3453
adopted after 1980 by the national association of insurance 3454
commissioners that is approved in rules adopted by the 3455
superintendent for use in determining the minimum standard of 3456
valuation for these contracts, or any modification of these tables 3457
approved by the superintendent;3458

       (B) For individual annuity and pure endowment contracts 3459
issued on or after January 1, 1989, other than single premium 3460
immediate annuity contracts, excluding any disability and 3461
accidental death benefits in those contracts, the 1971 individual 3462
annuity mortality table or any individual annuity mortality table 3463
adopted after 1980 by the national association of insurance 3464
commissioners that is adopted in rules by the superintendent for 3465
use in determining the minimum standard of valuation for those 3466
contracts, or any modification of these tables approved by the 3467
superintendent;3468

       (C) For annuities and pure endowments purchased on or after 3469
January 1, 1989, under group annuity and pure endowment contracts, 3470
excluding any disability and accidental death benefits purchased 3471
under those contracts, the 1971 group annuity mortality table, or 3472
any group annuity mortality table adopted after 1980 by the 3473
national association of insurance commissioners that is approved 3474
in rules adopted by the superintendent for use in determining the 3475
minimum standard of valuation for annuities and pure endowments, 3476
or any modification of these tables approved by the 3477
superintendent. 3478

       Sec. 3903.726.  (A) This section shall apply on and after the 3479
operative date of the valuation manual. 3480

       (B) Every company with an outstanding life insurance 3481
contract, accident and health insurance contract, or deposit-type 3482
contract in this state that is subject to rules adopted by the 3483
superintendent shall annually submit the opinion of an appointed 3484
actuary as to whether the reserves and related actuarial items 3485
held in support of the policies and contracts are computed 3486
appropriately, are based on assumptions that satisfy contractual 3487
provisions, are consistent with prior reported amounts, and comply 3488
with applicable laws of this state. The valuation manual shall 3489
prescribe the specifics of this opinion.3490

       (C) Every company with an outstanding life insurance 3491
contract, accident and health insurance contract, or deposit-type 3492
contract in this state that is subject to rules adopted by the 3493
superintendent, except as exempted in the valuation manual, shall 3494
also annually include in the opinion required by division (B) of 3495
this section, an opinion of the same appointed actuary as to 3496
whether the reserves and related actuarial items held in support 3497
of the policies and contracts specified in the valuation manual, 3498
when considered in light of the assets held by the company with 3499
respect to the reserves and related actuarial items, including the 3500
investment earnings on the assets and the considerations 3501
anticipated to be received and retained under the policies and 3502
contracts, make adequate provision for the company's obligations 3503
under the policies and contracts, including the benefits under and 3504
expenses associated with the policies and contracts.3505

       (D) Each opinion required by divisions (B) and (C) of this 3506
section shall be governed by the following provisions:3507

       (1) The opinion shall be in form and substance as specified 3508
in the valuation manual and acceptable to the superintendent. 3509

       (2) The opinion shall be submitted with the annual statement 3510
reflecting the valuation of such reserve liabilities for each year 3511
ending on or after the operative date of the valuation manual. 3512

       (3) The opinion shall apply to all policies and contracts 3513
subject to division (C) of this section, plus other actuarial 3514
liabilities as may be specified in the valuation manual.3515

       (4) The opinion shall be based on standards adopted from time 3516
to time by the actuarial standards board or its successor, and on 3517
such additional standards as may be prescribed in the valuation 3518
manual.3519

       (5) In the case of an opinion required to be submitted by a 3520
foreign or alien company, the superintendent may accept the 3521
opinion filed by that company with the insurance supervisory 3522
official of another state if the superintendent determines that 3523
the opinion reasonably meets the requirements applicable to a 3524
company domiciled in this state.3525

       (6) Except in cases of fraud or willful misconduct, the 3526
appointed actuary shall not be liable for damages to any person, 3527
other than the insurance company and the superintendent, for any 3528
act, error, omission, decision, or conduct with respect to the 3529
appointed actuary's opinion.3530

       (7) Disciplinary action by the superintendent against the 3531
company or the appointed actuary shall be defined in rules adopted 3532
by the superintendent.3533

       (E) In addition to the requirements specified in division (D) 3534
of this section, each opinion required by division (C) of this 3535
section shall be governed by the following provisions:3536

       (1) A memorandum, in form and substance as specified in the 3537
valuation manual, and acceptable to the superintendent, shall be 3538
prepared to support each actuarial opinion. 3539

       (2) If the insurance company fails to provide a supporting 3540
memorandum at the request of the superintendent within a period 3541
specified in the valuation manual or the superintendent determines 3542
that the supporting memorandum provided by the insurance company 3543
fails to meet the standards prescribed by the valuation manual or 3544
is otherwise unacceptable to the superintendent, the 3545
superintendent may engage a qualified actuary at the expense of 3546
the company to review the opinion and the basis for the opinion 3547
and prepare the supporting memorandum required by the 3548
superintendent.3549

       Sec. 3903.727.  For accident and health insurance contracts 3550
issued on or after the operative date of the valuation manual, the 3551
standard prescribed in the valuation manual is the minimum 3552
standard of valuation required under division (B) of section 3553
3903.721 of the Revised Code. For disability, accident and 3554
sickness, accident and health insurance contracts issued on or 3555
after January 1, 1989, and prior to the operative date of the 3556
valuation manual, the minimum standard of valuation is the 3557
standard adopted in rules by the superintendent.3558

       Sec. 3903.728.  (A) For policies issued on or after the 3559
operative date of the valuation manual, the standard prescribed in 3560
the valuation manual is the minimum standard of valuation required 3561
under division (B) of section 3903.721 of the Revised Code, except 3562
as provided under divisions (E) and (G) of this section.3563

       (B) The operative date of the valuation manual is January 1 3564
of the first calendar year following the first July 1 as of which 3565
all of the following have occurred:3566

       (1) The valuation manual has been adopted by the national 3567
association of insurance commissioners by an affirmative vote of 3568
at least forty-two members, or three-fourths of the members 3569
voting, whichever is greater.3570

       (2) The standard valuation law, as amended by the national 3571
association of insurance commissioners in 2009, or legislation 3572
including substantially similar terms and provisions, has been 3573
enacted by states representing greater than seventy-five per cent 3574
of the direct premiums written as reported in one or more of the 3575
following annual statements submitted for 2008: life, accident, 3576
and health annual statements; health annual statements; or 3577
fraternal annual statements.3578

       (3) The standard valuation law, as amended by the national 3579
association of insurance commissioners in 2009, or legislation 3580
including substantially similar terms and provisions, has been 3581
enacted by at least forty-two of the following fifty-five 3582
jurisdictions: the fifty states of the United States, American 3583
Samoa, the American Virgin Islands, the District of Columbia, 3584
Guam, and Puerto Rico.3585

       (C) Unless a change in the valuation manual specifies a later 3586
effective date, changes to the valuation manual shall be effective 3587
on January 1 following the date when all of the following have 3588
occurred:3589

       (1) The change to the valuation manual has been adopted by 3590
the national association of insurance commissioners by an 3591
affirmative vote representing both of the following:3592

       (a) At least three-fourths of the members of the national 3593
association of insurance commissioners voting, but not less than a 3594
majority of the total membership; 3595

       (b) Members of the national association of insurance 3596
commissioners representing jurisdictions totaling greater than 3597
seventy-five per cent of the direct premiums written as reported 3598
in one or more of the following annual statements most recently 3599
available prior to the vote in division (C)(1)(a) of this section: 3600
life, accident, and health annual statements; health annual 3601
statements; or fraternal annual statements.3602

       (D) The valuation manual shall specify all of the following: 3603

       (1) Minimum valuation standards for and definitions of the 3604
policies or contracts subject to division (B) of section 3903.721 3605
of the Revised Code. The minimum valuation standards shall be:3606

       (a) The commissioners reserve valuation method for life 3607
insurance contracts, other than annuity contracts, subject to 3608
division (B) of section 3903.721 of the Revised Code;3609

       (b) The commissioners annuity reserve valuation method for 3610
annuity contracts subject to division (B) of section 3903.721 of 3611
the Revised Code; 3612

       (c) Minimum reserves for all other policies or contracts 3613
subject to division (B) of section 3903.721 of the Revised Code. 3614

       (2) Which policies or contracts or types of policies or 3615
contracts are subject to the requirements of a principle-based 3616
valuation in division (A) of section 3903.729 of the Revised Code 3617
and the minimum valuation standards consistent with those 3618
requirements.3619

       (3) For policies and contracts subject to a principle-based 3620
valuation under section 3903.729 of the Revised Code:3621

       (a) Requirements for the format of reports to the 3622
superintendent under division (B)(3) of section 3903.729 of the 3623
Revised Code that shall include information necessary to determine 3624
if the valuation is appropriate and in compliance with sections 3625
3903.72 to 3903.7211 of the Revised Code.3626

       (b) Assumptions for risks over which the company does not 3627
have significant control or influence.3628

       (c) Procedures for corporate governance and oversight of the 3629
actuarial function, and a process for appropriate waiver or 3630
modification of such procedures.3631

       (4) For policies not subject to a principle-based valuation 3632
under section 3903.729 of the Revised Code, the minimum valuation 3633
standard, which shall be or do either of the following: 3634

       (a) Be consistent with the minimum standard of valuation 3635
prior to the operative date of the valuation manual; 3636

       (b) Develop reserves that quantify the benefits and 3637
guarantees, and the funding, associated with the contracts and 3638
their risks at a level of conservatism that reflects conditions 3639
that include unfavorable events that have a reasonable probability 3640
of occurring. 3641

       (5) Other requirements, including those relating to reserve 3642
methods, models for measuring risk, generation of economic 3643
scenarios, assumptions, margins, use of company experience, risk 3644
measurement, disclosure, certifications, reports, actuarial 3645
opinions and memorandums, transition rules, and internal controls; 3646

       (6) The data and form of the data required under section 3647
3903.7210 of the Revised Code, with whom the data must be 3648
submitted, and other requirements specified by the superintendent, 3649
which may include data analyses and reporting of analyses.3650

       (E) In the absence of a specific valuation requirement or if 3651
a specific valuation requirement in the valuation manual is not, 3652
in the opinion of the superintendent, in compliance with sections 3653
3903.72 to 3903.7211 of the Revised Code, then the company shall, 3654
with respect to such requirements, comply with minimum valuation 3655
standards prescribed in rules adopted by the superintendent.3656

       (F) The superintendent may engage a qualified actuary, at the 3657
expense of the company, to perform an actuarial examination of the 3658
company and opine on the appropriateness of any reserve assumption 3659
or method used by the company, or to review and opine on a 3660
company's compliance with any requirement set forth in sections 3661
3903.72 to 3903.7211 of the Revised Code. The superintendent may 3662
rely upon the opinion, regarding provisions contained within 3663
sections 3903.72 to 3903.7211 of the Revised Code, of a qualified 3664
actuary engaged by the insurance commissioner of another state, 3665
district, or territory of the United States. As used in this 3666
division, the term "engage" includes employment and contracting.3667

       (G) The superintendent may require a company to change any 3668
assumption or method that in the opinion of the superintendent is 3669
necessary in order to comply with the requirements of the 3670
valuation manual or sections 3903.72 to 3903.7211 of the Revised 3671
Code, and the company shall adjust the reserves as required by the 3672
superintendent. The superintendent may take other disciplinary 3673
action as permitted under applicable laws.3674

       Sec. 3903.729.  (A) A company shall establish reserves using 3675
a principle-based valuation that meets the following conditions 3676
for policies or contracts as specified in the valuation manual:3677

       (1) The principle-based valuation shall quantify the benefits 3678
and guarantees, and the funding, associated with the contracts and 3679
their risks at a level of conservatism that reflects conditions 3680
that include unfavorable events that have a reasonable probability 3681
of occurring during the lifetime of the contracts. 3682

       (2) The principle-based valuation shall reflect conditions, 3683
for policies or contracts with significant tail risk, 3684
appropriately adverse to quantify the tail risk.3685

       (3) The principle-based valuation shall incorporate 3686
assumptions, risk analysis methods, and financial models and 3687
management techniques that are consistent with, but not 3688
necessarily identical to, those utilized within the company's 3689
overall risk assessment process, while recognizing potential 3690
differences in financial reporting structures and any prescribed 3691
assumptions or methods.3692

       (4) The principle-based valuation shall incorporate 3693
assumptions that are derived in one of the following manners:3694

       (a) The assumption is prescribed in the valuation manual.3695

       (b) For assumptions that are not prescribed, the assumptions 3696
shall:3697

       (i) Be established utilizing the company's available 3698
experience, to the extent it is relevant and statistically 3699
credible; 3700

       (ii) To the extent company data is not available, relevant, 3701
or statistically credible, be established utilizing other relevant 3702
statistically credible experience. 3703

       (5) The principle-based valuation shall provide margins for 3704
uncertainty including adverse deviation and estimation error, such 3705
that the greater the uncertainty the larger the margin and 3706
resulting reserve.3707

       (B) A company using a principle-based valuation for one or 3708
more policies or contracts subject to this section as specified in 3709
the valuation manual shall do all of the following:3710

       (1) Establish procedures for corporate governance and 3711
oversight of the actuarial valuation function consistent with 3712
those described in the valuation manual;3713

       (2) Provide to the superintendent and the company's board of 3714
directors an annual certification of the effectiveness of the 3715
internal controls with respect to the principle-based valuation. 3716
Such controls shall be designed to assure that all material risks 3717
inherent in the liabilities and associated assets subject to such 3718
valuation are included in the valuation, and that valuations are 3719
made in accordance with the valuation manual. The certification 3720
shall be based on the controls in place as of the end of the 3721
preceding calendar year.3722

       (3) Develop, and file with the superintendent upon request, a 3723
principle-based valuation report that complies with standards 3724
prescribed in the valuation manual. 3725

       Sec. 3903.7210. A company shall submit mortality, morbidity, 3726
policyholder behavior, or expense experience and other data as 3727
prescribed in the valuation manual for policies it has issued that 3728
are in force on or after the operative date of the valuation 3729
manual.3730

       Sec. 3903.7211.  (A) As used in this section:3731

       (1) "Confidential information" means all of the following:3732

       (a) A memorandum in support of an opinion submitted under 3733
sections 3903.722 and 3903.726 of the Revised Code and any other 3734
documents, materials, and other information, including all working 3735
papers, and copies thereof, created, produced, or obtained by or 3736
disclosed to the superintendent or any other person in connection 3737
with such memorandum.3738

       (b)(i) Except as provided in division (A)(1)(b)(ii) of this 3739
section, all documents, materials, and other information, 3740
including all working papers, and copies thereof, created, 3741
produced, or obtained by or disclosed to the superintendent or any 3742
other person in the course of an examination made under division 3743
(F) of section 3903.728 of the Revised Code.3744

       (ii) If an examination report or other material prepared in 3745
connection with an examination made under section 3901.07 of the 3746
Revised Code is not held as private and confidential information 3747
under that section, an examination report or other material 3748
prepared in connection with an examination made under division (F) 3749
of section 3903.728 of the Revised Code shall not be considered 3750
confidential information to the same extent as if such examination 3751
report or other material had been prepared under section 3901.07 3752
of the Revised Code.3753

       (c) Any reports, documents, materials, and other information 3754
developed by a company in support of, or in connection with, an 3755
annual certification by the company under division (B)(2) of 3756
section 3903.729 of the Revised Code evaluating the effectiveness 3757
of the company's internal controls with respect to a 3758
principle-based valuation and any other documents, materials, and 3759
other information, including all working papers, and copies 3760
thereof, created, produced, or obtained by or disclosed to the 3761
superintendent or any other person in connection with such 3762
reports, documents, materials, and other information;3763

       (d) Any principle-based valuation report developed under 3764
division (B)(3) of section 3903.729 of the Revised Code and any 3765
other documents, materials, and other information, including all 3766
working papers, and copies thereof, created, produced, or obtained 3767
by or disclosed to the superintendent or any other person in 3768
connection with such report; 3769

       (e) Any documents, materials, data, and other information 3770
submitted by a company under section 3903.7210 of the Revised 3771
Code, referred to collectively as "experience data," and any other 3772
documents, materials, data, and other information, including all 3773
working papers, and copies thereof, created or produced in 3774
connection with such experience data, in each case that include 3775
any potentially company-identifying or personally identifiable 3776
information, that is provided to or obtained by the 3777
superintendent, which when combined with any experience data is 3778
referred to as "experience materials," and any other documents, 3779
materials, data, and other information, including all working 3780
papers, and copies thereof, created, produced, or obtained by or 3781
disclosed to the superintendent or any other person in connection 3782
with such experience materials.3783

       (2) "Regulatory agency," "law enforcement agency," and the 3784
"national association of insurance commissioners" includes their 3785
employees, agents, consultants, and contractors.3786

       (B)(1) Except as provided in division (B)(2) of this section 3787
and as otherwise provided in this section, a company's 3788
confidential information is confidential by law and privileged, is 3789
not a public record under section 149.43 of the Revised Code, 3790
shall not be subject to subpoena, and shall not be subject to 3791
discovery or admissible in evidence in any private civil action. 3792
Except as otherwise provided in this section, neither the 3793
superintendent nor any person who received confidential 3794
information while acting under the superintendent's authority 3795
shall be permitted or required to testify in any private civil 3796
action concerning that confidential information.3797

       (2) The superintendent is authorized to use the confidential 3798
information in the furtherance of any regulatory or legal action 3799
brought against the company as a part of the superintendent's 3800
official duties.3801

       (C)(1) In order to assist in the performance of the 3802
superintendent's duties, the superintendent may share confidential 3803
information with all of the following: 3804

       (a) Other state, federal, and international regulatory 3805
agencies; 3806

       (b) The national association of insurance commissioners and 3807
its affiliates and subsidiaries;3808

       (c) The actuarial board for counseling and discipline, or its 3809
successor, in the case of confidential information specified in 3810
divisions (A)(1)(a) and (d) of this section only, upon a request 3811
stating that the confidential information is required for the 3812
purpose of professional disciplinary proceedings; 3813

       (d) State, federal, and international law enforcement 3814
officials. 3815

       (2) The superintendent may share confidential information as 3816
specified in divisions (C)(1)(a) through (d) of this section only 3817
if the recipient agrees, and has the legal authority to agree, to 3818
maintain the confidentiality and privileged status of such 3819
documents, materials, data, and other information in the same 3820
manner and to the same extent as required for the superintendent.3821

       (D) The superintendent may receive documents, materials, 3822
data, and other information, including otherwise confidential and 3823
privileged documents, materials, data, or information, from the 3824
national association of insurance commissioners and its affiliates 3825
and subsidiaries, from regulatory or law enforcement officials of 3826
other foreign or domestic jurisdictions, and from the actuarial 3827
board for counseling and discipline or its successor. The 3828
superintendent shall maintain as confidential or privileged any 3829
document, material, data, or other information received with 3830
notice or the understanding that it is confidential or privileged 3831
under the laws of the jurisdiction that is the source of the 3832
document, material, data, or other information.3833

       (E) The superintendent may enter into agreements governing 3834
sharing and use of information consistent with this section.3835

       (F) No waiver of any applicable privilege or claim of 3836
confidentiality in the confidential information shall occur as a 3837
result of disclosure to the superintendent under this section or 3838
as a result of sharing as authorized in division (C) of this 3839
section. 3840

       (G) A privilege established under the law of any state or 3841
jurisdiction that is substantially similar to the privilege 3842
established under this section shall be available and enforced in 3843
any proceeding in, and in any court of, this state.3844

       (H) Notwithstanding divisions (B) to (G) of this section, any 3845
confidential information specified in divisions (A)(1)(a) and (d) 3846
of this section are subject to all of the following:3847

       (1) The confidential information may be subject to subpoena 3848
for the purpose of defending an action seeking damages from the 3849
appointed actuary submitting the related memorandum in support of 3850
an opinion submitted under sections 3903.722 and 3903.726 of the 3851
Revised Code or principle-based valuation report developed under 3852
division (B)(3) of section 3903.729 of the Revised Code by reason 3853
of an action required by sections 3903.72 to 3903.7211 of the 3854
Revised Code or by rules adopted pursuant to those sections. 3855

       (2) The confidential information may otherwise be released by 3856
the superintendent with the written consent of the company. 3857

       (3) Once any portion of a memorandum in support of an opinion 3858
submitted under section 3903.722 and 3903.726 of the Revised Code 3859
or a principle-based valuation report developed under division 3860
(B)(3) of section 3903.729 of the Revised Code is cited by the 3861
company in its marketing or is publicly volunteered to or before a 3862
governmental agency other than a state insurance department or is 3863
released by the company to the news media, all portions of that 3864
memorandum or report shall no longer be confidential.3865

       Sec. 3903.83.  (A) For purposes of sections 3903.81 to 3866
3903.93 of the Revised Code, a "company action level event" is any 3867
of the following events:3868

       (1) A domestic or foreign insurer's filing of an RBC report 3869
that indicates that the insurer's total adjusted capital is 3870
greater than or equal to its regulatory action level RBC but less 3871
than its company action level RBC;3872

       (2) A life or health insurer's filing of an RBC report that 3873
indicates that the insurer's total adjusted capital is greater 3874
than or equal to its company action level RBC but less than the 3875
product of 2.53.0 and its authorized control level RBC, and that 3876
indicates a negative trend;3877

       (3) A property and casualty insurer's filing of an RBC report 3878
that indicates that the insurer's total adjusted capital is 3879
greater than or equal to its company action level RBC but less 3880
than the product of its authorized control level RBC and 3.0, and 3881
that triggers the trend test determined in accordance with the 3882
trend test calculation included in the property and casualty RBC 3883
instructions;3884

       (4) The notification by the superintendent of insurance to an 3885
insurer of an adjustment to the insurer's RBC report, which 3886
adjusted RBC report shows the insurer's total adjusted capital 3887
within the range described in either division (A)(1) or (2) of 3888
this section, provided that the insurer does not challenge the 3889
adjusted RBC report under section 3903.87 of the Revised Code;3890

       (5) The superintendent's notification to an insurer, 3891
following the hearing required under section 3903.87 of the 3892
Revised Code, that the superintendent has rejected the insurer's 3893
challenge to an adjusted RBC report showing the insurer's total 3894
adjusted capital within the range described in either division 3895
(A)(1) or (2) of this section.3896

       (B) In the case of a company action level event, the insurer 3897
shall prepare and submit to the superintendent an RBC plan that 3898
shall:3899

       (1) Identify the conditions that contributed to the company 3900
action level event;3901

       (2) Contain proposals of corrective actions that the insurer 3902
intends to take to eliminate the conditions leading to the company 3903
action level event;3904

       (3) Provide projections of the insurer's financial results in 3905
the current year and at least the four succeeding years, both in 3906
the absence of the proposed corrective actions and giving effect 3907
to the proposed corrective actions. The projections shall include 3908
projections of statutory operating income, net income, capital, 3909
and surplus. Projections for both new and renewal business may 3910
include separate projections for each major line of business, and 3911
may separately identify each significant income, expense, and 3912
benefit component of the projection.3913

       (4) Identify the key assumptions impacting the insurer's 3914
projections made pursuant to division (B)(3) of this section, and 3915
describe the sensitivity of the projections to the assumptions;3916

       (5) Identify the quality of, and problems associated with, 3917
the insurer's business, including, but not limited to, its assets, 3918
anticipated business growth and associated surplus strain, 3919
extraordinary exposure to risk, mix of business, and use of 3920
reinsurance.3921

       (C) The RBC plan shall be submitted within forty-five days 3922
after a company action level event. However, if an insurer has 3923
challenged an adjusted RBC report pursuant to section 3903.87 of 3924
the Revised Code, the RBC plan need not be submitted until after 3925
the hearing required under section 3903.87 of the Revised Code. If 3926
the superintendent rejects the insurer's challenge, the RBC plan 3927
shall be submitted within forty-five days after the 3928
superintendent's notification to the insurer of the rejection of 3929
the challenge.3930

       (D)(1) Within sixty days after an insurer submits an RBC plan 3931
to the superintendent, the superintendent shall either require the 3932
insurer to implement the RBC plan or shall notify the insurer that 3933
the RBC plan is unsatisfactory in the judgment of the 3934
superintendent. If the superintendent has determined that the RBC 3935
plan is unsatisfactory, the notification to the insurer shall set 3936
forth the reasons for the determination, and may set forth 3937
proposed revisions that will render the RBC plan satisfactory in 3938
the judgment of the superintendent. Upon such notification from 3939
the superintendent, the insurer shall prepare and submit a revised 3940
RBC plan, which may incorporate by reference any revisions 3941
proposed by the superintendent.3942

       (2) If an insurer challenges, under section 3903.87 of the 3943
Revised Code, a notification from the Superintendent that the 3944
insurer's RBC plan or a revised RBC plan is unsatisfactory, 3945
submission of a revised RBC plan need not be made unless the 3946
superintendent rejects the insurer's challenge following the 3947
hearing required by section 3903.87 of the Revised Code and then 3948
notifies the insurer of this rejection.3949

       (3) An insurer shall submit a revised RBC plan to the 3950
superintendent within forty-five days after receiving notification 3951
from the superintendent that its RBC plan is unsatisfactory, or, 3952
that its challenge to a notification made under division (D)(1) of 3953
this section has been rejected, as applicable.3954

       (E) Notwithstanding division (D) of this section, if the 3955
superintendent notifies an insurer that its RBC plan or revised 3956
RBC plan is unsatisfactory, the superintendent may, at the 3957
superintendent's discretion, but subject to the insurer's right to 3958
a hearing under section 3903.87 of the Revised Code, specify in 3959
the notification that the notification constitutes a regulatory 3960
action level event.3961

       (F) Every domestic insurer that submits an RBC plan or 3962
revised RBC plan to the superintendent shall file a copy of the 3963
RBC plan or revised RBC plan with the insurance regulatory 3964
authority of every state in which the insurer is authorized to do 3965
business upon receiving the insurance regulatory authority's 3966
written request for a copy of the plan, if the state has a 3967
confidentiality law with provisions substantially similar to those 3968
set forth in divisions (A) and (B) of section 3903.88 of the 3969
Revised Code. The insurer shall file the copy in that state no 3970
later than the later of:3971

       (1) Fifteen days after receiving the request for a copy of 3972
the plan;3973

       (2) The date on which the RBC plan or revised RBC plan is 3974
filed pursuant to division (C) or (D) of this section.3975

       Sec. 3906.01.  As used in this chapter:3976

       (A) "Annual financial statement" means an insurer's 3977
statutorily required financial statement under the insurer's 3978
respective authorizing chapter of the Revised Code. 3979

       (B) "Authorized control level risked-based capital" means 3980
authorized control level RBC as defined in sections 1753.31 and 3981
3903.81 of the Revised Code. 3982

       (C) "Cash equivalent" means a short-term, highly liquid 3983
investment that is both readily convertible to known amounts of 3984
cash and so near its maturity that it presents an insignificant 3985
risk of change in value because of changes in interest rates, and 3986
that has an original maturity date, to the entity holding the 3987
investment, of three months or less.3988

       (D) "Covered" means that an insurer owns, or can immediately 3989
acquire through the exercise of options, warrants, or conversion 3990
rights already owned, the underlying interest in order to fulfill 3991
or secure its obligation under the option, cap, or floor it has 3992
written.3993

       (E)(1) "Derivative instrument" means an agreement, option, 3994
instrument, or a series or a combination thereof of either of the 3995
following types:3996

       (a) To make or take delivery of, or assume or relinquish, a 3997
specified amount of one or more underlying interest, or to make a 3998
cash settlement in lieu thereof; 3999

       (b) That has a price, performance, value, or cash flow based 4000
primarily upon the actual or expected price, level, performance, 4001
value, or cash flow of one or more underlying interests. 4002

       (2) "Derivative instrument" includes options, warrants, caps, 4003
floors, collars, swaps, forwards, futures, and any other 4004
agreements, options, or instruments substantially similar thereto 4005
or any series or combination thereof.4006

       (F) "Derivative transaction" means a transaction involving 4007
the use of one or more derivative instruments.4008

       (G) "Hedging transaction" means a derivative transaction that 4009
is entered into and maintained to reduce either of the following:4010

       (1) The risk of economic loss due to a change in the value, 4011
yield, price, cash flow, or quantity of assets or liabilities that 4012
the insurer has acquired or incurred or anticipates acquiring or 4013
incurring;4014

       (2) The currency exchange rate risk or the degree of exposure 4015
as to assets or liabilities that an insurer has acquired or 4016
incurred or anticipates acquiring or incurring.4017

       (H) "Income generation" means a derivative transaction 4018
involving the writing of covered options, caps, or floors that is 4019
intended to generate income or enhance return.4020

       (I) "Lower-grade investment" means a rated credit instrument 4021
or debt-like preferred stock rated 4, 5, or 6 by the securities 4022
valuation office. 4023

       (J) "Medium-grade investment" means a rated credit instrument 4024
or debt-like preferred stock rated 3 by the securities valuation 4025
office.4026

       (K) "Minimum asset requirement" is the requirement that an 4027
insurer maintain assets in an amount equal to the sum of the 4028
insurer's liabilities and its minimum financial security 4029
benchmark, as required by division (A) of section 3906.11 of the 4030
Revised Code.4031

       (L) "Minimum financial security benchmark" is the amount an 4032
insurer is required to have under section 3906.03 of the Revised 4033
Code.4034

       (M) "Replication transaction" means a derivative transaction 4035
that is intended to replicate the performance of one or more 4036
assets that an insurer is authorized to acquire under this 4037
chapter. "Replication transaction" does not include a derivative 4038
transaction that is entered into as a hedging transaction.4039

       (N) "Securities valuation office" means the securities 4040
valuation office of the national association of insurance 4041
commissioners or any successor office.4042

       (O) "Securities valuation office listed mutual fund" means a 4043
money market mutual fund or short-term bond fund that is 4044
registered with the United States securities and exchange 4045
commission under the "Investment Company Act of 1940," 54 Stat. 4046
789, 15 U.S.C. 80a-1 to 80a-64, and that has been determined by 4047
the securities valuation office to be eligible for special reserve 4048
and reporting treatment, rather than as common stock.4049

       (P) "Securities valuation office listed exchange traded fund" 4050
means a bond or preferred stock exchange traded fund that is 4051
registered with the United States securities and exchange 4052
commission under the "Investment Company Act of 1940," 54 Stat. 4053
789, 15 U.S.C. 80a-1 to 80a-64, and that has been rated 1 or 2 by 4054
the securities valuation office and determined by the office to be 4055
eligible for special reserve and reporting treatment, rather than 4056
as common stock.4057

       (Q) "Superintendent" means the superintendent of insurance.4058

       Sec. 3906.02.  (A) This chapter, and any rules adopted under 4059
it, apply to entities organized under Chapters 1731., 1751., 4060
3907., 3919., 3921., 3925., 3931., 3939., 3941., and 3953. of the 4061
Revised Code. 4062

       (B) An insurer may apply to the superintendent for permission 4063
to make investments under this chapter, in lieu of making 4064
investments under any other section of the Revised Code.4065

       (C) In determining whether to permit an entity to invest 4066
pursuant to this chapter, the superintendent shall consider all of 4067
the following:4068

       (1) The character, reputation, and financial standing of the 4069
officers of the entity;4070

       (2) The character, reputation, and financial condition of the 4071
entity;4072

       (3) The adequacy of the expertise, experience, character, and 4073
reputation of the person or persons who will manage the 4074
investments on behalf of the entity;4075

       (4) The quality of the enterprise risk management program 4076
implemented by the entity to identify, assess, monitor, manage, 4077
and report on its key investment and related risks;4078

       (5) Any other factor the superintendent considers relevant.4079

       (D) Separate accounts established in accordance with section 4080
3907.15 of the Revised Code shall continue to be governed by that 4081
section.4082

       Sec. 3906.03. (A)(1) Unless otherwise established in 4083
accordance with divisions (A)(2) and (3) of this section, the 4084
amount of the minimum financial security benchmark for an insurer 4085
shall be the greatest of the following:4086

       (a) The authorized control level risk-based capital 4087
applicable to the insurer, as defined and set forth by sections 4088
1753.31 to 1753.43 or 3903.81 to 3903.93 of the Revised Code, less 4089
the asset valuation reserve as defined in the risk-based capital 4090
instructions defined in division (M) of section 3903.81 of the 4091
Revised Code;4092

       (b) The minimum capital or minimum surplus required by 4093
statute or rule for maintenance of an insurer's certificate of 4094
authority in this state;4095

       (c) All invested assets of an entity organized under Chapter 4096
3919. or 3939. of the Revised Code;4097

       (d) For title insurers, the quotient of annualized net earned 4098
premiums divided by eight;4099

       (e) For multiple employer welfare arrangements, the greater 4100
of three hundred per cent of the risk-based capital amount 4101
reported in the annual statement or the quotient of annualized net 4102
earned premiums divided by twelve.4103

       (2) The superintendent may, in accordance with division (B) 4104
of this section, establish by order a minimum financial security 4105
benchmark to apply to a specific insurer that exceeds the amount 4106
arrived at under division (A)(1) of this section.4107

       (3) The superintendent may by rule change the minimum 4108
financial security benchmark that is a multiple of authorized 4109
control level risk-based capital, or equivalent risk-based capital 4110
calculation, to apply to any class of insurers provided the amount 4111
established by the rule is not less than the amount arrived at 4112
under division (A)(1) of this section.4113

       (B) The superintendent shall determine the amount of minimum 4114
capital or minimum surplus as specified in division (A)(1)(b) of 4115
this section to determine an insurer's minimum financial security 4116
benchmark. The amount shall be sufficient to provide reasonable 4117
security against contingencies affecting the insurer's financial 4118
position that are not fully covered by reserves or by reinsurance.4119

       (1) In determining this amount, the superintendent shall 4120
consider all of the following risks:4121

       (a) Increases in the frequency or severity of losses beyond 4122
the levels contemplated by the premium rates charged;4123

       (b) Increases in expenses beyond those contemplated by the 4124
premium rates charged;4125

       (c) Decreases in the value of assets, or the return on 4126
invested assets below those planned on;4127

       (d) Changes in economic conditions that would make liquidity 4128
more important than contemplated and would force untimely sale of 4129
assets or prevent timely investments;4130

       (e) Currency devaluation to which the insurer may be subject;4131

       (f) Any other contingencies the superintendent identifies 4132
that may affect the insurer's operations.4133

       (2) In determining the minimum financial security benchmark 4134
under division (A)(2) of this section, the superintendent shall 4135
also take into account the following factors:4136

       (a) The most reliable information available as to the 4137
magnitude of the various risks under division (B)(1) of this 4138
section;4139

       (b) The extent to which the risks in division (B)(1) of this 4140
section are independent of each other or are related, and whether 4141
any dependency is direct or inverse;4142

       (c) The insurer's recent history of profits or losses;4143

       (d) The extent to which the insurer has provided protection 4144
against adverse contingencies in ways other than the establishment 4145
of surplus, including redundancy of premiums, adjustability of 4146
contracts under their terms, investment valuation reserves, 4147
whether voluntary or mandatory, appropriate reinsurance, the use 4148
of conservative actuarial assumptions to provide a margin of 4149
security, reserve adjustments in recognition of previous rate 4150
inadequacies, contingency or catastrophe reserves, diversification 4151
of assets, and underwriting risks;4152

       (e) Independent judgments on the soundness of the insurer's 4153
operations, as evidenced by the ratings of reliable professional 4154
financial reporting services;4155

       (f) Any other factor the superintendent considers relevant.4156

       Sec. 3906.04. (A) Subject to this chapter, an insurer making 4157
investments under this chapter may loan or invest its funds, and 4158
may buy, sell, hold title to, possess, occupy, pledge, convey, 4159
manage, protect, insure, and deal with its investments, property, 4160
and other assets to the same extent as any other person or 4161
corporation under the laws of this state and of the United States.4162

       (B) With respect to all of the insurer's investments, the 4163
board of directors of an insurer making investments under this 4164
chapter shall exercise the judgment and care, under the 4165
circumstances then prevailing, that persons of reasonable 4166
prudence, discretion, and intelligence would exercise in the 4167
management of a like enterprise, not in regard to speculating but 4168
in regard to the permanent disposition of their funds, considering 4169
the probable income as well as the probable safety of their 4170
capital. Investments shall be of sufficient value, liquidity, and 4171
diversity to assure the insurer's ability to meet its outstanding 4172
obligations based on reasonable assumptions as to new business 4173
production for current lines of business. As part of its exercise 4174
of judgment and care, the board of directors shall take into 4175
account the prudence evaluation criteria of division (C) of 4176
section 3906.05 of the Revised Code. The exercise of judgment and 4177
care by the board of directors under this section shall also be 4178
governed by sections 1701.59 and 1702.30 of the Revised Code, as 4179
applicable.4180

       (C) An insurer making investments under this chapter shall 4181
establish and implement internal controls and procedures to assure 4182
compliance with investment policies and procedures to assure that 4183
all of the following are met:4184

       (1) The insurer's investment staff and any consultants used 4185
are reputable and capable.4186

       (2) A periodic evaluation and monitoring process occurs for 4187
assessing the effectiveness of investment policy and strategies.4188

       (3) Management's performance is assessed in meeting the 4189
stated objectives within the investment policy through periodic 4190
presentations to the board of directors.4191

       (4) Appropriate analyses are undertaken on the degree to 4192
which asset cash flows are adequate to meet liability cash flows 4193
under different economic environments. These analyses shall be 4194
conducted at least annually and make specific reference to the 4195
economic conditions considered.4196

       Sec. 3906.05.  (A) An insurer making investments under this 4197
chapter shall consider the factors listed in division (C) of this 4198
section along with its business in determining whether an 4199
investment portfolio or investment policy is prudent. 4200

       (B) The superintendent shall consider the factors listed in 4201
division (C) of this section prior to making a determination that 4202
an insurer's investment portfolio or investment policy is not 4203
prudent.4204

       (C) Insurers and the superintendent shall consider the 4205
following factors according to divisions (A) and (B) of this 4206
section:4207

       (1) General economic conditions;4208

       (2) The possible effect of inflation or deflation;4209

       (3) The expected tax consequences of investment decisions or 4210
strategies;4211

       (4) The fairness and reasonableness of the terms of an 4212
investment considering its probable risk and reward 4213
characteristics and relationship to the investment portfolio as a 4214
whole;4215

       (5) The extent of the diversification of the insurer's 4216
investments among all of the following:4217

       (a) Individual investments;4218

       (b) Classes of investments;4219

       (c) Industry concentrations;4220

       (d) Dates of maturity;4221

       (e) Geographic areas.4222

       (6) The quality and liquidity of investments in affiliates;4223

       (7) The investment exposure to all of the following risks, 4224
quantified in a manner consistent with the insurer's acceptable 4225
risk level as described in the insurer's written investment 4226
policy, required under division (H) of section 3906.06 of the 4227
Revised Code:4228

       (a) Liquidity;4229

       (b) Credit and default;4230

       (c) Systemic or market;4231

       (d) Interest rate;4232

       (e) Call, prepayment, and extension;4233

       (f) Currency;4234

       (g) Foreign sovereign.4235

       (8) The amount of the insurer's assets, capital and surplus, 4236
premium writings, insurance in force, and other appropriate 4237
characteristics;4238

       (9) The amount and adequacy of the insurer's reported 4239
liabilities;4240

       (10) The relationship of the expected cash flows of the 4241
insurer's assets and liabilities, and the risk of adverse changes 4242
in the insurer's assets and liabilities;4243

       (11) The adequacy of the insurer's capital and surplus to 4244
secure the risks and liabilities of the insurer;4245

       (12) Any other factors relevant to whether an investment is 4246
prudent.4247

       Sec. 3906.06. In acquiring, investing, exchanging, holding, 4248
selling, and managing investments under this chapter, an insurer 4249
shall establish and follow a written investment policy that shall 4250
be reviewed and approved by the insurer's board of directors on at 4251
least an annual basis. The content and format of an insurer's 4252
investment policy are at the insurer's discretion, but shall 4253
include written guidelines appropriate to the insurer's business 4254
with regard to all of the following:4255

       (A) The general investment policy of the insurer, containing 4256
policies, procedures, and controls covering all aspects of the 4257
investing function;4258

       (B) Quantified goals and objectives regarding the composition 4259
of classes of investments, including maximum internal limits;4260

       (C) Periodic evaluations of the investment portfolio as to 4261
its risk and reward characteristics;4262

       (D) Professional standards for the individuals making 4263
day-to-day investment decisions to assure that investments are 4264
managed in an ethical, prudent, and capable manner;4265

       (E) The types of investments that are allowed and that are 4266
prohibited, based on their risk and reward characteristics and the 4267
insurer's level of experience with the investments;4268

       (F) The relationship of classes of investments to the 4269
insurer's insurance products and liabilities;4270

       (G) The manner in which the insurer intends to implement 4271
section 3906.05 of the Revised Code;4272

       (H) The level of risk, based on quantitative measures, 4273
appropriate for the insurer given the level of capitalization and 4274
expertise available to the insurer.4275

       Sec. 3906.07.  All of the following classes of investments 4276
may be counted for the purposes specified in section 3906.11 of 4277
the Revised Code, whether they are made directly or as a 4278
participant in a partnership, joint venture, or limited liability 4279
company:4280

       (A) Cash, and cash equivalents, in the direct possession of 4281
the insurer or on deposit with a financial institution regulated 4282
by any federal or state agency of the United States;4283

       (B) Bonds, debt-like preferred stock, and other evidences of 4284
indebtedness of governmental units in the United States or Canada, 4285
or the instrumentalities of the governmental units, or private 4286
business entities domiciled in the United States or Canada, 4287
including asset-backed securities, securities valuation office 4288
listed mutual funds, and securities valuation office listed 4289
exchange traded funds;4290

       (C) Loans with a loan to value ratio of no greater than 4291
eighty per cent that are secured by mortgages, trust deeds, or 4292
other security interests in real property located in the United 4293
States or Canada, or secured by insurance against default issued 4294
by a government insurance corporation of the United States or 4295
Canada or by an insurer authorized to do business in this state;4296

       (D) Unaffiliated common stock, or equity-like preferred 4297
stock, or equity interests in any business entity organized under 4298
the United States, any state thereof, the District of Columbia, 4299
the Commonwealth of Puerto Rico, Canada, or any province or 4300
territory of Canada, or shares of mutual funds or exchange traded 4301
funds registered with the securities and exchange commission of 4302
the United States under the "Investment Company Act of 1940," 54 4303
Stat. 789, 15 U.S.C. 80a-1 to 80a-64, other than securities 4304
valuation office listed mutual funds and securities valuation 4305
office listed exchange traded funds;4306

       (E) Real property necessary for the convenient transaction of 4307
the insurer's business;4308

       (F) Real property, together with the fixtures, furniture, 4309
furnishings, and equipment pertaining thereto in the United States 4310
or Canada, which produces, or after suitable improvement can 4311
reasonably be expected to produce, substantial income;4312

       (G) Loans, securities, or other investments of the types 4313
described in divisions (A) to (F) of this section in countries 4314
other than the United States and Canada;4315

       (H) Bonds or other evidences of indebtedness of international 4316
development organizations of which the United States is a member;4317

       (I) Loans upon the security of the insurer's own policies in 4318
amounts that are adequately secured by the policies and that in no 4319
case exceed the surrender values of the policies;4320

       (J) Subsidiary or affiliate equity investments, including 4321
common stock, equity-like preferred stock, limited liability 4322
partnerships, or limited liability membership interests, of 4323
entities that are engaged exclusively in insurance, finance, or 4324
investments, and investment management companies that are 4325
registered with the securities and exchange commission under the 4326
"Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C. 80a-1 to 4327
80a-64, as amended;4328

       (K) Investments not otherwise permitted by this section, not 4329
specifically prohibited by statute, to which both of the following 4330
apply:4331

       (1) The assets do not exceed five per cent of the first five 4332
hundred million dollars of the insurer's admitted assets plus ten 4333
per cent of the insurer's admitted assets exceeding five hundred 4334
million dollars.4335

       (2) The assets qualified to meet the minimum asset 4336
requirement at the time they were acquired.4337

       Sec. 3906.08.  (A) For the purposes of determining an 4338
insurer's minimum asset requirement under section 3906.11 of the 4339
Revised Code, the following limitations on classes of investments 4340
shall apply:4341

       (1) For investments authorized by division (B) of section 4342
3906.07 of the Revised Code and investments authorized by division 4343
(G) of section 3906.07 of the Revised Code that are of the types 4344
described in division (B) of section 3906.07 of the Revised Code 4345
the following limitations shall apply:4346

       (a) The aggregate amount of medium- and lower-grade 4347
investments shall be not more than twenty per cent of an insurer's 4348
admitted assets.4349

       (b) The aggregate amount of lower-grade investments shall be 4350
not more than ten per cent of an insurer's admitted assets.4351

       (c) The aggregate amount of investments rated 5 or 6 by the 4352
securities valuation office shall be not more than five per cent 4353
of the insurer's admitted assets.4354

       (d) The aggregate amount of investments rated 6 by the 4355
securities valuation office shall be not more than one per cent of 4356
an insurer's admitted assets.4357

       (e) The aggregate amount of medium- and lower-grade 4358
investments that receive as cash income less than the yield for 4359
treasury issues with a comparative average life shall be not more 4360
than one per cent of an insurer's admitted assets.4361

       (2) Investments authorized by division (C) of section 3906.07 4362
of the Revised Code shall be not more than forty-five per cent of 4363
an insurer's admitted assets in the case of life insurers and not 4364
more than twenty-five per cent of an insurer's admitted assets in 4365
the case of insurers that are not life insurers.4366

       (3) Investments authorized by division (D) of section 3906.07 4367
of the Revised Code shall be not more than twenty per cent of an 4368
insurer's admitted assets in the case of life insurers and not 4369
more than twenty-five per cent of an insurer's admitted assets in 4370
the case of insurers that are not life insurers.4371

       (4) Investments authorized by division (E) of section 3906.07 4372
of the Revised Code shall be not more than ten per cent of an 4373
insurer's admitted assets.4374

       (5) Investments authorized by division (F) of section 3906.07 4375
of the Revised Code shall be not more than ten per cent of an 4376
insurer's admitted assets.4377

       (6) Investments authorized by division (G) of section 3906.07 4378
of the Revised Code shall be not more than twenty per cent of an 4379
insurer's admitted assets.4380

       (7) Investments authorized by division (H) of section 3906.07 4381
of the Revised Code shall be not more than two per cent of an 4382
insurer's admitted assets.4383

       (8) Investments authorized by division (J) of section 3906.07 4384
of the Revised Code shall be not more than ten per cent of an 4385
insurer's admitted assets in the case of life insurers and not 4386
more than three per cent of an insurer's admitted assets in the 4387
case of insurers that are not life insurers. An insurer may exceed 4388
the limits described in division (A)(8) of this section with 4389
investments in a wholly owned domestic insurer, or in a 4390
corporation, or similar business entity organized under the laws 4391
of the United States, any state thereof, or any other jurisdiction 4392
approved by the superintendent, that is formed and maintained to 4393
acquire or hold shares of an insurer, with the prior written 4394
consent of the superintendent.4395

       (B)(1) For purposes of determining compliance with section 4396
3906.11 of the Revised Code, securities issued by a single entity 4397
and its affiliates, other than the government of the United 4398
States, or agencies whose securities are backed by the full faith 4399
and credit of the United States, and subsidiaries authorized under 4400
division (J) of section 3906.07 of the Revised Code, shall be not 4401
more than five per cent of an insurer's admitted assets in the 4402
case of life insurers and shall be not more than five per cent of 4403
an insurer's admitted assets in the case of insurers that are 4404
non-life insurers.4405

       (2) Notwithstanding division (B)(1) of this section, 4406
investments in the voting securities of a depository institution, 4407
or any company that controls a depository institution, shall not 4408
exceed five per cent of an insurer's admitted assets.4409

       (C) For purposes of determining compliance with this section, 4410
the admitted portion of assets of subsidiaries of an insurer 4411
invested in under division (J) of section 3906.07 of the Revised 4412
Code shall be deemed to be owned directly by the insurer and any 4413
other investors in proportion to the market value of their 4414
interest in the subsidiaries. If interest in the subsidiary has no 4415
market value, then the asset allocation proportion shall be 4416
determined by the reasonable value of interest in the subsidiary 4417
as determined under the national association of insurance 4418
commissioners' accounting practices and procedures manual.4419

       (D) If the superintendent considers it necessary to get a 4420
proper evaluation of the investment portfolio of an insurer, the 4421
superintendent may require that investments in mutual funds, 4422
exchange traded funds, pooled investment vehicles, or other 4423
investment companies be treated for purposes of this chapter as if 4424
the investor owned directly its proportional share of the assets 4425
owned by the mutual fund, exchange traded fund, pooled investment 4426
vehicle, or investment company.4427

       (E) Unless otherwise specified in this chapter, an insurer's 4428
investment limitations shall be computed using the insurer's 4429
general account admitted assets, capital, or surplus as reported 4430
in the insurer's most recent annual financial statement required 4431
to be filed with the superintendent.4432

       Sec. 3906.09.  An insurer investing under this chapter that 4433
is doing business that requires the insurer to make payment in 4434
different currencies shall have investments in securities in each 4435
of these currencies in an amount that, independent of all other 4436
investments, meets the requirements of this chapter, as applied 4437
separately to the insurer's obligations in each currency. The 4438
superintendent may, by order, exempt an insurer, or, by rule, a 4439
class of insurers, from this requirement if the obligations in 4440
other currencies are small enough that no significant problem for 4441
financial solidity would be created by substantial fluctuations in 4442
relative currency values.4443

       Sec. 3906.10. (A) An insurer investing under this chapter 4444
shall not invest in investments that are prohibited for an insurer 4445
by statute or rules of this state.4446

       (B) An insurer investing under this chapter shall not invest 4447
in a partnership as a general partner.4448

       (C) The superintendent shall set a reasonable amount of time, 4449
not to exceed five years, for disposal of a prohibited investment 4450
in hardship cases if the insurer demonstrates that the investment 4451
was legal when made or the result of a mistake made in good faith, 4452
or if the superintendent determines that the sale of the asset 4453
would be contrary to the interests of insureds, creditors, or the 4454
general public.4455

       (D) Violation of division (A) of this section may be grounds 4456
for regulatory action pursuant to divisions (A) and (I) of section 4457
3903.12 of the Revised Code.4458

       Sec. 3906.11.  (A) An insurer investing under this chapter 4459
shall maintain assets in an amount equivalent to the sum of its 4460
liabilities and its minimum financial security benchmark at all 4461
times.4462

       (B) Assets invested under this chapter may be counted toward 4463
satisfaction of the minimum asset requirement only so far as they 4464
are invested in compliance with this chapter and any applicable 4465
rules adopted, or orders issued, by the superintendent pursuant to 4466
this chapter.4467

       (C) The amount of admitted assets used to calculate the 4468
minimum asset requirement shall be reduced by the amount of the 4469
liability recorded on an insurer's statutory balance sheet for all 4470
of the following:4471

       (1) The return of acceptable collateral received in a reverse 4472
repurchase transaction or a securities lending transaction;4473

       (2) Cash received in a dollar roll transaction;4474

       (3) Other amounts reported as borrowed money.4475

       (D) Assets other than invested assets may be counted toward 4476
satisfaction of the minimum asset requirement at admitted annual 4477
financial statement value. However, loans to officers or directors 4478
or their immediate families shall not be counted toward the 4479
satisfaction of the minimum asset requirement.4480

       (E) An investment held as an admitted asset by an insurer on 4481
the effective date of this section that qualified under the 4482
applicable insurance investment law of this state shall remain 4483
qualified as an admitted asset under this chapter.4484

       (F) Notwithstanding any provision of this chapter to the 4485
contrary, an asset acquired in the bona fide enforcement of 4486
creditors' rights or in bona fide workouts or settlements of 4487
disputed claims may be counted toward the minimum asset 4488
requirement for five years if the asset is real property and three 4489
years if the asset is not real property.4490

       (G) The superintendent may determine an insurer to be 4491
financially hazardous under section 3903.09 of the Revised Code if 4492
either of the following apply:4493

       (1) The insurer does not own the amount of assets needed to 4494
meet its minimum asset requirement.4495

       (2) The insurer is unable to apply the amount of assets 4496
needed to meet its minimum asset requirement toward compliance 4497
with this chapter.4498

       Sec. 3906.12.  (A) Prior to an insurer entering into 4499
derivative transactions, the board of directors of the insurer 4500
investing under this chapter shall approve a derivative use plan.4501

       (B) An insurer shall notify the superintendent of insurance 4502
in writing within three days after identifying either of the 4503
following:4504

        (1) Any event or occurrence related to an insurer's 4505
derivatives use that may lead to a material change to the 4506
insurer's policyholder surplus;4507

       (2) Any event or occurrence related to an insurer's 4508
derivatives use that, with the passage of time, may lead to a 4509
material change to the insurer's policyholder surplus.4510

       (C) Prior to entering into derivative transactions, an 4511
insurer shall file with the superintendent a copy of its 4512
derivative use plan and internal controls, for informational 4513
purposes. The insurer shall keep current the copy of its 4514
derivative use plan and internal controls filed with the 4515
superintendent. The insurer shall not enter into derivative 4516
transactions until thirty calendar days after the date on which 4517
the derivative use plan and internal controls is filed with the 4518
superintendent. This thirty-calendar-day period is to begin on the 4519
date that the superintendent receives the derivative use plan and 4520
internal controls.4521

       (D) The superintendent may adopt rules prescribing the form 4522
and content of derivative use plans, as well as any internal 4523
controls the superintendent considers necessary.4524

       (E) An insurer that engages in hedging transactions or 4525
replication transactions shall do both of the following:4526

       (1) Maintain its position in any outstanding derivative 4527
instrument used as part of a hedging transaction or replication 4528
transaction for as long as the hedging transaction or replication 4529
transaction continues to be effective;4530

       (2) Demonstrate to the superintendent, upon request, that any 4531
derivative transaction entered into and involving hedging 4532
transaction or replication transaction is an effective hedging 4533
transaction or replication transaction. The insurer must be able 4534
to demonstrate this at the time the derivative transaction is 4535
entered into, and for as long as the transaction continues to be 4536
in place.4537

       (F) An insurer may not invest, or use, a derivative 4538
instrument for any purpose other than a hedging transaction, 4539
income generation, or replication. 4540

       (G) All documents provided to the superintendent under this 4541
section shall be deemed trade secrets and shall be provided with 4542
trade secret protection. Such documents shall also be considered 4543
work papers of the superintendent that are subject to section 4544
3901.48 of the Revised Code and are confidential and privileged 4545
and shall not be considered a public record, as defined in section 4546
149.43 of the Revised Code. The original documents and any copies 4547
of them shall not be subject to subpoena and shall not be made 4548
public by the superintendent or any other person, except as 4549
otherwise provided in section 3901.48 of the Revised Code. 4550

       Sec. 3906.13.  (A) If the superintendent determines that an 4551
insurer's investment practices do not meet the requirements of 4552
this chapter, the superintendent may, after notification to the 4553
insurer of the superintendent's findings, order the insurer to 4554
make changes necessary to comply with this chapter.4555

       (B) If the superintendent determines that the financial 4556
condition, current investment practice, or current investment plan 4557
of an insurer are or may endanger the interests of insureds, 4558
creditors, or the general public, the superintendent may impose 4559
reasonable additional restrictions upon the admissibility or 4560
valuation of investments and may impose restrictions on the 4561
investment practices of the insurer, including prohibiting an 4562
investment or requiring the divestment of an investment.4563

       (C) The superintendent may count toward satisfaction of the 4564
minimum asset requirement any assets that an insurer is required 4565
to invest under the laws of a country other than the United States 4566
as a condition for doing business in that country if the 4567
superintendent finds that counting them does not endanger the 4568
interests of the insurer's insureds or creditors, or the general 4569
public.4570

       (D) If the superintendent is satisfied by evidence of the 4571
solidity of an insurer and the competence of management and its 4572
investment advisors, the superintendent, after a hearing, may, by 4573
order, adjust the class limitations prescribed in section 3906.08 4574
of the Revised Code for that insurer, to the extent that the 4575
superintendent is satisfied that the interests of the insurer's 4576
insureds and creditors and the general public are sufficiently 4577
protected. Such adjustments, in aggregate, shall be limited to an 4578
amount equal to ten per cent of the insurer's liabilities.4579

       Sec. 3906.14.  (A) An insurer subject to an order of the 4580
superintendent under section 3906.03 or 3906.13 of the Revised 4581
Code may request a hearing within thirty days of the date of the 4582
order. The hearing shall be held in compliance with Chapter 119. 4583
of the Revised Code.4584

       (B) The superintendent shall hold hearings required under 4585
this section privately unless the insurer requests a public 4586
hearing, in which case the hearing shall be public.4587

       Sec. 3906.15.  (A) The superintendent may, in accordance with 4588
section 119.03 of the Revised Code, adopt rules interpreting and 4589
implementing the provisions of this chapter.4590

       (B) The superintendent may, in accordance with section 119.03 4591
of the Revised Code, adopt one or more of the following 4592
restrictions on investments in rules:4593

       (1) The superintendent may prescribe for defined classes of 4594
insurers special procedural requirements, including special 4595
reports and prior approval on investments, as well as disapproval 4596
of investments subsequent to either.4597

       (2) The superintendent may prescribe substantive restrictions 4598
on investments of defined classes of insurers, including all of 4599
the following:4600

       (a) Specification of classes of assets that may not be 4601
counted toward satisfaction of the minimum asset requirement even 4602
though the assets may be counted for unrestricted insurers;4603

       (b) Specification of maximum amounts of assets that an 4604
insurer may invest in a single investment, issue, or class or 4605
group of classes of investments that shall be expressed as 4606
percentages of total assets, capital, surplus, legal reserves, or 4607
other variables;4608

       (c) Prescription of qualitative tests for investments and 4609
conditions under which investments may be made, including 4610
requirements of specified ratings from investment advisory 4611
services, listing on specified stock exchanges, collateral, 4612
marketability, currency matching, and the financial and legal 4613
status of the issuer and its earnings capacity.4614

       (C) If the superintendent is satisfied by evidence of the 4615
solidity of an insurer and the competence of management and its 4616
investment advisors, the superintendent, after a hearing, may by 4617
order grant an exemption to that insurer from any restriction made 4618
under division (B) of this section to the extent that the 4619
superintendent is satisfied that the interests of the insurer's 4620
insureds and creditors, as well as the general public, are 4621
protected.4622

       Sec. 3907.14.  The capital, surplus, and all accumulations of 4623
every domestic life insurance company shall be invested as 4624
follows:4625

       (A) A domestic company may acquire, hold, and convey real 4626
estate:4627

       (1) Which has been acquired or is acquired for its principal 4628
offices, or which is used in connection therewith, provided that 4629
it shall not invest more than five per cent of its admitted assets 4630
on the preceding thirty-first day of December in such real estate;4631

       (2) Which has been mortgaged to it in good faith by way of 4632
security for loans previously contracted or for money due;4633

       (3) Which has been conveyed to it in satisfaction of debts 4634
previously contracted in the course of its dealings, or which it 4635
may receive in or on account of an exchange for real estate 4636
acquired in its operations;4637

       (4) Which it has purchased at sales under mortgages and on 4638
any legal process in connection with its investments or under 4639
decrees obtained or made for such debts;4640

       (5) Which is acquired, owned, or held for the purpose of 4641
developing, improving, or otherwise utilizing such real estate for 4642
the production of income, without restriction or limitation as to 4643
time, and may acquire, lease, hold, and manage personal property 4644
used in connection therewith. No investments in real estate to be 4645
used primarily for recreational, agricultural, or mining purposes 4646
shall be made under authority of division (A)(5) of this section 4647
and except for investments authorized under divisions (A)(1), (2), 4648
(3), and (4) of this section, no domestic life insurance company 4649
shall invest in real estate under divisions (A)(5) and (R) of this 4650
section a sum exceeding in the aggregate ten per cent of its 4651
admitted assets on the preceding thirty-first day of December.4652

       All real estate specified in divisions (A)(3) and (4) of this 4653
section, which is not necessary for its accommodation in the 4654
convenient transaction of its business, shall be sold by the 4655
company and disposed of within five years after it has acquired 4656
the title to such real estate or within five years after such real 4657
estate has ceased to be necessary for the accommodation of its 4658
business, unless the company procures the certificate of the 4659
superintendent of insurance that its interests will suffer 4660
materially by a forced sale of the real estate, in which event the 4661
time for the sale may be extended to such time as the 4662
superintendent directs in such certificate.4663

       (B) A domestic company may acquire, hold, and convey tangible 4664
personal property or interests therein for the production of 4665
income, provided no domestic company shall invest in excess of two 4666
per cent of its admitted assets as of the preceding thirty-first 4667
day of December under this division.4668

       (C) In loans and liens upon the security of its own policies, 4669
not exceeding the reserve or present value of the policies, 4670
computed according to any standard authorized by law or according 4671
to such higher standard as the company has adopted and maintains 4672
on the policy, the reserve being the amount of debts of the life 4673
insurance company by reason of its outstanding policies in gross, 4674
which may be so treated in the returns for taxation made by it;4675

       (D) In bankers' acceptances and bills of exchange of the 4676
kinds and maturities made eligible by law for rediscount with 4677
federal reserve banks, provided that such acceptances and bills of 4678
exchange are accepted by a bank or trust company incorporated 4679
under the laws of the United States or of this state or any other 4680
bank or trust company which is a member of the federal reserve 4681
system;4682

       (E) In equipment trust obligations or certificates, security 4683
agreements, or other evidences of indebtedness entered into 4684
directly or guaranteed by any company operating wholly or partly 4685
within the United States or Canada, provided that the debt 4686
obligation is secured by a first lien on tangible personal 4687
property which is purchased or secured for payment thereof and the 4688
debt obligation is repayable within twenty years from the date of 4689
issue in annual, semiannual, or more frequent installments 4690
beginning not later than the first year after such date;4691

       (F) In bonds issued by or for federal land banks and any 4692
debentures issued by or for federal intermediate credit banks 4693
under the "Federal Farm Loan Act of 1916," 39 Stat. 360, 12 4694
U.S.C.A. 641 as amended; any debentures issued by or for banks for 4695
cooperatives under the "Farm Credit Act of 1933," 48 Stat. 257, 12 4696
U.S.C.A. 131 as amended;4697

       (G) In bonds issued under the "Home Owners' Loan Act of 4698
1933," 48 Stat. 128, 12 U.S.C.A. 1461;4699

       (H) In notes, bonds, debentures, or other such obligations 4700
issued by the federal housing administrator;4701

       (I)(1)(a) In bonds or other evidences of indebtedness, not in 4702
default as to principal or interest, which are valid obligations 4703
issued, assumed or guaranteed by the United States, by any state 4704
thereof, by the Commonwealth of Puerto Rico, by any territory or 4705
insular possession of the United States, or by the District of 4706
Columbia, or which are valid obligations issued, assumed, or 4707
guaranteed by any county, municipal corporation, district, or 4708
political subdivision, or by any civil division or public 4709
instrumentality of such governmental units, if by statutory or 4710
other legal requirements such obligations are payable, as to both 4711
principal and interest, from taxes levied upon all taxable 4712
property within the jurisdiction of such governmental unit;4713

       (b) In bonds or other obligations issued by or for account of 4714
any such governmental unit having a population of five thousand or 4715
more by the latest official federal or state census, which are 4716
payable as to both principal and interest from revenues or 4717
earnings from the whole or any part of a publicly owned utility 4718
supplying water, gas, sewage disposal facility, or electricity, or 4719
any or all of them, provided that by statute or other applicable 4720
legal requirements, rates from the service or operation of such 4721
utility must be fixed, maintained, and collected at all times so 4722
as to produce sufficient revenues or earnings to pay both 4723
principal and interest of such bonds or obligations as they become 4724
due;4725

       (c) In any bonds or obligations payable from and secured by 4726
revenues of the United States, the Commonwealth of Puerto Rico, or 4727
any state or instrumentality of any of them, or of the District of 4728
Columbia or of any commission, board, or other instrumentality of 4729
one or more of them, provided there is a specific pledge of 4730
revenues, and provided that there is adequate provision for 4731
payment of interest prior to completion of construction and that 4732
rates, fees, tolls, or charges fixed are, after completion of 4733
construction, sufficient to pay all expenses of operation and 4734
maintenance and the principal and interest when due.4735

       (2) In legally authorized and executed bonds, notes, 4736
warrants, and securities which are the direct obligation of or are 4737
guaranteed by Canada, or which are the direct obligation of or are 4738
guaranteed as to both principal and interest by any province of 4739
Canada, or which are the direct obligation of or are guaranteed as 4740
to both principal and interest by any municipality of Canada 4741
having a population of fifty thousand or more by the latest 4742
official census, and which are not in default as to principal or 4743
interest;4744

       (3) In bonds or other evidence of indebtedness, not in 4745
default as to principal or interest, which are valid obligations 4746
issued, assumed, or guaranteed by the United States, by any state 4747
thereof, the Commonwealth of Puerto Rico, or by the District of 4748
Columbia, if by statutory or other legal requirements such 4749
obligations are payable, as to both principal and interest, from 4750
selective taxes levied by such governmental unit.4751

       (J)(1) In mortgage bonds which are the direct obligation of a 4752
railroad, and which are the first lien on a substantial portion of 4753
its property, situated wholly in the United States or partly in 4754
the United States and partly in Canada, the average net yearly 4755
earnings of which, after deducting proper charges for maintenance 4756
of way and equipment, for the five fiscal years preceding such 4757
investments, have been at least one and one-half times the average 4758
yearly interest for the same period on its mortgages, bonds, and 4759
funded debts, and in the junior mortgage bond issues of such 4760
railroad corporations of the same character and under the same 4761
conditions where the average net yearly earnings for the five 4762
fiscal years preceding such investment, after deducting proper 4763
charges for maintenance of way and equipment, have been at least 4764
three times the average yearly interest charges on such issues and 4765
all prior liens; or in the mortgage bonds of any incorporated 4766
railroad company which have been assumed or guaranteed, both as to 4767
principal and interest, by any incorporated railroad company whose 4768
bonds constitute a legal investment under division (J)(1) of this 4769
section. In applying the earnings test to any issuing, assuming, 4770
or guaranteeing company, whether or not in legal existence during 4771
the whole of such five years next preceding the date of investment 4772
by such insurer, which has at any time during such five-year 4773
period acquired the assets of any other company by purchase, 4774
merger, consolidation, or otherwise, substantially as an entirety, 4775
or has been reorganized pursuant to the bankruptcy law, the 4776
earnings of such other predecessor or constituent companies, or of 4777
the company so reorganized, available for interest for such 4778
portion of such period that has preceded such acquisition, or such 4779
reorganization, may be included in the earnings of such issuing, 4780
assuming, or guaranteeing company for such portion of such period 4781
as is determined in accordance with adjusted or pro forma 4782
consolidated earnings statements covering such portion of such 4783
period. In such cases the requirements as to earnings shall be 4784
based upon the mortgages, bonds, and funded debts as they exist 4785
immediately after such acquisitions or such reorganizations.4786

       (2) In mortgage bonds or other interest-bearing obligations 4787
of terminal companies organized under the laws of the United 4788
States or any state thereof, provided such bonds or obligations 4789
have been assumed or guaranteed jointly or severally by two or 4790
more railroad corporations whose bonds constitute legal 4791
investments under division (J)(1) of this section;4792

       (3) In loans to veterans guaranteed in whole or in part by 4793
the United States pursuant to Title III of the "Servicemen's 4794
Readjustment Act of 1944," 58 Stat. 284, 38 U.S.C.A. 693, as 4795
amended, provided such guaranteed loans are liens upon real 4796
estate;4797

       (4) In mortgage bonds which are the direct obligation of and 4798
first lien upon the property of a corporation engaged directly and 4799
primarily in the production and sale of, or in the purchase and 4800
sale of electricity or gas, or in the operation of telephone or 4801
telegraph systems or waterworks, or in some combination of them, 4802
and situated wholly in the United States, or the Commonwealth of 4803
Puerto Rico, or partly in the United States and partly in Canada, 4804
the average net yearly earnings of which, after deducting proper 4805
charges for replacements, depreciation, and obsolescence, for the 4806
five fiscal years preceding such investment, have been at least 4807
one and one-half times the average yearly interest for the same 4808
period on its mortgages, bonds, and funded debts;4809

       (5) Any such corporation, or any of its predecessors, 4810
constituent, or successor corporations, must have been in business 4811
not less than ten years prior to the date of the purchase of such 4812
bonds, and must not have defaulted on the interest or principal of 4813
any of its bonds or funded debts outstanding during the five years 4814
immediately preceding the date of purchase, provided that division 4815
(J)(5) of this section does not preclude investments in mortgage 4816
bonds of railroads reorganized through purchase of assets, merger, 4817
consolidation, bankruptcy proceedings, or otherwise if such bonds 4818
are eligible for investment under division (J)(1) of this section;4819

       (6) No investment shall be made under division (J)(1), (2), 4820
(4), or (5) of this section if such railroad or other utility 4821
corporation and its business, and its issue of bonds, funded 4822
debts, and stocks are not under the supervision and control of an 4823
authorized state or federal official or commission, provided that 4824
division (J)(6) of this section does not apply to the mortgage 4825
bonds or other interest-bearing obligations of companies engaged 4826
in the operation of telephone or telegraph systems.4827

       (K)(1) In bonds or notes secured by mortgages or deeds of 4828
trust which are a first lien upon unencumbered fee simple real 4829
estate in any state, the Commonwealth of Puerto Rico, the District 4830
of Columbia, or Canada, provided the amount loaned does not exceed 4831
eighty per cent of the actual market value of such property.4832

       The actual market value of any such property shall be shown 4833
by a valuation and appraisement in writing by a qualified land 4834
appraiser.4835

       In the event the amount loaned under division (K)(1) of this 4836
section exceeds eighty per cent of the actual market value of the 4837
land, the structures on the land must be insured by an authorized 4838
fire insurance company or covered by other comparable 4839
indemnification, and the policies or indemnifications shall be 4840
payable or assigned to the mortgagee or to a trustee in its behalf 4841
and shall be held by the mortgagee or an agent of the mortgagee or 4842
by such trustee; or in lieu of holding such policies or 4843
indemnifications, the mortgagee may purchase a policy or policies 4844
of mortgage protection insurance, payable to the mortgagee or a 4845
trustee in its behalf, insuring the mortgagee against loss 4846
resulting from the failure of the mortgagor to acquire and 4847
maintain, from such an authorized fire insurance company or other 4848
comparable source, insurance or indemnification.4849

       (2) In bonds or notes secured by mortgages insured by the 4850
federal housing administrator;4851

       (3) In bonds or notes secured by mortgages or deeds of trust 4852
which are a first lien on leasehold estates in wholly or partly 4853
improved real property, unencumbered, except rentals accruing from 4854
the property to the owner of the fee, provided that any loan 4855
secured by a leasehold estate must provide for amortization by 4856
repayment of principal at least once in each year in amounts 4857
sufficient to repay the loan within a period of four-fifths of the 4858
unexpired term of the leasehold but within a period of not more 4859
than thirty years, and further provided that the amount loaned on 4860
the leasehold estate does not exceed seventy-five per cent of 4861
total market value of the leasehold estate determined by 4862
appraisements in writing made under oath by two real estate 4863
owners, residents of the county or local district in which the 4864
real estate is located, or by a qualified land appraiser; if the 4865
amount loaned exceeds seventy-five per cent of the value of that 4866
portion of the leasehold estate represented by the value of the 4867
land, exclusive of improvements on the land, such improvements 4868
shall be insured against fire for the benefit of the mortgagee in 4869
an amount not less than the difference between seventy-five per 4870
cent of the value of such land, exclusive of buildings, and the 4871
amount loaned; the policies for such amount shall be payable to 4872
and held by the mortgagee or a trustee named in the lease who 4873
shall be required by the terms of said lease to use and apply the 4874
proceeds of such insurance for repairing, restoring, or rebuilding 4875
such buildings;4876

       (4) The following shall not be considered as prior liens or 4877
encumbrances in the construction and application of this section: 4878
leasehold estates of any duration, rights-of-way, servitudes, 4879
joint driveways, easements, party wall agreements, current taxes 4880
and assessments not delinquent, and restrictions as to building, 4881
use, and occupancy.4882

       (5) This section does not prohibit a domestic life insurance 4883
company from renewing or extending a loan for the original or a 4884
lesser amount nor does it prohibit a company from accepting as 4885
part payment for real estate sold by it a mortgage on the real 4886
estate for a greater percentage of the purchase price of the real 4887
estate than is otherwise permitted by this section.4888

       (L) In bonds, notes, or other evidences of indebtedness of 4889
corporations, trusts, partnerships, or similar business entities 4890
organized under the laws of the United States, or any state 4891
thereof, the Commonwealth of Puerto Rico, the District of 4892
Columbia, or Canada or any province of Canada, secured by 4893
assignment of lease or leases or the rentals payable under such 4894
leases, of real or personal property or both to (1) the United 4895
States or any instrumentality thereof, or any state of the United 4896
States, the Commonwealth of Puerto Rico, or the District of 4897
Columbia, or any county, city, town, school, or water district, 4898
authority, or other political subdivision in any such government, 4899
or Canada, any province of Canada, or any municipal corporation of 4900
Canada that has a population of fifty thousand or more by the 4901
latest official census; or (2) one or more corporations, trusts, 4902
partnerships, or similar business entities organized under the 4903
laws of the United States, any state thereof, the Commonwealth of 4904
Puerto Rico, the District of Columbia, or Canada or any province 4905
of Canada, provided that (a) the fixed rentals assigned shall be 4906
sufficient to repay the indebtedness within the unexpired term of 4907
the lease, exclusive of the term which may be provided by an 4908
enforceable option of renewal; (b) such lessee has not defaulted 4909
in payment of interest or principal on any of its bonds, notes, 4910
debentures, or other evidences of indebtedness during the five 4911
years immediately preceding the date of the investment, and 4912
provided the average net earnings available for fixed charges of 4913
such lessee under division (L)(2) of this section for not less 4914
than five fiscal years preceding such investment have been at 4915
least one and one-half times average fixed charges for that period 4916
and during either of the last two years of such period, the net 4917
earnings available for fixed charges shall have been not less than 4918
one and one-half times fixed charges for such year, except that 4919
railroad companies and utility companies may qualify as lessees 4920
herein by application of the earnings test provided for railroads 4921
under division (J)(1) of this section and for utilities under 4922
division (J)(4) of this section; and (c) a first lien on the 4923
interest of the lessor in the unencumbered property so leased 4924
shall be obtained as additional security for the indebtedness;4925

       (M) In ground rents, land trust certificates, or fee 4926
ownership certificates representing or evidencing beneficial 4927
ownership of or interest in improved real estate under lease for 4928
not less than twenty-five years from the date of such lease, in 4929
which it must be provided that the lessee shall pay all taxes and 4930
assessments levied on or assessed against said real estate, shall 4931
maintain the improvements on the real estate in good repair, and 4932
shall provide and maintain fire insurance in an amount equal to 4933
the insurable value of the building on the real estate; provided:4934

       (1) The value of the land and improvements shall be evidenced 4935
by an appraisement made under oath by a disinterested appraiser 4936
resident in and the owner of real estate in the city in which the 4937
property is situated, and such appraisement shall not be less than 4938
one and sixty-seven hundredths times the amount of such land trust 4939
certificates, which amount shall be not less than twenty times the 4940
net annual rental distributable to holders of outstanding 4941
certificates;4942

       (2) Such beneficial interests shall only be in properties on 4943
which actual earning records for five years immediately preceding 4944
are available;4945

       (3) Such declaration of trust or other trust instrument shall 4946
provide for a depreciation or other similar fund, in an amount 4947
which is not less than nine per cent of the net annual 4948
distributable rental, for the benefit of the holders of 4949
outstanding certificates.4950

       (N)(1) In certificates of deposit or other evidence of 4951
indebtedness of a savings and loan association provided the 4952
certificates or other evidence of deposit are insured pursuant to 4953
the "Financial Institutions Reform, Recovery, and Enforcement Act 4954
of 1989," 103 Stat. 183, 12 U.S.C.A. 1811, as amended;4955

       (2) In interest-bearing obligations, including savings 4956
accounts and time certificates of deposit of a national bank or 4957
state bank provided such bank is a member of the federal deposit 4958
insurance corporation created pursuant to the "Banking Act of 4959
1933," 92 Stat. 624, 12 U.S.C.A. 624, as amended.4960

       (O) In obligations issued, assumed, or guaranteed by the 4961
international finance corporation or by the international bank for 4962
reconstruction and development, the Asian development bank, the 4963
inter-American development bank, the African development bank, or 4964
other similar development bank in which the president, as 4965
authorized by congress and on behalf of the United States, has 4966
accepted membership;4967

       (P)(1) In the preferred stocks of any company organized under 4968
the laws of the United States or of any state thereof engaged 4969
directly and primarily in the production and sale of, or in the 4970
purchase and sale of electricity or gas, or in the operation of 4971
telephone or telegraph systems or water works, or in some 4972
combination of them, if the average annual net earnings of such 4973
company, for not less than five fiscal years preceding purchase 4974
thereof, after deduction of interest on all mortgages, bonds, 4975
debentures, and funded debts and after deduction of the proper 4976
charges for replacements, depreciation, and obsolescence, have 4977
been at least two times the average yearly amount which is 4978
required to pay the dividends or distributions on all preferred 4979
stocks; and in which the mortgages, bonds, debentures, funded 4980
debts, and preferred stocks shall not in the aggregate exceed 4981
seventy per cent of the total capitalization of such company, 4982
including mortgages, bonds, debentures, funded debts, and 4983
preferred and common stocks;4984

       (2) In the preferred stocks of any other company organized 4985
under the laws of the United States, or of any state thereof if 4986
the average annual net earnings of such company for a period of 4987
not less than five fiscal years preceding purchase thereof, after 4988
deduction of interest on all mortgages, bonds, debentures, and 4989
funded debts and after deduction of the proper charges for 4990
replacements, depreciation, and obsolescence, have been at least 4991
four times the amount which is required to pay the dividends or 4992
distributions on all preferred stocks, and in which the mortgages, 4993
bonds, debentures, funded debts, and preferred stocks shall not in 4994
the aggregate exceed sixty per cent of the total capitalization of 4995
such company, including mortgages, bonds, debentures, funded 4996
debts, and preferred and common stocks;4997

       (3) A domestic life insurance company shall not purchase any 4998
preferred stocks when the total market values of such stocks then 4999
owned with those purchased exceed in the aggregate of book values 5000
and purchase price the capital, surplus, and contingency funds, 5001
excluding all reserves required by law, of such company on the 5002
thirty-first day of December preceding the date of such purchase, 5003
or contemplated purchase, provided that in case of appreciations 5004
in values of stocks owned the cost rather than the market values 5005
shall be used in arriving at such aggregate; the purpose being to 5006
restrict the investments of such company in all preferred stocks 5007
to capital, surplus, and contingency funds.5008

       (4) In the bonds, notes, debentures, or other evidences of 5009
indebtedness of a solvent corporation, trust, partnership, or 5010
similar business entity existing under the laws of the United 5011
States, of any state thereof, the Commonwealth of Puerto Rico, or 5012
Canada or any province of Canada, provided that either:5013

       (a) The bonds, notes, debentures, or other evidences of 5014
indebtedness of such corporation, trust, partnership, or similar 5015
business entity are rated 1 or 2 by the securities valuation 5016
office of the national association of insurance commissioners;5017

       (b) The corporation, trust, partnership, or similar business 5018
entity has not defaulted in payment of interest or principal on 5019
any of its bonds, notes, debentures, or other evidences of 5020
indebtedness during the five years immediately preceding the date 5021
of purchase, and the average annual net earnings of such 5022
corporation, trust, partnership, or similar business entity that 5023
are available for fixed charges for not less than five fiscal 5024
years preceding such purchase have been at least one and one-half 5025
times the average fixed charges of such corporation, trust, 5026
partnership, or similar business entity for that period and during 5027
either of the last two years of such period, the net earnings 5028
available for fixed charges shall have been not less than one and 5029
one-half times the fixed charges of such corporation, trust, 5030
partnership, or similar business entity for such year.5031

       (5) In common stocks or shares of any solvent incorporated 5032
company organized under the laws of the United States, or of any 5033
state, district, or territory thereof, or the Commonwealth of 5034
Puerto Rico, provided that a dividend or distribution has been 5035
paid by the corporation in the preceding twelve months upon such 5036
stock to be purchased, or that such corporation, together with its 5037
predecessor corporation or corporations, has been in existence for 5038
a period of at least five years. No domestic company shall invest 5039
in common stock or shares under divisions (P)(5) and (R) of this 5040
section a sum exceeding in the aggregate ten per cent of its 5041
admitted assets on the preceding thirty-first day of December.5042

       (6) In the stocks, limited liability company membership 5043
interests, limited partnership interests, or limited liability 5044
partnership interests of insurance, financial, investment, and 5045
investment management companies, which investment management 5046
companies are registered with the securities and exchange 5047
commission under the "Investment Company Act of 1940," 54 Stat. 5048
789, 15 80a-1, as amended, or the stocks, limited liability 5049
company membership interests, limited partnership interests, or 5050
limited liability partnership interests in an entity wholly owned 5051
by a domestic company or by a domestic company and its affiliates, 5052
that is formed and maintained to acquire or hold specific assets 5053
or liabilities for bankruptcy remoteness or limitation of 5054
liability purposes, except its own stock, but no domestic life 5055
insurance company shall invest in such stocks, limited liability 5056
company membership interests, or limited liability partnership 5057
interests under division (P)(6) of this section, exclusive of its 5058
investments in stocks or limited liability company membership 5059
interests of insurance company subsidiaries or subsidiaries 5060
engaged exclusively in the ownership of insurance company 5061
subsidiaries, a sum exceeding the lesser of fifty per cent of its 5062
policyholder surplus or ten per cent of its admitted assets as of 5063
the preceding thirty-first day of December unless the approval of 5064
the superintendent of insurance is first obtained. Whenever the 5065
superintendent has reason to believe that the retention, 5066
investment, or acquisition of the stock, limited liability company 5067
membership interest, limited partnership interest, or limited 5068
liability partnership interest of any such company substantially 5069
lessens competition generally in the business of insurance or 5070
creates a monopoly therein the superintendent shall proceed under 5071
section 3901.13 of the Revised Code to cause such domestic 5072
insurance company to divest itself of such stock, limited 5073
liability company membership interest, limited partnership 5074
interest, or limited liability partnership interest.5075

       (7)(a) In bonds, notes, debentures, or other evidences of 5076
indebtedness issued, assumed, or guaranteed by a solvent 5077
corporation, trust, or partnership formed or existing under the 5078
laws of a foreign jurisdiction, provided each such foreign 5079
investment is of the same kind and quality as United States 5080
investments authorized under this section; or in common or 5081
preferred stock, shares, membership interest, or partnership 5082
interest of any solvent business entity formed or existing under 5083
the laws of a foreign jurisdiction provided each such foreign 5084
investment is of the same kind and quality as United States 5085
investments authorized under this section; or in bonds or other 5086
evidences of indebtedness issued, assumed, or guaranteed by a 5087
foreign jurisdiction.5088

       An insurer shall not invest in foreign investments under 5089
division (P)(7) of this section, including investments denominated 5090
in foreign currency, a sum exceeding in the aggregate fifteen per 5091
cent of its admitted assets as of the preceding thirty-first day 5092
of December. The aggregate amount of investments held by an 5093
insurer in a single foreign jurisdiction shall not exceed three 5094
per cent of its admitted assets as of the preceding thirty-first 5095
day of December.5096

       As used in division (P)(7)(a) of this section, "foreign 5097
jurisdiction" means a jurisdiction outside the United States, 5098
Puerto Rico, or canadaCanada, whose bonds are rated 1 by the 5099
securities valuation office of the national association of 5100
insurance commissioners.5101

       (b) An insurer may acquire investments denominated in foreign 5102
currency whether or not they are foreign investments.5103

       An insurer shall not invest in investments denominated in 5104
foreign currency a sum exceeding in the aggregate ten per cent of 5105
its admitted assets as of the preceding thirty-first day of 5106
December. The aggregate amount of investments denominated in a 5107
single foreign currency held by an insurer shall not exceed three 5108
per cent of an insurer's admitted assets as of the preceding 5109
thirty-first day of December.5110

       (c) As used in division (P)(7) of this section, "foreign 5111
currency" means a currency other than that of the United States.5112

       (8) An insurer may invest without limitation in investments 5113
of government money market funds. As used in division (P)(8) of 5114
this section, "government money market fund" means a mutual fund 5115
that at all times invests in obligations issued, guaranteed, or 5116
insured by the federal government of the United States, or 5117
collateralized repurchase agreements comprised of these 5118
obligations, and that qualifies for investment without a reserve 5119
pursuant to the purposes and procedures of the securities 5120
valuation office of the national association of insurance 5121
commissioners.5122

       (Q) In loans upon the pledge of any securities in which such 5123
companies are authorized by this section to invest, provided that 5124
any loan upon such a pledge shall not exceed eighty per cent of 5125
the cash market value of the collateral at the time of the making 5126
of such loan and at the end of each twelve-month period 5127
thereafter, and such company, through the collateral pledged to 5128
it, shall not exceed the amounts which it may, under this section, 5129
invest in one corporation so that, in the stocks and securities 5130
which may be owned and those which are pledged to it, the 5131
limitations in this section might be indirectly evaded;5132

       (R)(1) Any domestic legal reserve life insurance company may 5133
loan or invest its funds, to an extent not exceeding in the 5134
aggregate five per cent of its total admitted assets, in loans or 5135
investments not permitted under this section. Any such company may 5136
also invest up to an additional five per cent of its total 5137
admitted assets, in loans or investments in small businesses 5138
having more than half of their assets or employees in this state 5139
and in venture capital firms having an office within this state, 5140
provided that, as a condition of a company making an investment in 5141
a venture capital firm, the firm must agree to use its best 5142
efforts to make investments, in an aggregate amount at least equal 5143
to the investment to be made by the company in that venture 5144
capital firm, in small businesses having their principal offices 5145
within this state and having either more than one-half of their 5146
assets within this state or more than one-half of their employees 5147
employed within this state.5148

       As used in division (R) of this section:5149

       (a) "Small businesses" means any corporation, partnership, 5150
proprietorship, or other entity that either does not have more 5151
than four hundred employees, or would qualify as a small business 5152
for the purpose of receiving financial assistance from small 5153
business investment companies licensed under the "Small Business 5154
Investment Act of 1958," 72 Stat. 689, 15 U.S.C.A. 661, as 5155
amended, and rules of the small business administration.5156

       (b) "Venture capital firms" means any corporation, 5157
partnership, proprietorship, or other entity, the principal 5158
business of which is or will be the making of investments in small 5159
businesses.5160

       (c) "Investments" means any equity investment, including 5161
limited partnership interests and other equity interests in which 5162
liability is limited to the amount of the investment, but does not 5163
include general partnership interests or other interests involving 5164
general liability.5165

       (2) In the event that, subsequent to being made under 5166
provisions of division (R) of this section, an investment is 5167
determined to have become qualified as an investment for a 5168
domestic life insurance company as provided for in this section, 5169
the company may consider such investment as held under the 5170
applicable provisions of the foregoing divisions (A) to (Q) of 5171
this section and such investment shall no longer be considered as 5172
having been made under the provisions of this division.5173

       (S)(1) No domestic life insurance company shall subscribe to 5174
or participate in any underwriting for the purchase or sale of 5175
securities or property, nor shall it enter into any such 5176
transaction for purchase or sale on account of said company 5177
jointly with any other person, nor shall any such company enter 5178
into any agreement to withhold from sale any of its property, but 5179
the disposition of its property shall be at all times within the 5180
control of its board of directors. Nothing contained in division 5181
(S)(1) of this section shall be construed to invalidate or 5182
prohibit an agreement by an insurance company for the purchase for 5183
its own account of an entire issue of the securities of a 5184
corporation or to invalidate or prohibit an agreement by an 5185
insurance company and one or more other investors to join and 5186
share in the purchase of investments for their individual accounts 5187
and for bona fide investment purposes.5188

       (2) In the determination of capitalization in this section 5189
the value of all bonds, debentures, and funded debts, and 5190
nonconvertible or nonparticipating preferred stocks shall be 5191
figured at par. Participating or convertible preferred shares 5192
shall be figured at par or market on the preceding thirty-first 5193
day of December, whichever is higher, and the value of all common 5194
shares shall be figured at the market on the preceding 5195
thirty-first day of December.5196

       (3) As used in this section:5197

       (a) "Funded debt" means all interest-bearing obligations 5198
maturing in more than one year from their issuance and all 5199
guaranteed or assumed interest-bearing obligations or stock. 5200
Securities or stock of a corporation pledged to secure other 5201
funded debt of the corporation are not included in the funded 5202
debt.5203

       (b) "Fixed charges" include actual interest incurred in each 5204
year on funded and unfunded debt and annual apportionment of debt 5205
discount or premium. Where interest is partially or entirely 5206
contingent upon earnings, "fixed charges" include contingent 5207
interest payments.5208

       (c) "Net earnings available for fixed charges" means income 5209
after deducting operating and maintenance expenses, taxes other 5210
than income taxes, depreciation, and depletion. Extraordinary, 5211
nonrecurring items of income or expense shall be excluded.5212

       (4) Except as provided in a plan of mutualization adopted 5213
pursuant to the provisions of sections 3913.01 to 3913.10 of the 5214
Revised Code, no domestic life insurance company may invest in or 5215
loan upon its own stock, either directly or indirectly.5216

       (5) If the investments of any domestic life insurance company 5217
are at the time of the making thereof or on October 13, 1953, 5218
otherwise than as authorized in this section, such investments 5219
shall not be admitted or accepted as authorized investments for 5220
such company.5221

       (6) Any earnings test provided for in this section shall be 5222
deemed to have been met if the requirements of such earnings test 5223
are met by any company which assumes or guarantees the investment 5224
or which assumes or guarantees the performance of any lease which 5225
is the security for the investment. In applying any such earnings 5226
test, the operations of a company's predecessor companies, if any, 5227
for the stipulated period shall be included.5228

       (7) No domestic life insurance company shall at any time have 5229
invested in or loaned upon the security of the obligations, 5230
property, or securities of a particular corporation, trust, 5231
partnership, or similar business entity a sum exceeding the 5232
greater of two per cent of its admitted assets as of the preceding 5233
thirty-first day of December or twenty-five per cent of that 5234
portion of its capital and surplus, or its surplus in the case of 5235
a mutual company, that exceeds the minimum required capital and 5236
surplus under section 3907.05 of the Revised Code unless the 5237
approval of the superintendent of insurance is first obtained. The 5238
restrictions of division (S)(7) of this section do not apply to 5239
divisions (C), (F), (G), (H), (P)(6), and (R) of this section or 5240
to any valid obligation issued, assumed, or guaranteed by the 5241
United States, or any state thereof, the Commonwealth of Puerto 5242
Rico, the District of Columbia, or Canada or any province of 5243
Canada. For purposes of division (S)(7) of this section, such 5244
company may, at its option, consider either the lessor or the 5245
lessee under division (L) of this section to be the person to whom 5246
any such investment or loan is made.5247

       (8) This section does not affect the propriety or legality of 5248
an investment made by a domestic life insurance company which was 5249
in accordance with the laws in force at the time of the making of 5250
the investment.5251

       (T) A domestic life insurance company may seek permission 5252
from the superintendent of insurance to invest funds under Chapter 5253
3906. of the Revised Code and may invest funds under that chapter 5254
if such permission is granted.5255

       (U) As used in divisions (U) and (V) of this section:5256

       (1) "Covered" means that an insurer owns, or can immediately 5257
acquire through the exercise of options, warrants, or conversion 5258
rights already owned, the underlying interest in order to fulfill 5259
or secure its obligation under the option, cap, or floor it has 5260
written. 5261

       (2)(a) "Derivative instrument" means an agreement, option, 5262
instrument, or a series or combination thereof of either of the 5263
following types:5264

       (i) To make or take delivery of, or assume or relinquish, a 5265
specified amount of one or more underlying interests, or to make a 5266
cash settlement in lieu thereof; 5267

       (ii) That has a price, performance, value, or cash flow based 5268
primarily upon the actual or expected price, level, performance, 5269
value, or cash flow of one or more underlying interests.5270

       (b) Derivative instruments include options, warrants, caps, 5271
floors, collars, swaps, forwards, futures, and any other 5272
agreements, options, or instruments substantially similar thereto 5273
or any series or combination thereof. 5274

       (3) "Derivative transaction" means a transaction involving 5275
the use of one or more derivative instruments.5276

       (4) "Hedging transaction" means a derivative transaction that 5277
is entered into and maintained to reduce either of the following:5278

       (a) The risk of economic loss due to a change in the value, 5279
yield, price, cash flow, or quantity of assets or liabilities that 5280
the insurer has acquired or incurred or anticipates acquiring or 5281
incurring;5282

       (b) The currency exchange rate risk or the degree of exposure 5283
as to assets or liabilities that an insurer has acquired or 5284
incurred or anticipates acquiring or incurring.5285

       (5) "Income generation" means a derivative transaction 5286
involving the writing of covered options, caps, or floors that is 5287
intended to generate income or enhance return.5288

       (6) "Replication transaction" means a derivative transaction 5289
that is intended to replicate the performance of one or more 5290
assets that an insurer is authorized to acquire under this 5291
chapter. "Replication transaction" does not include a derivative 5292
transaction that is entered into as a hedging transaction.5293

       (V)(1) Prior to an insurer entering into derivative 5294
transactions, the board of directors of the insurer shall approve 5295
a derivative use plan.5296

       (2) An insurer shall notify the superintendent of insurance 5297
in writing within three days after identifying either of the 5298
following:5299

        (a) Any event or occurrence related to an insurer's 5300
derivatives use that may lead to a material change to the 5301
insurer's policyholder surplus;5302

       (b) Any event or occurrence related to an insurer's 5303
derivatives use that, with the passage of time, may lead to a 5304
material change to the insurer's policyholder surplus. 5305

       (3) Prior to entering into derivative transactions, an 5306
insurer shall file with the superintendent a copy of its 5307
derivative use plan and internal controls, for informational 5308
purposes. The insurer shall keep current the copy of its 5309
derivative use plan and internal controls filed with the 5310
superintendent. The insurer shall not enter into derivative 5311
transactions until thirty calendar days after the date on which 5312
the derivative use plan and internal controls is filed with the 5313
superintendent. This thirty-calendar-day period is to begin on the 5314
date that the superintendent receives the derivative use plan and 5315
internal controls.5316

       (4) The superintendent may adopt rules prescribing the form 5317
and content of derivative use plans, as well as any internal 5318
controls the superintendent considers necessary.5319

       (5) An insurer that engages in hedging transactions or 5320
replication transactions shall do both of the following:5321

       (a) Maintain its position in any outstanding derivative 5322
instrument used as part of a hedging transaction or replication 5323
transaction for as long as the hedging transaction or replication 5324
transaction continues to be effective;5325

       (b) Demonstrate to the superintendent, upon request, that any 5326
derivative transaction entered into and involving hedging 5327
transaction or replication transaction is an effective hedging 5328
transaction or replication transaction. The insurer must be able 5329
to demonstrate this at the time the derivative transaction is 5330
entered into, and for as long as the transaction continues to be 5331
in place.5332

       (6) An insurer may not invest in, or use, a derivative 5333
instrument for any purpose other than a hedging transaction, 5334
income generation, or replication.5335

       (7) An insurer shall not invest in, or use a derivative 5336
instrument for purposes of income generation in a sum exceeding in 5337
the aggregate five per cent of its admitted assets, as of the 5338
preceding thirty-first day of December.5339

       (8) All documents provided to the superintendent under 5340
division (V) of this section shall be deemed trade secrets and 5341
shall be provided with trade secret protection. Such documents 5342
shall also be considered work papers of the superintendent that 5343
are subject to section 3901.48 of the Revised Code and are 5344
confidential and privileged and shall not be considered a public 5345
record, as defined in section 149.43 of the Revised Code. The 5346
original documents and any copies of them shall not be subject to 5347
subpoena and shall not be made public by the superintendent or any 5348
other person, except as otherwise provided in section 3901.48 of 5349
the Revised Code. 5350

       Sec. 3913.01.  Any domestic stock life insurance corporation, 5351
incorporated under a general law, may become a mutual life 5352
insurance corporation, and to that end may carry out a plan for 5353
the acquisition of shares of its capital stock, provided such 5354
plan:5355

       (A) Has been adopted by a vote of a majority of the directors 5356
of such corporation;5357

       (B) Has been approved by a vote of stockholders representing 5358
a majority of the capital stock then outstanding at a meeting of 5359
stockholders called for the purpose;5360

       (C) Has been approved by a majority of the policyholders 5361
voting at a meeting of policyholders called for the purpose, each 5362
of whom is insured in a sum of at least one thousand dollars and 5363
whose insurance shall then be in force and shall have been in 5364
force for at least one year prior to such meeting.5365

       As used in this section, "policyholder" means the person 5366
insured under an individual policy of life insurance, and the 5367
person to whom any annuity or pure endowment is presently or 5368
prospectively payable by the terms of an individual annuity or 5369
pure endowment contract, except where the policy or contract 5370
declares some other person to be the owner or holder thereof, in 5371
which case such owner or policyholder shall be deemed the 5372
policyholder, and except in cases of assignment. In the case of 5373
any individual policy or contract insuring two or more persons 5374
jointly or in case the policy or contract declares two or more 5375
persons to be the owner, the persons insured or declared to be the 5376
owner are considered as one policyholder for the purposes of this 5377
section. In case any such policy or contract has been assigned by 5378
an assignment absolute on its face to an assignee other than the 5379
corporation, and such assignment has been filed at the principal 5380
office of the corporation at least thirty days prior to the date 5381
of the meeting of policyholders, then such assignee shall be 5382
deemed a policyholder. Except as provided in this section, an 5383
assignee of a policy or contract shall not be deemed a 5384
policyholder. The reference in division (C) of this section to 5385
insurance in the amount of one thousand dollars or more is deemed 5386
to include any annuity contract, the commuted value of which is 5387
one thousand dollars or more on the date of said meeting, and any 5388
pure endowment contract for the principal sum of one thousand 5389
dollars or more.5390

       Notice of the meeting of policyholders shall be given by 5391
mailing such notice from the home office of the corporation at 5392
least thirty days prior to such meeting in a sealed envelope, 5393
postage prepaid, addressed to such policyholders at their last 5394
known post-office addresses, provided that personal delivery of 5395
such written notice to any policyholder evidenced by written 5396
receipt therefor may be substituted for mailing the same. The 5397
meeting shall be otherwise provided for and conducted in such 5398
manner as is provided in the mutualization plan, provided that 5399
policyholders may vote in person, by proxy, or by mail, and that 5400
all votes shall be cast by ballot on a uniform ballot furnished by 5401
the corporation. The superintendent of insurance shall supervise 5402
and direct the method and procedure of said meeting and shall 5403
appoint an adequate number of inspectors to conduct the voting at 5404
said meeting who may determine all questions concerning the 5405
verification of the ballots, the ascertainment of the validity of 5406
such ballots, the qualifications of the voters, and the canvass of 5407
the vote, and who shall certify to the superintendent and to the 5408
corporation the result of such proceedings, which shall be 5409
supervised by said inspectors in accordance with such rules as are 5410
prescribed by the superintendent. All necessary expenses incurred 5411
by the superintendent shall be paid by the corporation, as 5412
certified to by himthe superintendent.5413

       Before such a plan can be carried out, it must be submitted 5414
to the superintendent and must be approved by himthe 5415
superintendent in writing; provided that every payment for the 5416
acquisition of any shares of the capital stock of such 5417
corporation, the purchase price of which is not fixed by such 5418
plan, shall be subject to the approval of the superintendent, and 5419
provided that neither such plan, nor any such payment, shall be 5420
approved by the superintendent unless at the time of such 5421
approvals, respectively, the corporation, after deducting the 5422
aggregate sum appropriated by such plan for the acquisition of any 5423
part or all of its capital stock, and, in the case of any payment 5424
not fixed by such plan and subject to separate approval by the 5425
superintendent, after deducting also the amount of such payment, 5426
shall be possessed of net assets of not less than two hundred 5427
thousand dollars from which it shall maintain its deposit made 5428
previously with the superintendent, and such assets shall be not 5429
less than the entire liabilities of the corporation, including the 5430
net values of its outstanding contracts computed according to the 5431
standard adopted by the corporation under sectionsections 3903.72 5432
to 3903.7211 of the Revised Code and including all funds, 5433
contingent reserves, and surplus, except for such surplus as has 5434
been appropriated or paid under such plan.5435

       Sec. 3913.34.  (A) Sections 3913.11 to 3913.13 and 3913.20 to 5436
3913.23 of the Revised Code shall apply to a mutual insurance 5437
holding company as if the mutual insurance holding company were a 5438
domestic mutual insurance company. The members of the mutual 5439
insurance holding company are deemed to be members of a domestic 5440
mutual insurance company for all purposes of such sections.5441

       (B) A reorganization of a domestic mutual life insurance 5442
company subject to sections 3913.25 to 3913.38 of the Revised Code 5443
also is subject to sections 3907.09 to 3907.11 of the Revised 5444
Code, if applicable, but is not subject to sections 3901.32 to 5445
3901.323 of the Revised Code.5446

       (C) Notwithstanding division (B) of this section, for a 5447
period of five years following the effective date of a 5448
reorganization under sections 3913.25 to 3913.38 of the Revised 5449
Code, no person shall acquire control of a reorganized stock 5450
company without compliance with sections 3901.32 to 3901.323 of 5451
the Revised Code. For purposes of this division, "control" has the 5452
same meaning as in division (B) of section 3901.32 of the Revised 5453
Code, except that control is presumed to exist if any person, 5454
directly or indirectly, owns, controls, holds with the power to 5455
vote, or holds proxies representing five per cent or more of the 5456
voting securities of any other person.5457

       (D) An intermediate holding company or, if there is no such 5458
company, a reorganized stock company shall not issue shares of 5459
stock, in addition to the shares issued pursuant to the 5460
reorganization plan under which the company was formed, without 5461
the prior approval of the mutual insurance holding company as its 5462
majority shareholder. The prior approval of the mutual insurance 5463
holding company must be evidenced by a resolution of the board of 5464
directors of the mutual insurance holding company delivered to the 5465
board of directors of the intermediate holding company or the 5466
reorganized stock company prior to the issuance of the additional 5467
shares.5468

       (E) A mutual insurance holding company, and an intermediate 5469
holding company, if any, are deemed to be insurers subject to 5470
sections 3901.07, 3901.071, and 3901.48 of the Revised Code.5471

       Sec. 3915.04.  Life insurance policies may provide for not 5472
more than one year preliminary term insurance by incorporation 5473
therein of the following clause immediately preceding the "change 5474
of beneficiary" clause:5475

       "The first year's insurance under this policy is term 5476
insurance."5477

       If the premium charged for term insurance under a limited 5478
payment life or endowment preliminary term policy, providing for 5479
the payment of all premiums thereon in less than twenty years from 5480
the date of the policy, exceeds that charged for like insurance 5481
under whole life preliminary term policies of the same company, 5482
the reserve thereon at the end of any year, including the first, 5483
shall not be less than the reserve on a whole life preliminary 5484
term policy issued in the same year and at the same age together 5485
with an amount equivalent to the accumulation of a net level 5486
premium sufficient to provide for a pure endowment at the end of 5487
the premium-payment period equal to the difference between the 5488
value at the end of such period of such a whole life preliminary 5489
term policy and the full reserve at such time of such limited 5490
payment life or endowment policy. This section does not apply to 5491
any policy issued under section 3915.07 of the Revised Code on or 5492
after the operative date for such policy as authorized by division 5493
(H) of such section.5494

       This section is applicable to any preliminary term policies, 5495
except in the case of policies which are subject to the valuation 5496
requirements of division (D) oflife insurance policies and 5497
annuity and pure endowment contracts issued between July 17, 1947, 5498
and November 5, 1959, that are subject to valuation under section 5499
3903.723903.723 of the Revised Code.5500

       Sec. 3915.071.  (A) As used in this section, "operative date 5501
of the valuation manual" means the January 1 of the first calendar 5502
year that the valuation manual, as defined in section 3903.72 of 5503
the Revised Code, is effective. 5504

       (B) No policy of life insurance shall be delivered or issued 5505
for delivery in this state, on or after January 1, 1989, or the 5506
operative date (not before January 1, 1983) applicable to such 5507
policy, as permitted by division (P) of this section, unless it 5508
contains in substance the provisions set out in this division 5509
which are applicable to the plan of insurance or corresponding 5510
provisions which, in the opinion of the superintendent of 5511
insurance, are at least as favorable to the policyholder:5512

       (1) That the company will, upon proper request within sixty 5513
days after the due date of a premium in default, grant a paid-up 5514
nonforfeiture benefit on a plan stated in the policy. The 5515
effective date of the benefit shall be the due date of the unpaid 5516
premium. The benefit shall be in the amount specified in this 5517
section.5518

       (2) That upon proper request, within the same sixty-day 5519
period, the company may substitute an alternative nonforfeiture 5520
benefit of an actuarially equivalent value. The amount may be 5521
greater or the death benefit may be for a longer period. If the 5522
benefit is an endowment benefit, the amount may be greater or 5523
payment may be made earlier.5524

       (3) That after premiums have been paid for at least three 5525
full years for ordinary insurance or for at least five full years 5526
for industrial insurance, the company will, upon surrender of the 5527
policy within sixty days after the due date of an unpaid premium, 5528
pay a cash surrender value in the amount specified in this section 5529
in lieu of any paid-up nonforfeiture benefits.5530

       (4) That if another available nonforfeiture benefit is not 5531
elected within sixty days after the due date of an unpaid premium, 5532
the paid-up nonforfeiture benefit specified in the policy shall 5533
become effective.5534

       (5) That if all premiums for the policy have been paid, the 5535
company will pay the cash surrender value, upon surrender of the 5536
policy within thirty days after a policy anniversary, in the 5537
amount specified in this section. That value will also be 5538
available within any such thirty-day period if the policy is 5539
continuing under any nonforfeiture benefit which became effective 5540
on or after the third policy anniversary in the case of ordinary 5541
insurance or the fifth policy anniversary in the case of 5542
industrial insurance.5543

       (6) A statement of the mortality table, interest rate, and 5544
method used in calculating cash surrender values and paid-up 5545
nonforfeiture benefits available under policies which guarantee 5546
unscheduled changes in benefits or premiums upon the happening of 5547
specified events or upon the exercise of an option without change 5548
to a new policy.5549

       For all other policies, a statement of the mortality table 5550
and interest rate used in calculating the cash surrender values 5551
and paid-up nonforfeiture benefits, together with a table showing 5552
such values and benefits on each policy anniversary during the 5553
first twenty policy years, or the term of the policy, if shorter. 5554
Values and benefits are to be calculated on the assumption that 5555
there are no dividends or paid-up additions credited to the policy 5556
and that there is no indebtedness to the company on the policy.5557

       (7) A statement that the cash surrender values and paid-up 5558
nonforfeiture benefits are not less than those required by the law 5559
of the state in which the policy is delivered.5560

       (8) An explanation of the manner in which cash surrender 5561
values and paid-up nonforfeiture benefits are increased by any 5562
paid-up additions to the policy and decreased by any indebtedness 5563
to the company on the policy.5564

       (9) A statement that a detailed statement of the method of 5565
computation of values and benefits has been filed with the 5566
insurance supervisory official of the state in which the policy is 5567
delivered if such a detailed statement is not included in the 5568
policy.5569

       (10) A statement of the method used in calculating the cash 5570
surrender value and paid-up nonforfeiture benefit available on any 5571
policy anniversary beyond the last anniversary for which values 5572
and benefits are consecutively shown in the policy.5573

       The company shall reserve the right to defer the payment of 5574
any cash surrender value for a period of six months after demand 5575
and surrender of the policy.5576

       (B)(C) Upon default in payment of a premium due on a policy 5577
anniversary, any cash surrender value shall be determined as of 5578
the due date. The value shall be not less than the present value 5579
on the anniversary of the future guaranteed benefits which would 5580
have been provided for by the policy, including any existing 5581
paid-up additions, had default not occurred, less the present 5582
value on the anniversary of the adjusted premiums corresponding to 5583
the premiums which would have fallen due on and after such 5584
anniversary and less any indebtedness to the company on the 5585
policy. Any cash surrender value provided for by the policy shall 5586
be in substantial compliance with section 3915.072 of the Revised 5587
Code.5588

       If supplemental life insurance or annuity benefits are added 5589
at issue, at the option of the insured, to a policy by rider or 5590
supplemental policy provision and for an identifiable additional 5591
premium, the cash surrender values for the basic insurance and for 5592
the supplemental insurance or benefits shall be determined as if 5593
each had been issued as a separate policy. The cash surrender 5594
value of the policy shall be the sum of the cash surrender value 5595
of the basic insurance and of the supplemental insurance or 5596
benefits.5597

       The cash surrender value for a family policy, which defines a 5598
primary insured and which provides term insurance on the life of 5599
the spouse of the primary insured expiring before the spouse's age 5600
seventy-one, is the sum of the cash surrender value of the 5601
insurance on the primary insured and the cash surrender value of 5602
the term insurance on the spouse, determined as if the insurance 5603
on each had been issued as a separate policy.5604

       Any cash surrender value available within thirty days after a 5605
policy anniversary, under a policy paid up by completion of all 5606
premium payments or continued under any paid-up nonforfeiture 5607
benefit, shall be not less than the present value, on the 5608
anniversary, of the future guaranteed benefits provided by the 5609
policy, including any paid-up additions, and decreased by any 5610
indebtedness to the company on the policy.5611

       Any paid-up nonforfeiture benefit available upon default in 5612
payment of the premium due on a policy anniversary shall have a 5613
present value as of the anniversary at least equal to the policy's 5614
cash surrender value on that date or, if none is provided for, the 5615
cash surrender value which would have been required by this 5616
section in the absence of the condition that premiums shall have 5617
been paid for the requisite number of years.5618

       (C)(D)(1) Amounts payable as extra premiums to cover 5619
impairments or special hazards and uniform annual contract charges 5620
or policy fees specified in the policy statement of the method to 5621
be used in calculating cash surrender values and paid-up 5622
nonforfeiture benefits are excluded in calculating adjusted 5623
premiums and recalculated future adjusted premiums.5624

       A policy issued on a substandard basis but similar to one 5625
issued on a standard basis may be considered the same as the 5626
standard policy in calculating adjusted premiums and present 5627
values if tabular mortality costs in each policy year are the same 5628
as those in the standard policy and if the policies differ only in 5629
that the substandard policy provides reduced graded amounts of 5630
insurance and the standard policy provides higher uniform amounts 5631
of insurance.5632

       (2) The adjusted premiums for any policy are calculated on an 5633
annual basis and shall be a uniform per cent of the respective 5634
premiums specified in the policy for each policy year such that 5635
the present value, at the date of issue, of all such adjusted 5636
premiums is equal to the sum of the following:5637

       (a) The present value at the date of issue of the future 5638
guaranteed benefits;5639

       (b) One per cent of either the amount of insurance, if 5640
uniform in amount, or the average amount of insurance at the 5641
beginning of each of the first ten policy years; and5642

       (c) One hundred twenty-five per cent of the nonforfeiture net 5643
level premium, as defined in division (C)(D)(3) of this section, 5644
provided that for the purposes of this division (C)(D)(2)(c) the 5645
nonforfeiture net level premium shall not be deemed to exceed four 5646
per cent of either the amount of insurance, if uniform in amount, 5647
or the average amount of insurance at the beginning of each of the 5648
first ten policy years.5649

       The date of issue, as used in this division, is the date as 5650
of which the rated age of the insured is determined.5651

       (3) The nonforfeiture net level premium is equal to the 5652
present value, at the date of issue, of the guaranteed benefits 5653
provided for by the policy divided by the present value, at the 5654
date of issue, of an annuity of one per annum payable on the date 5655
of issue and on each anniversary of the policy on which a premium 5656
falls due.5657

       (4) Adjusted premiums, present values, additional expense 5658
allowances, and nonforfeiture net level premiums for policies 5659
which guarantee unscheduled changes in benefits or premiums upon 5660
the happening of specified events or upon the exercise of an 5661
option without change to a new policy are determined as follows:5662

       (a) At the date of issue, adjusted premiums, nonforfeiture 5663
net level premiums, and present values are calculated on the 5664
assumption that there will be no change in future benefits or 5665
premiums;5666

       (b) At the time of a change in benefits or premiums, future 5667
adjusted premiums, nonforfeiture net level premiums and present 5668
values are recalculated on the assumption that there will be no 5669
other change in future benefits or premiums;5670

       (c) These recalculated future adjusted premiums are a uniform 5671
percentage of the respective future premiums specified in the 5672
policy for each policy year after the change such that the present 5673
value, at the time of change, of the future adjusted premiums is 5674
equal to the sum of:5675

       (i) The present value at the time of change of all future 5676
guaranteed benefits provided for by the policy;5677

       (ii) Any additional expense allowance less the cash surrender 5678
value at that time or, if none, the value of any paid-up 5679
nonforfeiture benefit.5680

       (d) The additional expense allowance, at the time of change, 5681
is the sum of one per cent of any increase in the average amount 5682
of insurance and one hundred twenty-five per cent of any increase 5683
in the nonforfeiture net level premium. The average amount of 5684
insurance after the change is the average amount of insurance at 5685
the beginning of the first ten policy years following the change. 5686
The average amount of insurance before the change is the average 5687
amount of insurance at the beginning of each of the first ten 5688
policy years starting with the date of the most recent previous 5689
change or, if there has been no change, the date of issue.5690

       (e) The recalculated nonforfeiture net level premium is the 5691
quotient of (i) the present value of the increase in future 5692
guaranteed benefits provided by the policy plus (ii) the 5693
nonforfeiture net level premium before the change times the 5694
present value of an annuity of one per annum payable on each 5695
anniversary of the policy on and after the date of change on which 5696
a premium would, except for the change, have fallen due divided by 5697
(iii) the present value of an annuity of one per annum payable on 5698
each anniversary on or after the date of change on which a premium 5699
falls due.5700

       (D)(E) For policies issued prior to the operative date of the 5701
valuation manual:5702

       (1) For all policies of ordinary insurance issued on the 5703
standard basis, all adjusted premiums and present values referred 5704
to in this section shall be calculated on the basis of the 5705
commissioners 1980 standard ordinary mortality table and a rate of 5706
interest not exceeding the nonforfeiture interest rate provided 5707
for by division (F)(E)(3) of this section or, at the option of the 5708
company, a rate not exceeding the nonforfeiture interest rate for 5709
policies issued in the preceding calendar year. The company may 5710
elect to use the commissioners 1980 standard ordinary mortality 5711
table with ten-year select mortality factors for any specified 5712
plan of life insurance. The superintendent may approve the use of 5713
any ordinary mortality table adopted after 1980 by the national 5714
association of insurance commissioners in determining the minimum 5715
nonforfeiture standard for such policies.5716

       (E)(2) For all policies of industrial insurance issued on the 5717
standard basis, all adjusted premiums and present values referred 5718
to in this section shall be calculated on the basis of the 5719
commissioners 1961 standard industrial mortality table and a rate 5720
of interest not exceeding the nonforfeiture interest rate provided 5721
for by division (F)(E)(3) of this section or, at the option of the 5722
company, a rate not exceeding the nonforfeiture interest rate for 5723
policies issued in the preceding calendar year. The superintendent 5724
may approve the use of any industrial mortality table adopted 5725
after 1980 by the national association of insurance commissioners 5726
in determining the minimum nonforfeiture standard for such 5727
policies.5728

       (F)(3) The nonforfeiture interest rate for a policy issued in 5729
any calendar year is equal to one hundred twenty-five per cent of 5730
the valuation interest rate for the policy as defined in section5731
3903.7213903.724 of the Revised Code, rounded to the nearer 5732
one-quarter of one per cent, provided, however, that the 5733
nonforfeiture interest rate shall not be less than four per cent.5734

       (F) For all policies issued on or after the operative date of 5735
the valuation manual:5736

       (1) For all policies of ordinary insurance, the valuation 5737
manual shall provide the commissioners standard mortality table 5738
for use in determining the minimum nonforfeiture standard that may 5739
be substituted for the commissioners 1980 standard ordinary 5740
mortality table, with or without ten-year select mortality 5741
factors, or for the commissioners 1980 extended term insurance 5742
table. If the superintendent approves by rule any commissioners 5743
standard ordinary mortality table adopted by the national 5744
association of insurance commissioners for use in determining the 5745
minimum nonforfeiture standard for policies issued on or after the 5746
operative date of the valuation manual, then that minimum 5747
nonforfeiture standard supersedes the minimum nonforfeiture 5748
standard provided by the valuation manual. 5749

       (2) For all policies of industrial insurance, the valuation 5750
manual shall provide the commissioners standard mortality table 5751
for use in determining the minimum nonforfeiture standard that may 5752
be substituted for the commissioners 1961 standard industrial 5753
mortality table or the commissioners 1961 industrial extended term 5754
insurance table. If the superintendent approves by rule any 5755
commissioners standard industrial mortality table adopted by the 5756
national association of insurance commissioners for use in 5757
determining the minimum nonforfeiture standard for policies issued 5758
on or after the operative date of the valuation manual, then that 5759
minimum nonforfeiture standard supersedes the minimum 5760
nonforfeiture standard provided by the valuation manual. 5761

       (3) The nonforfeiture interest rate per annum for any policy 5762
issued in a particular calendar year shall be provided by the 5763
valuation manual. 5764

       (G) Any cash surrender value for any paid-up nonforfeiture 5765
benefit including any paid-up dividend additions shall be 5766
calculated on the basis of the mortality table and rate of 5767
interest used in determining the amount of such benefit and 5768
paid-up dividend additions.5769

       (H) Guaranteed paid-up nonforfeiture benefits, including any 5770
paid-up additions, shall be calculated on the basis of an interest 5771
rate no lower than that specified in the policy when calculating 5772
cash surrender values.5773

       (I) Present values, for any paid-up term insurance or any 5774
paid-up term insurance with accompanying pure endowment offered as 5775
a nonforfeiture benefit, shall be calculated using rates of 5776
mortality not to exceed those shown in the commissioners 1980 5777
extended term insurance table for policies of ordinary insurance 5778
and those shown in the commissioners 1961 industrial extended term 5779
insurance table for policies of industrial insurance. The 5780
superintendent may approve the use of any extended term insurance 5781
table adopted after 1980 by the national association of insurance 5782
commissioners in determining such present values.5783

       (J) Adjusted premiums and present values for policies that 5784
are issued on a substandard basis may be calculated on the basis 5785
of such table of mortality as may be specified by the company and 5786
approved by the superintendent.5787

       (K) The superintendent of insurance may by rule adopt methods 5788
for computing cash surrender values and paid-up nonforfeiture 5789
benefits for plans of life insurance which are of such a nature 5790
that values cannot be determined by any method described in this 5791
section, provided the superintendent is satisfied that the 5792
benefits provided in any such plan are substantially as favorable 5793
to policyholders and insureds as the minimum benefits otherwise 5794
required by this section and that the benefits and patterns of 5795
premiums for the plan will not mislead prospective policyholders 5796
or insureds. Such methods must be consistent with the principles 5797
of this section. This division shall apply to any plan of life 5798
insurance which provides for future premium determination, the 5799
amounts of which are to be determined by the company on the basis 5800
of estimates of future experience made at the time of any such 5801
determination.5802

       (L) Any cash surrender value and any paid-up nonforfeiture 5803
benefit, available upon default in payment of a premium due at any 5804
time other than on a policy anniversary, shall be calculated with 5805
allowance for lapse of time and payment of fractional premiums 5806
beyond the preceding policy anniversary. All values referred to in 5807
this section may be calculated upon the assumption that any death 5808
benefit is payable at the end of the policy year of death. The net 5809
value of any paid-up addition, other than paid-up term additions, 5810
shall be not less than the amount used to provide such additions.5811

       (M) All other policy benefits additional to life insurance 5812
and endowment benefits shall be disregarded, and premiums for all 5813
such additional benefits and any extra premiums to cover 5814
impairments or special hazards shall be disregarded, in 5815
ascertaining the cash surrender values and nonforfeiture benefits 5816
required by this section. No such additional benefits shall be 5817
required to be included in any paid-up nonforfeiture benefit. Such 5818
benefits include additional benefits payable:5819

       (1) For death or dismemberment by accident or accidental 5820
means;5821

       (2) For total and permanent disability;5822

       (3) As reversionary annuity or deferred reversionary annuity 5823
benefits;5824

       (4) As term insurance benefits provided by rider or 5825
supplemental policy provisions to which, issued as a separate 5826
policy, this section would not apply;5827

       (5) As term insurance on the life of a child or lives of 5828
children provided in a policy on the life of a parent, if such 5829
term insurance expires before the child's age is twenty-six, is 5830
uniform in amount after the child's age is one, and has not become 5831
paid-up by reason of the death of a parent.5832

       (N) This section does not apply to any reinsurance, group 5833
insurance, pure endowment or annuity or reversionary annuity 5834
contract nor to any:5835

       (1) Term policy, or renewal thereof, of uniform amount and 5836
for twenty years or less expiring before age seventy-one which 5837
provides no guaranteed nonforfeiture or endowment benefit and for 5838
which uniform premiums are payable during the entire term and any 5839
renewal of the policy;5840

       (2) Term policy of decreasing amount, which provides no 5841
guaranteed nonforfeiture or endowment benefits, and for which each 5842
adjusted premium is less than the adjusted premium for a term 5843
policy described in division (N)(1) of this section issued at the 5844
same age and for the same initial amount of insurance;5845

       (3) Policy, which provides no guaranteed nonforfeiture or 5846
endowment benefits, and for which the cash surrender value or 5847
present value of any paid-up nonforfeiture benefit for any policy 5848
year calculated according to this section as of the beginning of 5849
such policy year, does not exceed two and one-half per cent of the 5850
amount of insurance at the beginning of the same policy year;5851

       (4) Policy which is delivered outside this state through an 5852
agent or other representative of the company issuing the policy.5853

       For purposes of determining the applicability of this 5854
division to a joint-term life insurance policy, the age at expiry 5855
shall be the age at expiry of the oldest life.5856

       (O) No approved policy form need be refiled if nonforfeiture 5857
values or methods for computing such values for it are refiled and 5858
the only change is in the interest rate or the mortality table.5859

       (P) The operative date of this section shall be January 1, 5860
1989, except that an earlier operative date may be elected as 5861
provided in this division. A company may, by written notice filed 5862
with the superintendent, elect to issue all, or one or more, of 5863
its policy forms pursuant to this section on and after a date 5864
specified in the notice. The date specified may be any date on or 5865
after January 1, 1983, and before January 1, 1989. The date 5866
specified shall be the operative date of this section for the 5867
policy form or forms specified in the notice.5868

       No other statute shall be construed to prohibit any life 5869
insurance company from classifying its policies and electing to 5870
issue specified forms of policies pursuant to the plan set forth 5871
in this section, while using other legal basis as to reserve 5872
calculations and nonforfeiture values for other of its policies, 5873
nor shall it be construed to prohibit any life insurance company 5874
from adopting other reasonable classifications of policies or 5875
policyholders.5876

       Sec. 3915.072.  This section applies to all policies of life 5877
insurance, not excluded by division (N) of section 3915.071 of the 5878
Revised Code, that are delivered, or issued for delivery, in this 5879
state on or after January 1, 1989.5880

       (A) Upon default in payment of the premium due on a policy 5881
anniversary, the cash surrender value shall not differ by more 5882
than two-tenths of one per cent of the amount of insurance from 5883
the sum of the greater of zero or the basic cash value, as defined 5884
in division (B) of this section, and the present value of any 5885
paid-up additions less any indebtedness to the company on the 5886
policy. If the amount of insurance is not uniform, the amount is 5887
the average amount of insurance in force at the beginning of each 5888
of the first ten policy years.5889

       (B) The basic cash value is equal to the present value on the 5890
anniversary of the future guaranteed benefits which would have 5891
been provided for by the policy had default not occurred less the 5892
present value on the anniversary of the nonforfeiture factors 5893
corresponding to the premiums which would have fallen due on and 5894
after the anniversary. The basic cash value may not be less than 5895
the value obtained by substituting the adjusted premiums, as 5896
defined in division (C)(D)(2) of section 3915.071 of the Revised 5897
Code, for the nonforfeiture factors. Paid-up additions and 5898
indebtedness to the company on the policy are not taken into 5899
consideration in determining basic cash value. Basic cash values 5900
for policies having supplemental life insurance or annuity 5901
benefits or for a family policy as described in division (B) of 5902
section 3915.071 of the Revised Code shall be determined in the 5903
manner provided in division (B) of that section for cash surrender 5904
values.5905

       (C) The nonforfeiture factor is a percentage of the adjusted 5906
premium, as defined in division (C)(D)(2) of section 3915.071 of 5907
the Revised Code, for each policy year. The percentage must be the 5908
same for each policy year after the second until the later of the 5909
fifth policy anniversary and the first policy anniversary after 5910
the second on which the cash surrender value, before including any 5911
paid-up additions and before deducting any indebtedness, is at 5912
least equal to two-tenths of one per cent of the amount of 5913
insurance. Any change in percentage after the fifth policy 5914
anniversary must apply to no fewer than five consecutive policy 5915
years before a different percentage can be adopted. If the amount 5916
of insurance is not uniform, the amount is the average amount of 5917
insurance in force at the beginning of each of the first ten 5918
policy years.5919

       (D) Adjusted premiums and present values shall be calculated 5920
using the same mortality table and interest rate used to 5921
demonstrate the policy's compliance with section 3915.071 of the 5922
Revised Code. The cash surrender values referred to in this 5923
section include any endowment benefit provided for by the policy.5924

       (E) Any cash surrender value available upon default in a 5925
premium payment due at any time other than on a policy 5926
anniversary, and the amount of any paid-up nonforfeiture benefit 5927
available upon default in a premium at any time shall be 5928
calculated in accordance with the requirements for determining 5929
analogous minimum amounts in section 3915.071 of the Revised Code. 5930
The amounts of any cash surrender values and paid-up nonforfeiture 5931
benefits granted in connection with additional benefits such as 5932
those listed in division (M) of section 3915.071 of the Revised 5933
Code shall conform with the principles of this section.5934

       Sec. 3921.21. A(A) Except as provided in division (B) of 5935
this section, a fraternal benefit society shall invest its funds 5936
only in such investments as are authorized by section 3907.14 of 5937
the Revised Code for the investment of assets of life insurers and 5938
subject to the limitations thereon. Any foreign or alien society 5939
permitted or seeking to do business in this state that invests its 5940
funds in accordance with the laws of the state, district, 5941
territory, country, or province in which it is incorporated, is 5942
held to meet the requirements of this section for the investment 5943
of funds.5944

       (B) A fraternal benefit society may seek permission from the 5945
superintendent of insurance to invest funds under Chapter 3906. of 5946
the Revised Code and may invest funds under that chapter if such 5947
permission is granted.5948

       Sec. 3925.08.  Funds accumulated in the course of business, 5949
or surplus money above the capital stock, of any company organized 5950
under any law of this state, for the purpose provided in section 5951
3925.01 of the Revised Code, shall only be loaned or invested in 5952
the securities listed in sections 3925.05 and 3925.06 of the 5953
Revised Code, or in the following:5954

       (A)(1) Bonds and mortgages on unencumbered real estate within 5955
this or any other state worth twenty-five per cent more than the 5956
sum loaned thereon, exclusive of buildings, unless such buildings 5957
are insured in some company authorized to do business in this 5958
state, and the policy is transferred to the company making the 5959
investment; or, in lieu of transferring such policies, the 5960
mortgagee may purchase a policy or policies of mortgage protection 5961
insurance, payable to the mortgagee or a trustee in its behalf, 5962
insuring the mortgagee against loss resulting from the failure of 5963
the mortgagor to acquire and maintain, from such an authorized 5964
insurance company, insurance in the amount required by this 5965
section;5966

       (2) Bonds or notes secured by mortgages insured by the 5967
federal housing administrator;5968

       (3) Loans to veterans guaranteed in whole or in part by the 5969
United States pursuant to Title III of the "Servicemen's 5970
Readjustment Act of 1944," 58 Stat. 284, 38 U.S.C. 693, as 5971
amended, provided such guaranteed loans are liens upon real 5972
estate.5973

       (B)(1) Legally authorized and executed bonds, notes, 5974
warrants, and securities which are the direct obligation of or are 5975
guaranteed as to both principal and interest by Canada, or which 5976
are the direct obligation of or are guaranteed as to both 5977
principal and interest by any province of Canada, or which are the 5978
direct obligation of or are guaranteed as to both principal and 5979
interest by any municipal corporation of Canada having a 5980
population of one hundred thousand or more by the latest official 5981
census, and which are not in default as to principal or interest;5982

       (2) Obligations issued, assumed, or guaranteed by the 5983
international finance corporation or by the international bank for 5984
reconstruction and development, the Asian development bank, the 5985
inter-American development bank, the African development bank, or 5986
similar development bank in which the president, as authorized by 5987
congress and on behalf of the United States, has accepted 5988
membership.5989

       (C) Bonds or other evidences of indebtedness, not in default 5990
as to principal or interest, which are valid obligations issued, 5991
assumed, or guaranteed by the United States, by any state thereof, 5992
the Commonwealth of Puerto Rico, by any territory or insular 5993
possession of the United States, or by the District of Columbia, 5994
or which are valid obligations issued, assumed, or guaranteed by 5995
any county, municipal corporation, district, or political 5996
subdivision, or by any civil division or public instrumentality of 5997
such governmental units, if by statutory or other legal 5998
requirements such obligations are payable, as to both principal 5999
and interest, from taxes levied upon all taxable property within 6000
the jurisdiction of such governmental unit, or in bonds or other 6001
obligations issued by or for account of any such governmental unit 6002
having a population of five thousand or more by the latest 6003
official federal or state census, which are payable as to both 6004
principal and interest from revenues or earnings from the whole or 6005
any part of a publicly owned utility, provided that by statute or 6006
other applicable legal requirements, rates from the service or 6007
operation of such utility must be fixed, maintained, and collected 6008
at all times so as to produce sufficient revenues or earnings to 6009
pay both principal and interest of such bonds or obligations as 6010
they become due, and in any bonds or obligations issued or 6011
guaranteed by the United States, any state, the District of 6012
Columbia, the Commonwealth of Puerto Rico, any county, municipal 6013
corporation, district, political subdivision, civil division, 6014
commission, board, authority, agency, or other instrumentality of 6015
one or more of them, provided there is a specific pledge of 6016
revenues, earnings, or other adequate security and provided that 6017
no prior or parity obligation of the same issuer, payable from 6018
revenues or earnings from the same source, has been in default as 6019
to principal or interest during the five years next preceding the 6020
date of such investment, but such issuer need not have been in 6021
existence for that period, and obligations acquired under this 6022
section may be newly issued, and further provided that there is 6023
adequate provision for payment of expenses of operation and 6024
maintenance and the principal and interest on all obligations when 6025
due;6026

       (D)(1) Bonds or other evidences of indebtedness, bearing or 6027
accruing interest, issued, assumed, or guaranteed by any solvent 6028
corporation, trust, partnership, or similar business entity 6029
organized and existing under the laws of this or any other state, 6030
or of the United States, the Commonwealth of Puerto Rico, or of 6031
the District of Columbia, or of Canada or any province of Canada, 6032
upon which there is no existing interest or principal default, 6033
provided that either:6034

       (a) The bonds or other evidences of indebtedness are rated 1 6035
or 2 by the securities valuation office of the national 6036
association of insurance commissioners;6037

       (b) The corporation, together with its predecessor 6038
corporation or corporations, or the trust, partnership, or similar 6039
business entity, has been in existence for a period of at least 6040
five years.6041

       (2) Stocks, limited liability company membership interests, 6042
limited partnership interests, or limited liability partnership 6043
interests of any insurance, financial, investment, or investment 6044
management companies, which investment management companies are 6045
registered with the securities and exchange commission under the 6046
"Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C. 80a-1, 6047
as amended, or the stocks, limited liability company membership 6048
interests, limited partnership interests, or limited liability 6049
partnership interests in an entity wholly owned by a domestic 6050
company or by a domestic company and its affiliates, that is 6051
formed and maintained to acquire or hold specific assets or 6052
liabilities for bankruptcy remoteness or limitation of liability 6053
purposes, except its own stock, and stocks, limited liability 6054
company membership interests, limited partnership interests, 6055
limited liability partnership interests, bonds, notes, and 6056
debentures of any company which is organized for, and limited in 6057
its operations to, the financing of insurance premiums, upon 6058
approval of such investments by the superintendent of insurance; 6059
except that approval shall not be required for the purchase of the 6060
outstanding stocks, limited liability company membership 6061
interests, limited partnership interests, or limited liability 6062
partnership interests of any such company, if investment in each 6063
such company does not exceed in the aggregate two and one-half per 6064
cent of the total admitted assets of the company making the 6065
investment as of the preceding thirty-first day of December. 6066
Whenever the superintendent has reason to believe that the 6067
retention, investment, or acquisition of the stock, limited 6068
liability company membership interest, limited partnership 6069
interest, or limited liability partnership interest of any such 6070
company substantially lessens competition generally in the 6071
business of insurance or creates a monopoly therein the 6072
superintendent shall proceed under section 3901.13 of the Revised 6073
Code to cause such domestic insurance company to divest itself of 6074
such stock, limited liability company membership interest, limited 6075
partnership interest, or limited liability partnership interest.6076

       (3) Other stocks, limited liability company membership 6077
interests, or limited partnership interests, or limited liability 6078
partnership interests of any solvent corporation organized under 6079
the laws of this or any other state, or of the United States, or 6080
of the District of Columbia, or of Canada or any province of 6081
Canada, provided that a dividend or distribution has been paid by 6082
the business entity in the preceding twelve months upon the stock, 6083
membership interest, or partnership interest to be purchased or 6084
such business entity, together with its predecessor entity or 6085
entities, has been in existence for a period of at least five 6086
years.6087

       (4) A domestic company may acquire, hold, and convey tangible 6088
personal property or interests therein for the production of 6089
income, provided no domestic company shall invest in excess of two 6090
per cent of its admitted assets as of the preceding thirty-first 6091
day of December under this division.6092

       (5) In equipment trust obligations or certificates, security 6093
agreements, or other evidences of indebtedness entered into 6094
directly or guaranteed by any company operating wholly or partly 6095
within the United States or Canada, provided that such debt 6096
obligation is secured by a first lien on tangible personal 6097
property which is purchased or secured for payment thereof and 6098
such debt obligation is repayable within twenty years from the 6099
date of issue in annual, semiannual, or more frequent installments 6100
beginning not later than the first year after such date.6101

       (6) An insurer may invest without limitation in investments 6102
of government money market funds. As used in division (D)(6) of 6103
this section, "government money market fund" means a fund that at 6104
all times invests in obligations issued, guaranteed, or insured by 6105
the federal government of the United States or collateralized 6106
repurchase agreements comprised of such obligations, and that 6107
qualifies for investment without a reserve pursuant to the 6108
purposes and procedures of the securities valuation office of the 6109
national association of insurance commissioners.6110

       (E) Negotiable promissory notes maturing in not more than six 6111
months from the date thereof, secured by collateral security 6112
through the transfer of any of the classes of securities described 6113
in this section or in sections 3925.05 and 3925.06 of the Revised 6114
Code, with absolute power of sale within twenty days after default 6115
in payment at maturity;6116

       (F)(1) Repurchase agreements with, and interest-bearing 6117
obligations, including savings accounts and time certificates of 6118
deposit of, a national bank of the United States, a commonwealth 6119
bank of Puerto Rico, a chartered bank of Canada, or a state bank, 6120
provided such bank is either a member of the federal deposit 6121
insurance corporation created pursuant to the "Banking Act of 6122
1933," as amended, or the Canada deposit insurance corporation 6123
created pursuant to the act of parliament known as the "Canada 6124
Deposit Insurance Corporation Act," as amended.6125

       (2) Certificates of deposit, savings share accounts, 6126
investment share accounts, stock deposits, stock certificates, or 6127
other evidences of indebtedness of a savings and loan association, 6128
provided all such evidences of indebtedness are insured pursuant 6129
to the "Financial Institutions Reform, Recovery, and Enforcement 6130
Act of 1989," 103 Stat. 183, 12 U.S.C.A. 1811, as amended;6131

       (3) Bankers' acceptances and bills of exchange of the kinds 6132
and maturities made eligible by law for rediscount with the 6133
federal reserve banks, provided that the same are accepted by a 6134
bank or trust company incorporated under the laws of the United 6135
States or of this state or any other bank or trust company which 6136
is a member of the federal reserve system.6137

       (G) Any securities issued as a result of any reorganization, 6138
or capital or debt adjustment, in whole or in part, in exchange 6139
for securities acquired by it prior to such reorganization, or 6140
capital or debt adjustment;6141

       (H)(1) In bonds, notes, debentures, or other evidences of 6142
indebtedness issued, assumed, or guaranteed by a solvent 6143
corporation, trust, or partnership formed or existing under the 6144
laws of a foreign jurisdiction, provided each such foreign 6145
investment is of the same kind and quality as United States 6146
investments authorized under this section; or in common or 6147
preferred stock, shares, membership interests, or partnership 6148
interests of any solvent business entity formed or existing under 6149
the laws of a foreign jurisdiction, provided each such foreign 6150
investment is of the same kind and quality as United States 6151
investments authorized under this section; or in bonds or other 6152
evidences of indebtedness issued, assumed, or guaranteed by a 6153
foreign jurisdiction.6154

       An insurer shall not invest in foreign investments under 6155
division (H) of this section, including investments denominated in 6156
foreign currency, a sum exceeding in the aggregate fifteen per 6157
cent of its admitted assets as of the preceding thirty-first day 6158
of December. The aggregate amount of investments held by an 6159
insurer in a single foreign jurisdiction shall not exceed three 6160
per cent of its admitted assets as of the preceding thirty-first 6161
day of December.6162

       As used in division (H)(1) of this section, "foreign 6163
jurisdiction" means a jurisdiction outside the United States, 6164
Puerto Rico, or Canada whose bonds are rated 1 by the securities 6165
valuation office of the national association of insurance 6166
commissioners.6167

       (2) An insurer may acquire investments denominated in foreign 6168
currency whether or not they are foreign investments.6169

       An insurer shall not invest in investments denominated in 6170
foreign currency a sum exceeding in the aggregate fifteen per cent 6171
of its admitted assets as of the preceding thirty-first day of 6172
December. The aggregate amount of investments denominated in a 6173
single foreign currency held by an insurer shall not exceed three 6174
per cent of an insurer's admitted assets as of the preceding 6175
thirty-first day of December.6176

       (3) As used in division (H) of this section, "foreign 6177
currency" means a currency other than that of the United States.6178

       (I)(1) Any securities or other property not permitted under 6179
section 3925.05, 3925.06, 3925.08, or 3925.20 of the Revised Code 6180
to an extent not exceeding in the aggregate six per cent of the 6181
total admitted assets of such company on the preceding 6182
thirty-first day of December, within the limitations prescribed in 6183
division (J) of this section. Any such company may also invest up 6184
to an additional five per cent of the total admitted assets of 6185
such company on the preceding thirty-first day of December, within 6186
the limitations prescribed in division (J) of this section, in 6187
loans or investments in small businesses having more than half of 6188
their assets or employees in this state and in venture capital 6189
firms having an office within this state, provided that, as a 6190
condition of a company making an investment in a venture capital 6191
firm, the firm must agree to use its best efforts to make 6192
investments, in an aggregate amount at least equal to the 6193
investment to be made by the company in that venture capital firm, 6194
in small businesses having their principal offices within this 6195
state and having either more than one-half of their assets within 6196
this state or more than one-half of their employees employed 6197
within this state.6198

       As used in division (I) of this section:6199

       (a) "Small businesses" means any corporation, partnership, 6200
proprietorship, or other entity that either does not have more 6201
than four hundred employees, or would qualify as a small business 6202
for the purpose of receiving financial assistance from small 6203
business investment companies licensed under the "Small Business 6204
Investment Act of 1958," 72 Stat. 689, 15 U.S.C.A. 661, as 6205
amended, and rules of the small business administration.6206

       (b) "Venture capital firms" means any corporation, 6207
partnership, proprietorship, or other entity, the principal 6208
business of which is or will be the making of investments in small 6209
businesses.6210

       (c) "Investments" means any equity investment, including 6211
limited partnership interests and other equity interests in which 6212
liability is limited to the amount of the investment, but does not 6213
include general partnership interests or other interests involving 6214
general liability.6215

       (2) In the event that, subsequent to being made under this 6216
division, a loan or investment is determined to have become 6217
qualified as a loan or investment under any of the divisions (A) 6218
to (F) of this section or under section 3925.05, 3925.06, or 6219
3925.20 of the Revised Code, the company may consider such loan or 6220
investment as held under such other statutory provision and such 6221
loan or investment shall no longer be considered as having been 6222
made under this division.6223

       (J) No domestic insurance company shall at any time have 6224
invested a sum exceeding five per cent of its admitted assets as 6225
of the preceding thirty-first day of December in the bonds, notes, 6226
debentures, other evidences of indebtedness, and stocks of a 6227
particular corporation, trust, partnership, or similar business 6228
entity, except for investments authorized under divisions (A) and 6229
(D)(2) of this section, and no domestic insurance company together 6230
with its subsidiary, if any, shall at any time own directly or 6231
indirectly more than twenty-five per cent of the outstanding 6232
bonds, notes, debentures, other evidences of indebtedness, and 6233
stocks of any corporation, except for investments authorized under 6234
divisions (A) and (D)(2) of this section.6235

       This section does not affect the propriety or legality of an 6236
investment made by such domestic insurance company which was in 6237
accordance with the laws in force at the time of the making of the 6238
investment.6239

       A business entity organized for the purpose provided in 6240
section 3925.01 of the Revised Code may seek permission from the 6241
superintendent of insurance to invest funds under Chapter 3906. of 6242
the Revised Code and may invest funds under that chapter if such 6243
permission is granted.6244

       (K) As used in divisions (K) and (L) of this section:6245

       (1) "Covered" means that an insurer owns, or can immediately 6246
acquire through the exercise of options, warrants, or conversion 6247
rights already owned, the underlying interest in order to fulfill 6248
or secure its obligation under the option, cap, or floor it has 6249
written.6250

       (2)(a) "Derivative instrument" means an agreement, option, 6251
instrument, or a series or combination thereof of either of the 6252
following types:6253

       (i) To make or take delivery of, or assume or relinquish, a 6254
specified amount of one or more underlying interest, or to make a 6255
cash settlement in lieu thereof; 6256

       (ii) That has a price, performance, value, or cash flow based 6257
primarily upon the actual or expected price, level, performance, 6258
value, or cash flow of one or more underlying interests.6259

       (b) Derivative instruments include options, warrants, caps, 6260
floors, collars, swaps, forwards, futures, and any other 6261
agreements, options, or instruments substantially similar thereto 6262
or any series or combination thereof. 6263

       (3) "Derivative transaction" means a transaction involving 6264
the use of one or more derivative instruments.6265

       (4) "Hedging transaction" means a derivative transaction that 6266
is entered into and maintained to reduce either of the following:6267

       (a) The risk of economic loss due to a change in the value, 6268
yield, price, cash flow, or quantity of assets or liabilities that 6269
the insurer has acquired or incurred or anticipates acquiring or 6270
incurring;6271

       (b) The currency exchange rate risk or the degree of exposure 6272
as to assets or liabilities that an insurer has acquired or 6273
incurred or anticipates acquiring or incurring.6274

       (5) "Income generation" means a derivative transaction 6275
involving the writing of covered options, caps, or floors that is 6276
intended to generate income or enhance return.6277

       (6) "Replication transaction" means a derivative transaction 6278
that is intended to replicate the performance of one or more 6279
assets that an insurer is authorized to acquire under this 6280
chapter. "Replication transaction" does not include a derivative 6281
transaction that is entered into as a hedging transaction.6282

       (L)(1) Prior to an insurer entering into derivative 6283
transactions, the board of directors of the insurer shall approve 6284
a derivative use plan.6285

       (2) An insurer shall notify the superintendent of insurance 6286
in writing within three days after identifying either of the 6287
following:6288

       (a) Any event or occurrence related to an insurer's 6289
derivatives use that may lead to a material change to the 6290
insurer's policyholder surplus;6291

        (b) Any event or occurrence related to an insurer's 6292
derivatives use that, with the passage of time, may lead to a 6293
material change to the insurer's policyholder surplus. 6294

       (3) Prior to entering into derivative transactions, an 6295
insurer shall file with the superintendent a copy of its 6296
derivative use plan and internal controls, for informational 6297
purposes. The insurer shall keep current the copy of its 6298
derivative use plan and internal controls filed with the 6299
superintendent. The insurer shall not enter into derivative 6300
transactions until thirty calendar days after the date on which 6301
the derivative use plan and internal controls is filed with the 6302
superintendent. This thirty-calendar-day period is to begin on the 6303
date that the superintendent receives the derivative use plan and 6304
internal controls.6305

       (4) The superintendent may adopt rules prescribing the form 6306
and content of derivative use plans, as well as any internal 6307
controls the superintendent considers necessary.6308

       (5) An insurer that engages in hedging transactions or 6309
replication transactions shall do both of the following:6310

       (a) Maintain its position in any outstanding derivative 6311
instrument used as part of a hedging transaction or replication 6312
transaction for as long as the hedging transaction or replication 6313
transaction continues to be effective;6314

       (b) Demonstrate to the superintendent, upon request, that any 6315
derivative transaction entered into and involving hedging 6316
transaction or replication transaction is an effective hedging 6317
transaction or replication transaction. The insurer must be able 6318
to demonstrate this at the time the derivative transaction is 6319
entered into, and for as long as the transaction continues to be 6320
in place.6321

       (6) An insurer may not invest in, or use, a derivative 6322
instrument for any purpose other than a hedging transaction, 6323
income generation, or replication.6324

       (7) An insurer shall not invest in, or use a derivative 6325
instrument for purposes of income generation a sum exceeding in 6326
the aggregate five per cent of its admitted assets, as of the 6327
preceding thirty-first day of December.6328

       (8) All documents provided to the superintendent under 6329
division (L) of this section shall be deemed trade secrets and 6330
shall be provided with trade secret protection. Such documents 6331
shall also be considered work papers of the superintendent that 6332
are subject to section 3901.48 of the Revised Code and are 6333
confidential and privileged and shall not be considered a public 6334
record, as defined in section 149.43 of the Revised Code. The 6335
original documents and any copies of them shall not be subject to 6336
subpoena and shall not be made public by the superintendent or any 6337
other person, except as otherwise provided in section 3901.48 of 6338
the Revised Code. 6339

       Sec. 3937.19. (A) As used in this section:6340

       (1) "Personal lines policy of insurance" means a policy of 6341
property and casualty insurance issued to a natural person 6342
primarily for personal or family protection for personal 6343
automobile, homeowner's, tenant's, mobile-homeowner's, 6344
non-commercial dwelling fire or personal umbrella coverage.6345

       (2) "Customer" has the same meaning as in section 3901.19 of 6346
the Revised Code. 6347

       (B)(1) An insurer may, but is not required to, provide or 6348
make a policy summary of material coverages and exclusions in a 6349
personal lines policy of insurance available to a customer. If an 6350
insurer chooses to provide or make any such policy summary 6351
available, the summary shall include at a minimum all of the 6352
following:6353

       (a) A brief description of the principal benefits provided 6354
under the policy for which a premium is charged;6355

       (b) A brief description of the principal exclusions, provided 6356
under the policy;6357

       (c) A statement of the loss valuation methods provided under 6358
the policy;6359

       (d) The following notice, or a substantially similar notice, 6360
prominently displayed in conjunction with the policy summary:6361

       "You should read your insurance policy and get assistance in 6362
understanding the coverages and any exclusions directly from your 6363
agent or the insurance company issuing your policy. This policy 6364
summary is for informational purposes only and is designed to 6365
provide a basic description of insurance coverages and exclusions 6366
in your policy. This summary does not reflect all the coverages 6367
and exclusions contained in your policy and is qualified in its 6368
entirety to the policy terms.6369

       State law prohibits this policy summary from replacing, 6370
modifying, altering, amending, or changing any of the terms or 6371
provisions of the insurance policy that is the subject of this 6372
summary." 6373

       (2) A policy summary, as described in division (B)(1) of this 6374
section, does not include the policy declarations page and any 6375
notations contained therein. 6376

       (C) Nothing contained in this section shall be construed to 6377
prohibit an insurer from providing information related to an 6378
insurance policy that does not meet the requirements prescribed in 6379
division (B) of this section. 6380

       (D) An insurer may display sections of a policy summary 6381
individually, in any combination or in any order, as long as the 6382
summary meets the requirements prescribed in division (B) of this 6383
section and the notice contained in division (B)(1)(d) of this 6384
section appears in each section of the policy summary. If the 6385
policy summary is paginated, then the notice contained in division 6386
(B)(1)(d) of this section shall appear on each page.6387

       (E) An insurer's election to provide or make a policy summary 6388
available to a customer does not obligate the insurer to provide a 6389
policy summary upon the renewal of the policy or for any other 6390
policies issued to the same customer.6391

       (F) If an insurer elects to provide or make a policy summary 6392
available for a personal lines policy of insurance, the insurer 6393
shall provide a policy summary for the named insured under a 6394
policy for that product.6395

       (G) A policy summary provided or made available under this 6396
section shall not be considered a replacement for the terms of the 6397
policy of insurance, shall not have the effect of altering the 6398
coverage afforded by the policy, and shall not confer new or 6399
additional rights beyond those expressly provided for in the 6400
policy. Nothing in this section shall be construed to create or 6401
imply a private cause of action for a violation of this section. A 6402
policy summary provided or made available pursuant to this section 6403
shall not be admissible in court or in any other legal or 6404
administrative proceeding, except to enforce division (H) of this 6405
section.6406

       (H) No person doing the business of insurance in this state 6407
shall provide or use a policy summary that contains any false, 6408
misleading, or deceptive representation or statement. 6409

       (I) Any violation of this section is an unfair and deceptive 6410
act or practice in the business of insurance under sections 6411
3901.19 to 3901.26 of the Revised Code. If the superintendent, by 6412
written order, finds that any person is about to engage, is 6413
engaging, or has engaged in a violation of this section, the 6414
superintendent may impose any or all of the administrative 6415
remedies set forth in divisions (D)(1) to (5) of section 3901.22 6416
of the Revised Code. If the superintendent finds that the 6417
violation was due to gross or willful misconduct, the 6418
superintendent may order that person to reimburse any customer 6419
harmed by the violation or violations, including reimbursement or 6420
payment of insurance claims for which a loss occurred as a result 6421
of a customer's reliance upon a policy summary containing any 6422
false, misleading, or deceptive representation or statement.6423

       Sec. 3939.01.  (A) Any number of persons of lawful age, not 6424
less than ten in number, owning insurable property in this state, 6425
may associate themselves together for the purpose of insuring each 6426
other against the risk of direct physical loss or damage to 6427
property in this state, including theft of property in this state, 6428
except loss or damage to motor vehicles caused by collision. Any 6429
association organized under this section shall file with the 6430
department of insurance all policy forms currently in use by the 6431
association and all additions, deletions, or amendments to the 6432
policy forms at least thirty days prior to the use of the policy 6433
forms, additions, deletions, or amendments. Each filing under this 6434
division is deemed approved thirty days after the filing is 6435
received by the superintendent of insurance, unless the filing is 6436
disapproved by the superintendent during that thirty-day period.6437

       (B) Any association organized under this section, from time 6438
to time, may assess upon and collect from its members or other 6439
responsible parties sums of money that are necessary to pay 6440
expenses and losses that occur, or are anticipated to occur, from 6441
those covered perils. The assessment and collection of those sums 6442
of money shall be regulated by the constitution of the association 6443
adopted under section 3939.06 of the Revised Code. The 6444
constitution shall require the assessments to be made directly and 6445
specifically upon the members or other responsible parties, and to 6446
be paid by them out of any funds paid to or deposited with the 6447
association in anticipation of assessments. Any association 6448
organized under this section may borrow money for the payment of 6449
losses and associated expenses, but those loans shall not be made 6450
for a period of time that extends beyond the collection of the 6451
association's next assessment. 6452

       (C) Any association organized under this section may 6453
accumulate a surplus from its assessments. ThatExcept as provided 6454
in division (D) of this section, that surplus and all other funds 6455
received or accumulated in the course of business shall be 6456
invested under sections 3925.05 and 3925.08 of the Revised Code. 6457
Upon prior approval of the superintendent of insurance, the 6458
association may invest that surplus and those other funds in real 6459
estate for the association's convenient accommodation in the 6460
transaction of its business. The association shall not have at any 6461
one time more than ten per cent of its admitted assets invested in 6462
real estate.6463

       (D) An association organized under this section may seek 6464
permission from the superintendent of insurance to invest funds 6465
under Chapter 3906. of the Revised Code and may invest funds under 6466
that chapter if such permission is granted.6467

       (E) Any association organized under this section may insure 6468
farm buildings, residential and detached dwellings, outbuildings, 6469
churches, township buildings, grange buildings, farm machinery, 6470
equipment, and other farm personal property, household goods and 6471
personal effects, pleasure and utility vehicles, and other similar 6472
property, except motor vehicles titled or capable of being titled 6473
for use on public roads and property used exclusively for 6474
commercial or industrial purposes.6475

        The property described in this division may be classified 6476
only for the purpose of determining and levying assessments, and 6477
that property may be located within or without the limits of any 6478
municipal corporation. 6479

       (E)(F) Any association organized under this section may 6480
collect a charge on each contract of insurance in accordance with 6481
its constitution adopted under section 3939.06 of the Revised 6482
Code.6483

       (F)(G) Any association organized under this section may make 6484
contracts of reinsurance for the kinds of insurance authorized by 6485
sections 3939.01 to 3939.11 of the Revised Code or accept 6486
reinsurance on any portion of that insurance.6487

       Sec. 3953.15. The(A) Except as provided in division (B) of 6488
this section, the unearned premium reserve of a title insurance 6489
company shall be invested in accordance with sections 3925.05 to 6490
3925.08, inclusive, of the Revised Code.6491

       (B) A title insurance company may seek permission from the 6492
superintendent of insurance to invest funds under Chapter 3906. of 6493
the Revised Code and may invest funds under that chapter if such 6494
permission is granted.6495

       Section 2. That existing sections 1751.25, 3901.043, 6496
3901.045, 3901.17, 3901.32, 3901.321, 3901.33, 3901.34, 3901.341, 6497
3901.35, 3901.36, 3901.62, 3901.63, 3901.64, 3903.72, 3903.721, 6498
3903.83, 3907.14, 3913.01, 3913.34, 3915.04, 3915.071, 3915.072, 6499
3921.21, 3925.08, 3939.01, and 3953.15, and sections 3907.09, 6500
3907.10, 3907.11, and 3907.13 of the Revised Code are hereby 6501
repealed.6502

       Section 3.  Sections 3901.371 to 3907.378 of the Revised 6503
Code, as enacted in this act, shall take effect on January 1, 6504
2015. The first filing of the own risk and solvency assessment 6505
summary report, as required by section 3901.375 of the Revised 6506
Code, shall be in 2015.6507

       Section 4. The intent of the General Assembly, in enacting 6508
this act is to protect and to further the interests of insureds, 6509
creditors, and the general public by providing, with minimum 6510
interference with management initiative and judgment, prudent 6511
standards for the development and administration of insurer 6512
investment programs. 6513

       Section 5.  This act shall be known as the "Ohio Insurer 6514
Investment Act." 6515

       Section 6.  The Superintendent of Insurance shall adopt rules 6516
in accordance with Chapter 119. of the Revised Code to implement 6517
the amendments to sections 3901.62, 3901.63, and 3901.64 of the 6518
Revised Code as enacted in this act and to implement new sections 6519
3901.621 and 3901.631 of the Revised Code as enacted in this act. 6520
It is the intent of the General Assembly in mandating the adoption 6521
of these rules that the Superintendent adopt rules that are 6522
substantially similar to those portions of the Credit for 6523
Reinsurance Model Regulation, #786, as approved by the National 6524
Association of Insurance Commissioners on November 6, 2011, that 6525
the Reinsurance Task Force of the National Association of 6526
Insurance Commissioners approved on May 4, 2012, as key elements 6527
for purposes of accreditation. 6528

       Section 7.  Notwithstanding division (V)(3) of section 6529
3907.14 and division (L)(3) of section 3925.08 of the Revised 6530
Code, an insurer that is engaged in derivative transactions, 6531
pursuant to a derivative use plan approved by that insurer's board 6532
of directors, prior to the effective date of this act, may 6533
continue to engage in derivative transactions pursuant to that 6534
derivative use plan for a period of no longer than one hundred 6535
twenty days after the effective date of this act.6536