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S. B. No. 140 As IntroducedAs Introduced
130th General Assembly | Regular Session | 2013-2014 |
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A BILL
To amend sections 1751.25, 3901.043, 3901.17,
3901.32, 3901.321, 3901.33, 3901.34, 3901.341,
3901.35, 3901.36, 3901.62, 3901.63, 3901.64,
3907.14, 3913.34, 3921.21, 3925.08, 3939.01, and
3953.15, to enact sections 3901.351, 3901.371,
3901.372, 3901.373, 3901.374, 3901.375, 3901.376,
3901.377, 3901.378, 3901.41, 3901.621, 3901.631,
and 3906.01 to 3906.15, and to repeal sections
3907.09, 3907.10, 3907.11, and 3907.13 of the
Revised Code to make changes to the law governing
insurance holding company systems, to eliminate
the petition requirement for domestic mutual
companies that wish to merge or consolidate with
another company, to eliminate the commission
created to hear and determine petitions for merger
and consolidation, to provide the requirements for
maintaining a risk management framework and
completing an own risk and solvency assessment,
and to provide guidance and instructions for
filing an own risk and solvency assessment summary
report with the superintendent of insurance.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1751.25, 3901.043, 3901.17,
3901.32, 3901.321, 3901.33, 3901.34, 3901.341, 3901.35, 3901.36,
3901.62, 3901.63, 3901.64, 3907.14, 3913.34, 3921.21, 3925.08,
3939.01, and 3953.15 be amended and sections 3901.351, 3901.371,
3901.372, 3901.373, 3901.374, 3901.375, 3901.376, 3901.377,
3901.378, 3901.41, 3901.621, 3901.631, 3906.01, 3906.02, 3906.03,
3906.04, 3906.05, 3906.06, 3906.07, 3906.08, 3906.09, 3906.10,
3906.11, 3906.12, 3906.13, 3906.14, and 3906.15 of the Revised
Code be enacted to read as follows:
Sec. 1751.25. The (A) Except as provided in division (B) of
this section, the funds of a health insuring corporation shall be
invested only in securities or other investments or assets that
constitute permissible investments under section 1751.26 or
3925.08 of the Revised Code.
(B) A health insuring corporation may seek permission from
the superintendent of insurance to invest funds under Chapter
3906. of the Revised Code and may invest funds under that chapter
if such permission is granted.
Sec. 3901.043. The superintendent of insurance may adopt
rules in accordance with Chapter 119. of the Revised Code to
establish reasonable fees for any service or transaction performed
by the department of insurance pursuant to section 1751.03,
3901.321, 3901.341, 3907.09, 3907.10, 3907.11, 3907.12, 3911.011,
3913.40, 3915.14, 3917.06, 3918.07, 3923.02, 3935.04, 3937.03, or
3953.28 of the Revised Code or any provision in sections 3913.01
to 3913.23 or in Chapter 3905. of the Revised Code, if no fee is
otherwise provided under Title XVII or XXXIX of the Revised Code
for such service or transaction. Any fee collected pursuant to
those rules shall be paid into the state treasury to the credit of
the department of insurance operating fund.
Sec. 3901.17. (A) As used in this section:
(1) "Captive insurer" has the meaning defined in section
3905.36 of the Revised Code.
(2) "Insurer" includes, but is not limited to, any person
that is an affiliate of or affiliated with the insurer, as defined
in division (A) of section 3901.32 of the Revised Code, and any
person that is a subsidiary of the insurer as defined in division
(F) of section 3901.32 of the Revised Code.
(3) "Laws of this state relating to insurance" has the
meaning defined in division (A)(1) of section 3901.04 of the
Revised Code.
(4) "Person" has the meaning defined in division (A) of
section 3901.19 of the Revised Code.
(5) "Home state" has the same meaning as in section 3905.30
of the Revised Code.
(B) Any of the following acts in this state, effected by mail
or otherwise, by any foreign or alien insurer not authorized to
transact business within this state, any nonresident person acting
on behalf of an insurer, or any nonresident insurance agent
subjects the insurer, person, or agent to the exercise of personal
jurisdiction over the insurer, person, or agent to the extent
permitted by the constitutions of this state and of the United
States:
(1) Issuing or delivering contracts of insurance to residents
of this state or to corporations authorized to do business
therein;
(2) Making or proposing to make any insurance contracts;
(3) Soliciting, taking, or receiving any application for
insurance;
(4) Receiving or collecting any premium, commission,
membership fee, assessment, dues, or other consideration for any
insurance contract or any part thereof;
(5) Disseminating information as to coverage or rates,
forwarding applications, inspecting risks, fixing rates,
investigating or adjusting claims or losses, or transacting any
matters subsequent to effecting a contract of insurance and
arising out of it;
(6) Doing any kind of business recognized as constituting the
doing of an insurance business under Title XXXIX of the Revised
Code or subject to regulation by the superintendent of insurance
under the laws of this state relating to insurance.
Any such act shall be considered to be the doing of an
insurance business in this state by such insurer, person, or agent
and shall be its agreement that service of any lawful subpoena,
notice, order, or process is of the same legal force and validity
as personal service of the subpoena, notice, order, or process in
this state upon the insurer, person, or agent.
(C) Service of process in judicial proceedings shall be as
provided by the Rules of Civil Procedure. Service in or out of
this state of notice, orders, or subpoenas in administrative
proceedings before the superintendent shall be as provided in
section 3901.04 of the Revised Code.
(D) Service of any notice, order, subpoena, or process in any
such action, suit, or proceeding shall, in addition to the manner
provided in division (C) of this section, be valid if served upon
any person within this state who, in this state on behalf of such
insurer, person, or agent is or has been:
(1) Soliciting, procuring, effecting, or negotiating for
insurance;
(2) Making, issuing, or delivering any contract of insurance;
(3) Collecting or receiving any premium, membership fees,
assessment, dues, or other consideration for insurance;
(4) Disseminating information as to coverage or rates,
forwarding applications, inspecting risks, fixing rates,
investigating or adjusting claims or losses, or transacting any
matters subsequent to effecting a contract of insurance and
arising out of it.
(E) Nothing in this section shall limit or abridge the right
to serve any subpoena, order, process, notice, or demand upon any
insurer, person, or agent in any other manner permitted by law.
(F) Every person investigating or adjusting any loss or claim
under a policy of insurance not excepted under division (I) of
this section and issued by any such insurer and covering a subject
of insurance that was resident, located, or to be performed in
this state at the time of issuance shall immediately report the
policy to the superintendent.
(G) If this state is the home state of the insured, each such
insurer that does any of the acts set forth in division (B) of
this section shall be subject to the requirements of section
3905.36 of the Revised Code.
(H) No contract of insurance effected in this state by mail
or otherwise by any such insurer is enforceable by the insurer.
(I) This section does not apply to:
(1) Insurance obtained pursuant to sections 3905.30 to
3905.36 of the Revised Code;
(2) The transaction of reinsurance by insurers;
(3) Transactions in this state involving a policy of group
life or group accident and sickness insurance solicited, written,
and delivered outside this state;
(4) Transactions involving contracts of insurance
independently procured through negotiations occurring entirely
outside this state which are reported and the tax is paid in
accordance with section 3905.36 of the Revised Code;
(5) An attorney at law acting on behalf of the attorney's
clients in the adjustment of claims or losses;
(6) Ocean marine insurance;
(7) Transactions involving policies issued by a captive
insurer.
Sec. 3901.32. As used in sections 3901.32 to 3901.37 of the
Revised Code:
(A) "Affiliate of" or "affiliated with" a specific person
means a person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, the person specified.
(B) "Control," including "controlling," "controlled by," and
"under common control with," means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership
of voting securities, by contract other than a commercial contract
for goods or nonmanagement services, or otherwise, unless the
power is the result of an official position with or corporate
office held by the person. Control shall be presumed to exist if
any person, directly or indirectly, owns, controls, holds with the
power to vote, or holds proxies representing, ten per cent or more
of the voting securities of any other person. This presumption may
be rebutted by a showing made in the manner provided in division
(J) of section 3901.33 of the Revised Code that control does not
exist in fact. The superintendent of insurance may determine,
after furnishing all persons in interest notice and opportunity to
be heard and making specific findings of fact to support such
determination, that control exists in fact, notwithstanding the
absence of a presumption to that effect.
(C) "Enterprise risk" means any activity, circumstance,
event, or series of events involving one or more affiliates of an
insurer that, if not remedied promptly, is likely to have a
material adverse effect on the financial condition or liquidity of
the insurer or its insurance holding company system as a whole.
"Enterprise risk" includes anything that would cause the insurer's
risk-based capital to fall into company action level as set forth
in section 3903.83 of the Revised Code or would cause the insurer
to be in a hazardous financial condition.
(D) "Insurance holding company system" means two or more
affiliated persons, one or more of which is an insurer.
(D)(E) "Insurer" means any person engaged in the business of
insurance, guaranty, or membership, an inter-insurance exchange, a
mutual or fraternal benefit society, or a health insuring
corporation, excepting. "Insurer" does not include any agency,
authority, or instrumentality of the United States, its
possessions and territories, the Commonwealth of Puerto Rico, the
District of Columbia, or a state or political subdivision of a
state.
(E)(F) "Person" means an individual, a corporation, a
partnership, an association, a joint stock company, a trust, an
unincorporated organization, any similar entity, or any
combination of the foregoing acting in concert.
(F)(G) "Security holder" of a specified person is one who
owns any security of such person, including common stock,
preferred stock, debt obligations, and any other security
convertible into or evidencing the right to acquire, any of the
foregoing.
(H) "Subsidiary" of a specified person is an affiliate
controlled by such person, directly or indirectly, through one or
more intermediaries.
(G)(I) "Voting security" includes any security convertible
into or evidencing a right to acquire a voting security.
Sec. 3901.321. (A) For the purposes of this section:
(1) "Acquiring party" means any person by whom or on whose
behalf a merger or other acquisition of control is to be effected.
(2) "Domestic insurer" includes any person controlling a
domestic insurer unless the person, as determined by the
superintendent of insurance, is either directly or through its
affiliates primarily engaged in business other than the business
of insurance.
(3) "Person" does not include any securities broker holding,
in the usual and customary broker's function, less than twenty per
cent of the voting securities of an insurance company or of any
person that controls an insurance company.
(B)(1) Subject to compliance with division (B)(2) of this
section, no person other than the issuer shall do any of the
following if, as a result, the person would, directly or
indirectly, including by means of conversion or the exercise of
any right to acquire, be in control of a domestic insurer:
(a) Make a tender offer for any voting security of a domestic
insurer;
(b) Make a request or invitation for tenders of any voting
security of a domestic insurer;
(c) Enter into any agreement to exchange securities of a
domestic insurer;
(d) Seek to acquire or acquire, in the open market or
otherwise, any voting security of a domestic insurer;
(e) Enter into an agreement to merge with, or otherwise to
acquire control of, a domestic insurer.
(2)(a) No person shall engage in any transaction described in
division (B)(1) of this section, unless all of the following
conditions are met:
(i) The person has filed with the superintendent of insurance
a statement containing the information required by division (C) of
this section;
(ii) The person has sent the statement to the domestic
insurer;
(iii) The offer, request, invitation, agreement, or
acquisition has been approved by the superintendent in the manner
provided in division (F) of this section.
(b) The requirements of division (B)(2)(a) of this section
shall be met at the time any offer, request, or invitation is
made, or any agreement is entered into, or prior to the
acquisition of the securities if no offer or agreement is
involved.
(3) Any controlling person of a domestic insurer seeking to
divest its controlling interest in the domestic insurer shall file
a confidential notice of its proposed divestiture with the
superintendent at least thirty days prior to the cessation of
control, and provide a copy of the confidential notice to the
insurer. The superintendent may require the person seeking to
divest the controlling interest to file for and obtain approval of
the transaction. The information shall remain confidential until
the conclusion of the transaction unless the superintendent, in
the superintendent's discretion, determines that the confidential
treatment will interfere with enforcement of this section. If the
statement required by division (B)(2) of this section is otherwise
filed with the superintendent, this division shall not apply.
(C) The statement required by division (B)(2) of this section
shall be made under oath or affirmation, and shall contain all of
the following information:
(1) The name and address of each acquiring party;
(2) If the acquiring party is an individual, the individual's
principal occupation and all offices and positions held during the
past five years, and any conviction of crimes other than minor
traffic violations during the past ten years;
(3) If the acquiring party is not an individual, a report of
the nature of its business operations during the past five years
or for such lesser period as the acquiring party and any of its
predecessors shall have been in existence; an informative
description of the business intended to be done by the acquiring
party and the acquiring party's subsidiaries; and a list of all
individuals who are or who have been selected to become directors
or executive officers of the acquiring party, who perform or will
perform functions appropriate to such positions. The list shall
include for each individual the information required by division
(C)(2) of this section.
(4) The source, nature, and amount of the consideration used
or to be used in effecting the merger or other acquisition of
control, a description of any transaction in which funds were or
are to be obtained for any such purpose, including any pledge of
the domestic insurer's stock, or the stock of any of its
subsidiaries or controlling affiliates, and the identity of
persons furnishing such consideration;
(5) Fully audited financial information as to the earnings
and financial condition of each acquiring party for its preceding
five fiscal years, or for such lesser period as the acquiring
party and any of its predecessors shall have been in existence,
and similar unaudited information as of a date not earlier than
ninety days prior to the filing of the statement;
(6) Any plans or proposals which each acquiring party may
have to liquidate such domestic insurer, to sell its assets or
merge or consolidate it with any person, or to make any other
material change in its business or corporate structure or
management;
(7) The number of shares of any security of such issuer or
such controlling person that each acquiring party proposes to
acquire, and the terms of the offer, request, invitation,
agreement, or acquisition, and a statement as to the method by
which the fairness of the proposal was determined;
(8) The amount of each class of any security of such issuer
or such controlling person which is beneficially owned or
concerning which there is a right to acquire beneficial ownership
by each acquiring party;
(9) A full description of any contracts, arrangements, or
understandings with respect to any security of such issuer or such
controlling person in which any acquiring party is involved,
including but not limited to transfer of any of the securities,
joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or guarantees of
profits, division of losses or profits, or the giving or
withholding of proxies. The description shall identify the persons
with whom such contracts, arrangements, or understandings have
been made.
(10) A description of the purchase of any security of such
issuer or such controlling person during the year preceding the
filing of the statement, by any acquiring party, including the
dates of purchase, names of the purchasers, and consideration paid
or agreed to be paid therefor;
(11) A description of any recommendations to purchase any
security of such issuer or such controlling person made during the
year preceding the filing of the statement, by any acquiring
party, or by anyone based upon interviews or at the suggestion of
the acquiring party;
(12) Copies of all tender offers for, requests, or
invitations for tenders of, exchange offers for, and agreements to
acquire or exchange any securities of such issuer or such
controlling person, and, if distributed, of additional
solicitation material relating thereto;
(13) The terms of any agreement, contract, or understanding
made with or proposed to be made with any broker or dealer as to
solicitation of securities of such issuer or such controlling
person for tender, and the amount of any fees, commissions, or
other compensation to be paid to brokers or dealers with regard
thereto;
(14) With respect to proposed affiliations between depository
institutions or any affiliate thereof, within the meaning of Title
I, section 104(c) of the "Gramm-Leach-Bliley Act," Pub. L. No.
106-102, 113 Stat. 1338 (1999), and a domestic insurer, the
proposed effective date of the acquisition or change of control;
(15) An agreement by the person required to file the
statement required by division (B) of this section that the person
will provide the annual registration required by division (K) of
section 3901.33 of the Revised Code for so long as the person has
control of the domestic insurer;
(16) An acknowledgment by the person required to file the
statement required by division (B) of this section that the person
and all subsidiaries within the person's control in the insurance
holding company system will provide information to the
superintendent upon request as necessary to evaluate enterprise
risk to the insurer;
(17) Such additional information as the superintendent may by
rule prescribe as necessary or appropriate for the protection of
policyholders of the domestic insurer or in the public interest.
(D)(1) If the person required to file the statement required
by division (B)(2) of this section is a partnership, limited
partnership, syndicate, or other group, the superintendent may
require that the information required by division (C) of this
section be furnished with respect to each partner of such
partnership or limited partnership, each member of such syndicate
or group, and each person that controls such partner or member. If
any such partner, member, or person is a corporation, or the
person required to file the statement is a corporation, the
superintendent may require that the information required by
division (C) of this section be furnished with respect to the
corporation, each officer and director of the corporation, and
each person that is directly or indirectly the beneficial owner of
more than ten per cent of the outstanding voting securities of the
corporation.
(2) If any material change occurs in the facts set forth in
the statement required by division (B)(2) of this section, an
amendment setting forth such change, together with copies of all
documents and other material relevant to the change, shall be
filed with the superintendent by the person subject to division
(B)(2) of this section and sent to the domestic insurer within two
business days after such person learns of the occurrence of the
material change.
(E) If any offer, request, invitation, agreement, or
acquisition described in division (B)(1) of this section is
proposed to be made by means of a registration statement under the
"Securities Act of 1933," 48 Stat. 74, 15 U.S.C.A. 78a, or in
circumstances requiring the disclosure of similar information
under the "Securities Exchange Act of 1934," 48 Stat. 881, 15
U.S.C.A. 78a, or under a state law requiring similar registration
or disclosure, the person required to file the statement required
by division (B)(2) of this section may use such documents in
furnishing the information required by that statement.
(F)(1) The superintendent shall approve any merger or other
acquisition of control described in division (B)(1) of this
section unless, after a public hearing, the superintendent finds
that any of the following apply:
(a) After the change of control, the domestic insurer would
not be able to satisfy the requirements for the issuance of a
license to write the line or lines of insurance for which it is
presently licensed;
(b) The effect of the merger or other acquisition of control
would be substantially to lessen competition in insurance in this
state or tend to create a monopoly;
(c) The financial condition of any acquiring party is such as
might jeopardize the financial stability of the domestic insurer,
or prejudice the interests of its policyholders;
(d) The plans or proposals that the acquiring party has to
liquidate the domestic insurer, sell its assets, or consolidate or
merge it with any person, or to make any other material change in
its business or corporate structure or management, are unfair and
unreasonable to policyholders of the domestic insurer and not in
the public interest;
(e) The competence, experience, and integrity of those
persons that would control the operation of the domestic insurer
are such that it would not be in the interest of policyholders of
the domestic insurer and of the public to permit the merger or
other acquisition of control;
(f) The acquisition is likely to be hazardous or prejudicial
to the insurance-buying public.
(2)(a) Chapter 119. of the Revised Code, except for section
119.09 of the Revised Code, applies to any hearing held under
division (F)(1) of this section, including the notice of the
hearing, the conduct of the hearing, the orders issued pursuant to
it, the review of the orders, and all other matters relating to
the holding of the hearing, but only to the extent that Chapter
119. of the Revised Code is not inconsistent or in conflict with
this section.
(b) The notice of a hearing required under this division
shall be transmitted by personal service, certified mail, e-mail,
or any other method designed to ensure and confirm receipt of the
notice, to the persons and addresses designated to receive notices
and correspondence in the information statement filed under
division (B)(2) of this section. Confirmation of receipt of the
notice, including electronic "Read Receipt" confirmation, shall
constitute evidence of compliance with the requirement of this
section. The notice of hearing shall include the reasons for the
proposed action and a statement informing the acquiring party that
the party is entitled to a hearing. The notice also shall inform
the acquiring party that at the hearing the acquiring party may
appear in person, by attorney, or by such other representative as
is permitted to practice before the superintendent, or that the
acquiring party may present its position, arguments, or
contentions in writing, and that at the hearing the acquiring
party may present evidence and examine witnesses appearing for and
against the acquiring party. A copy of the notice also shall be
transmitted to attorneys or other representatives of record
representing the acquiring party.
(c) The hearing shall be held at the offices of the
superintendent within ten calendar days, but not earlier than
seven calendar days, of the date of transmission of the notice of
hearing by any means, unless it is postponed or continued; but in
no event shall the hearing be held unless notice is received at
least three days prior to the hearing. The superintendent may
postpone or continue the hearing upon receipt of a written request
by an acquiring party, or upon the superintendent's motion,
provided, however, a hearing in connection with a proposed change
of control involving a depository institution or any affiliate
thereof, within the meaning of Title I, section 104(c) of the
"Gramm-Leach-Bliley Act," Pub. L. No. 106-102, 113 Stat. 1338
(1999), and a domestic insurer, may be postponed or continued only
upon the request of an acquiring party, or upon the
superintendent's motion when the acquiring party agrees in writing
to extend the sixty-day period provided for in section 104(c) of
the "Gramm-Leach-Bliley Act," by a number of days equal to the
number of days of such postponement or continuance.
(d) For the purpose of conducting any hearing held under this
section, the superintendent may require the attendance of such
witnesses and the production of such books, records, and papers as
the superintendent desires, and may take the depositions of
witnesses residing within or without the state in the same manner
as is prescribed by law for the taking of depositions in civil
actions in the court of common pleas, and for that purpose the
superintendent may, and upon the request of an acquiring party
shall, issue a subpoena for any witnesses or a subpoena duces
tecum to compel the production of any books, records, or papers,
directed to the sheriff of the county where such witness resides
or is found, which shall be served and returned in the same manner
as a subpoena in a criminal case is served and returned. The fees
of the sheriff shall be the same as that allowed in the court of
common pleas in criminal cases. Witnesses shall be paid the fees
and mileage provided for under section 119.094 of the Revised
Code. Fees and mileage shall be paid from the fund in the state
treasury for the use of the superintendent in the same manner as
other expenses of the superintendent are paid. In any case of
disobedience or neglect of any subpoena served on any person or
the refusal of any witness to testify in any matter regarding
which the witness may lawfully be interrogated, the court of
common pleas of any county where such disobedience, neglect, or
refusal occurs or any judge thereof, on application by the
superintendent, shall compel obedience by attachment proceedings
for contempt, as in the case of disobedience of the requirements
of a subpoena issued from the court or a refusal to testify
therein.
In any hearing held under this section, a record of the
testimony, as provided by stenographic means or by use of audio
electronic recording devices, as determined by the superintendent,
and other evidence submitted shall be taken at the expense of the
superintendent. The record shall include all of the testimony and
other evidence, and rulings on the admissibility thereof,
presented at the hearing.
The superintendent shall pass upon the admissibility of
evidence, but a party to the proceedings may at that time object
to the rulings of the superintendent, and if the superintendent
refuses to admit evidence, the party offering the evidence shall
proffer the evidence. The proffer shall be made a part of the
record of the hearing.
In any hearing held under this section, the superintendent
may call any person to testify under oath as upon
cross-examination. The superintendent, or any one delegated by the
superintendent to conduct a hearing, may administer oaths or
affirmations.
In any hearing under this section, the superintendent may
appoint a hearing officer to conduct the hearing; the hearing
officer has the same powers and authority in conducting the
hearing as is granted to the superintendent. The hearing officer
shall have been admitted to the practice of law in the state and
be possessed of any additional qualifications as the
superintendent requires. The hearing officer shall submit to the
superintendent a written report setting forth the hearing
officer's finding of fact and conclusions of law and a
recommendation of the action to be taken by the superintendent. A
copy of the written report and recommendation shall, within seven
days of the date of filing thereof, be served upon the acquiring
party or the acquiring party's attorney or other representative of
record, by personal service, certified mail, e-mail, or any other
method designed to ensure and confirm receipt of the report. The
acquiring party may, within three days of receipt of the copy of
the written report and recommendation, file with the
superintendent written objections to the report and
recommendation, which objections the superintendent shall consider
before approving, modifying, or disapproving the recommendation.
The superintendent may grant extensions of time to the acquiring
party within which to file such objections. No recommendation of
the hearing officer shall be approved, modified, or disapproved by
the superintendent until after three days following the service of
the report and recommendation as provided in this section. The
superintendent may order additional testimony to be taken or
permit the introduction of further documentary evidence. The
superintendent may approve, modify, or disapprove the
recommendation of the hearing officer, and the order of the
superintendent based on the report, recommendation, transcript of
testimony, and evidence, or the objections of the acquiring party,
and additional testimony and evidence shall have the same effect
as if the hearing had been conducted by the superintendent. No
such recommendation is final until confirmed and approved by the
superintendent as indicated by the order entered in the record of
proceedings, and if the superintendent modifies or disapproves the
recommendations of the hearing officer, the reasons for the
modification or disapproval shall be included in the record of
proceedings.
After the order is entered, the superintendent shall transmit
in the manner and by any of the methods set forth in division
(F)(2)(b) of this section a certified copy of the order and a
statement of the time and method by which an appeal may be
perfected. A copy of the order shall be mailed to the attorneys or
other representatives of record representing the acquiring party.
(e) An order of disapproval issued by the superintendent may
be appealed to the court of common pleas of Franklin county by
filing a notice of appeal with the superintendent and a copy of
the notice of appeal with the court, within fifteen calendar days
after the transmittal of the copy of the order of disapproval. The
notice of appeal shall set forth the order appealed from and the
grounds for appeal, in accordance with section 119.12 of the
Revised Code.
(3) The superintendent may retain at the acquiring party's
expense any attorneys, actuaries, accountants, and other experts
not otherwise a part of the superintendent's staff as may be
reasonably necessary to assist the superintendent in reviewing the
proposed acquisition of control.
(G) This section does not apply to either of the following:
(1) Any transaction that is subject to section 3907.09,
3907.10, 3907.11, or 3921.14, or sections 3925.27 to 3925.31,
3941.35 to 3941.46, or section 3953.19 of the Revised Code;
(2) Any offer, request, invitation, agreement, or acquisition
that the superintendent by order exempts from this section on
either of the following bases:
(a) It has not been made or entered into for the purpose and
does not have the effect of changing or influencing the control of
a domestic insurer;
(b) It is not otherwise comprehended within the purposes of
this section.
(H) Nothing in this section or in any other section of Title
XXXIX of the Revised Code shall be construed to impair the
authority of the attorney general to investigate or prosecute
actions under any state or federal antitrust law with respect to
any merger or other acquisition involving domestic insurers.
(I) In connection with a proposed change of control involving
a depository institution or any affiliate thereof, within the
meaning of Title I, section 104(c) of the "Gramm-Leach-Bliley
Act," Pub. L. No. 106-102, 113 Stat. 1338 (1999), and a domestic
insurer, not later than sixty days after the date of the
notification of the proposed change in control submitted pursuant
to division (B)(2) of this section, the superintendent shall make
any determination that the person acquiring control of the insurer
shall maintain or restore the capital of the insurer to the level
required by the laws and regulations of this state.
Sec. 3901.33. (A) Every insurer that is authorized to do
business in this state and that is a member of an insurance
holding company system shall register with the superintendent of
insurance, except a foreign insurer subject to disclosure
requirements and standards adopted by statute or regulation in the
jurisdiction of its domicile that are substantially similar to
those contained in this section and section 3901.341 of the
Revised Code. Every insurer that is subject to registration under
this section shall register initially not later than
December 31,
1971, or within thirty days after it becomes subject to
registration, whichever is later, unless the superintendent for
good cause shown extends the time for registration, and then
within the extended time, and every such insurer shall register
annually after its initial registration. The superintendent may
require any authorized insurer that is a member of a holding
company system that is not subject to registration under this
section to furnish a copy of the registration statement or other
information filed by the insurance company with the insurance
regulatory authority of domiciliary jurisdiction.
(B) Every insurer subject to registration shall file a
registration statement with the superintendent on a form and in a
format provided by the superintendent, which shall contain current
information about all of the following:
(1) The capital structure, general financial condition,
ownership, and management of the insurer and any person
controlling the insurer;
(2) The identity of every member of the insurance holding
company system;
(3) The following agreements in force, relationships
subsisting, and transactions currently outstanding between the
insurer and its affiliates:
(a) Loans, other investments, or purchases, sales or
exchanges of securities of the affiliates by the insurer or of the
insurer by its affiliates;
(b) Purchases, sales, or exchanges of assets;
(c) Transactions not in the ordinary course of business;
(d) Guarantees or undertakings for the benefit of an
affiliate that result in an actual contingent exposure of the
insurer's assets to liability, other than insurance contracts
entered into in the ordinary course of the insurer's business;
(e) All management and service contracts and all cost-sharing
arrangements;
(f) Reinsurance agreements;
(g) Dividends and other distributions to shareholders;
(h) Consolidated tax allocation agreements.
(4) Any pledge of the insurer's stock, including stock of any
subsidiary or controlling affiliate, for a loan made to any member
of the insurance holding company system;
(5) If requested by the superintendent, financial statements
of an insurance holding company system, including all affiliates.
Financial statements may include annual audited financial
statements filed with the United States securities and exchange
commission pursuant to the "Securities Act of 1933," 48 Stat. 74,
15 U.S.C. 77a, or the "Securities Exchange Act of 1934," 48 Stat.
881, 15 U.S.C. 78a. The insurer may satisfy the request by
providing the superintendent with the most recently filed parent
corporation financial statements that have been filed with the
securities and exchange commission.
(6) Other matters concerning transactions between registered
insurers and any affiliates as may be included from time to time
in any registration forms adopted or approved by the
superintendent;
(7) Statements that the insurer's board of directors oversees
corporate governance and internal controls and that the insurer's
officers or senior management have approved, implemented, and
continue to maintain and monitor corporate governance and internal
control procedures;
(8) Any other information required by the superintendent by
rule or regulation.
(C) Each registration statement filed pursuant to division
(B) of this section shall summarize the information that has
changed from the prior registration statement filed pursuant to
that division.
(D) No information need be disclosed on the registration
statement filed pursuant to division (B) of this section if the
information is not material for the purposes of this section.
Unless the superintendent by rule, regulation, or order provides
otherwise, sales, purchases, exchanges, loans or extensions of
credit, or investments involving one-half of one per cent or less
of an insurer's admitted assets as of the thirty-first day of
December next preceding shall not be deemed material for the
purposes of this section.
(E) Each registered insurer shall keep current the
information required to be disclosed in its registration statement
by reporting all material changes or additions on amendment forms
provided by the superintendent within fifteen days after the end
of the month in which it learns of each change or addition.
(F) The superintendent shall terminate the registration of
any insurer that demonstrates that it no longer is a member of an
insurance holding company system.
(G) The superintendent may require or allow two or more
affiliated insurers subject to registration under this section to
file a consolidated registration statement or consolidated reports
amending their consolidated registration statement or their
individual registration statements.
(H) The superintendent may allow an insurer that is
authorized to do business in this state and that is part of an
insurance holding company system to register on behalf of any
affiliated insurer that is required to register under division (A)
of this section and to file all information and material required
to be filed under this section.
(I) This section does not apply to any insurer, information,
or transaction if and to the extent that the superintendent by
rule, regulation, or order exempts it from this section.
(J) Any person may file with the superintendent a disclaimer
of affiliation with any authorized insurer or such a disclaimer
may be filed by the insurer or any member of an insurance holding
company system. The disclaimer shall fully disclose all material
relationships and bases for affiliation between the person and the
insurer as well as the basis for disclaiming the affiliation.
After a disclaimer has been filed, the insurer shall be relieved
of any duty to register or report under this section which may
arise out of the insurer's relationship with the person unless and
until the superintendent disallows the disclaimer. The
superintendent shall disallow such a disclaimer only in the manner
provided in Chapter 119. of the Revised Code.
(K) The ultimate controlling person of every insurer subject
to registration under this section also shall file an annual
enterprise risk report. The report shall, to the best of the
ultimate controlling person's knowledge and belief, identify the
material risks within the insurance holding company system that
could pose enterprise risk to the insurer. The ultimate
controlling person shall file the report with the lead state
commissioner of the insurance holding company system as determined
by the procedures within the financial analysis handbook adopted
by the national association of insurance commissioners.
(L) The failure to file any registration statement or any
amendment thereto or enterprise risk report required by this
section within the time specified for the filing is a violation of
this section.
Sec. 3901.34. (A) Material transactions by registered
insurers with their affiliates Transactions within an insurance
holding company system to which an insurer subject to registration
is a party shall be subject to the following standards:
(1) The terms shall be fair and reasonable.
(2) Charges or fees for services performed shall be
reasonable.
(3) Expenses incurred and payment received shall be allocated
to the insurer in conformity with customary insurance accounting
practices that are consistently applied.
(4) The books, accounts, and records of each party shall be
so maintained as to clearly and accurately disclose the precise
nature and details of the transactions including such accounting
information as is necessary to support the reasonableness of the
charges or fees to the respective parties.
(5) The insurer's surplus as regards policyholders following
any dividends or distributions to shareholder affiliates shall be
reasonable in relation to the insurer's outstanding liabilities
and adequate to its financial needs.
(6) Agreements for cost-sharing services and management
services shall include such provisions as required by the
superintendent of insurance in rule or regulation.
(B) For the purposes of this section, in determining whether
an insurer's surplus as regards policyholders is reasonable in
relation to the insurer's outstanding liabilities and adequate to
its financial needs, the following factors, among others, may be
considered:
(1) The size of the insurer as measured by its assets,
capital, surplus, reserves, premium writings, insurance in force,
and other appropriate criteria;
(2) The extent to which the insurer's business is diversified
among the several lines of insurance;
(3) The number and size of risks insured in each line of
business;
(4) The extent of the geographical dispersion of the
insurer's insured risks;
(5) The nature and extent of the insurer's reinsurance
program;
(6) The quality, diversification, and liquidity of the
insurer's investment portfolio;
(7) The recent past and projected future trend in the size of
the insurer's surplus as regards policyholders;
(8) The adequacy of the insurer's reserves;
(9) The quality and liquidity of investments in subsidiaries.
The superintendent may discount any such investment or treat any
investment as a nonadmitted asset for purposes of determining the
adequacy of surplus as regards policyholders whenever the
investment so warrants.
(10) The quality of the insurer's earnings and the extent to
which the reported earnings include extraordinary items;
(11) The surplus as regards policyholders maintained by other
comparable insurers in respect of the factors enumerated in this
division.
(C) No insurer subject to registration under section 3901.33
of the Revised Code shall pay any extraordinary dividend or make
any other extraordinary distribution to its shareholders and the
declaration of any such dividend or distribution shall be
conditional and shall confer no rights upon shareholders until
thirty days after the superintendent has received notice of the
declaration thereof and has not within the thirty-day period
disapproved the dividend or distribution, or the superintendent
has approved the dividend or distribution within the thirty-day
period.
Prior to paying any dividend or distribution, the insurer
shall notify the superintendent on a form provided by the
superintendent for informational purposes within five business
days following its declaration of any dividend or distribution and
at least ten calendar days prior to payment of such dividend or
distribution, such ten-calendar-day period to be measured from the
date of the superintendent's receipt of the notice.
For the purposes of this section, an extraordinary dividend
or distribution includes any dividend or distribution of cash or
other property, whose fair market value, together with that of
other dividends or distributions made within the preceding twelve
months, exceeds the greater of ten per cent of the insurer's
surplus as regards policyholders as of the thirty-first day of
December next preceding, or the net income of the insurer for the
twelve-month period ending the thirty-first day of December next
preceding, but shall not include pro rata distributions of any
class of the insurer's own securities.
Any dividend or distribution paid from other than earned
surplus shall be considered an extraordinary dividend or
extraordinary distribution. For the purposes of this section,
"earned surplus" means an amount equal to an insurer's unassigned
funds as set forth in its most recent statutory financial
statement submitted to the superintendent, including net
unrealized capital gains and losses or revaluation of assets.
Sec. 3901.341. (A) No insurer subject to registration under
section 3901.33 of the Revised Code shall enter into any of the
following transactions with any person in its insurance holding
company system, including amendments or modifications of affiliate
agreements previously filed under this section that are subject to
the materiality standards contained in divisions (A)(1) to (5) of
this section, until thirty days after the superintendent of
insurance has received, for his the superintendent's review,
written notice of the insurer's intention to enter into the
transaction and if, during that period, the superintendent has not
disapproved the proposed transaction. The notice for amendments or
modifications shall include the reasons for the change and the
financial impact on the domestic insurer. Informal notice shall be
reported to the superintendent within thirty days after
termination of a previously filed agreement. These requirements
shall apply to all of the following transactions:
(1) Any sale, purchase, exchange of assets, loan, extension
of credit, guarantee, or investment, if the transaction equals or
exceeds, with respect to insurers other than life insurers, the
lesser of three per cent of the insurer's admitted assets as of
the thirty-first day of December next preceding or twenty-five per
cent of the insurer's surplus as regards policyholders as of the
thirty-first day of December next preceding or, with respect to
life insurers, three per cent of the insurer's admitted assets as
of the thirty-first day of December next preceding;
(2) Any loan or extension of credit to any person that is not
an affiliate of the insurer, if both of the following apply:
(a) The loan or extension of credit equals or exceeds, with
respect to insurers other than life insurers, the lesser of three
per cent of the insurer's admitted assets as of the thirty-first
day of December next preceding or twenty-five per cent of the
insurer's surplus as regards policyholders as of the thirty-first
day of December next preceding or, with respect to life insurers,
three per cent of the insurer's admitted assets as of the
thirty-first day of December next preceding.
(b) The insurer makes the loan or extends the credit with an
agreement or understanding that the proceeds of the transaction,
in whole or in substantial part, are to be used to make loans or
extend credit to, to purchase assets of, or to make investments
in, any affiliate of the insurer.
(3) Reinsurance agreements or modifications of such
agreements including both of the following:
(a) All reinsurance pooling agreements;
(b) Agreements in which the reinsurance premium or the change
in the insurer's liabilities, or the projected reinsurance premium
or a change in the insurer's liabilities in any of the next three
years, equals or exceeds five per cent of the insurer's surplus as
regards policyholders as of the thirty-first day of December next
preceding. Division
Division (A)(3) of this section also applies to reinsurance
agreements that may require as consideration the transfer of
assets from an insurer to a nonaffiliate, if the insurer and
nonaffiliate have an agreement or understanding that any portion
of the assets will be transferred to one or more affiliates of the
insurer.
(4) All management agreements, service contracts, tax
allocation agreements, guarantees, and cost-sharing arrangements;
(5) Any other material transaction that the superintendent,
pursuant to rules adopted in accordance with Chapter 119. of the
Revised Code, determines may render the insurer's surplus as
regards policyholders unreasonable in relation to the insurer's
outstanding liabilities and inadequate to its financial needs.
(B) In reviewing transactions under division (A) of this
section, the superintendent shall consider whether the terms of
the transaction are fair and reasonable and whether the
transaction may adversely affect the interests of policyholders.
(C) Any transaction or agreement described in division (A) of
this section that is not disapproved by the superintendent in
accordance with that division is effective as of the effective
date set forth in the notice required under this section.
(D) The superintendent, pursuant to rules adopted in
accordance with Chapter 119. of the Revised Code, may designate
certain types of transactions that need not be submitted for
review under division (A) of this section, if those transactions
would not have a significant impact on the financial condition of
an insurer.
(E) A domestic insurer shall not enter into any transaction
described in division (A) of this section with members of its
insurance holding company system if the transaction is part of a
plan or series of similar transactions and if the purpose of
entering into the separate transactions is to avoid the review
required under division (A) of this section that would otherwise
occur. If the superintendent determines that the insurer, within a
twelve-month period, entered into those separate transactions for
that purpose, he the superintendent may take any action authorized
by section 3901.37 of the Revised Code.
(F) A domestic insurer shall give written notice to the
superintendent, within thirty days after making an investment, if
the investment is made in a corporation and the total investment
in the corporation by the insurance holding company system exceeds
ten per cent of the voting securities of the corporation.
(G) Nothing in division (A) of this section shall be
construed to authorize or permit any transaction that would
otherwise be contrary to law.
Sec. 3901.35. (A)(1) In addition to the powers which that
the superintendent has under sections 3901.01 to 3901.31,
inclusive, of the Revised Code, relating to the examination of
insurers, the superintendent of insurance, subject to sections
119.01 to 119.13, inclusive, of the Revised Code, shall also have
the power to order examine any insurer registered under section
3901.33 of the Revised Code and its affiliates to ascertain the
financial condition of the insurer, including the enterprise risk
to the insurer by the ultimate controlling party, or by any entity
or combination of entities within the insurance holding company
system, or by the insurance holding company system on a
consolidated basis.
(2) The superintendent of insurance may order any insurer
registered under section 3901.33 of the Revised Code to produce
for examination such records, books, or other information papers
in the possession of the insurer and its affiliates as may be
reasonably necessary to ascertain the financial condition or
legality of conduct of such insurer, but only if the
superintendent finds that an examination of such insurer pursuant
to sections 3901.01 to 3901.31, inclusive, of the Revised Code,
would be inadequate or the interests of the policyholders of such
insurer may be adversely affected. In the event such insurer fails
to comply with such order, the superintendent shall have the power
to examine such affiliates to obtain such information determine
compliance with sections 3901.32 to 3901.37 of the Revised Code.
(3) To determine compliance with sections 3901.32 to 3901.37
of the Revised Code, the superintendent may order any insurer
registered under section 3901.33 of the Revised Code to produce
information not in the possession of the insurer if the insurer
can obtain access to such information pursuant to a contractual
relationship, statutory obligation, or other method. If the
insurer cannot obtain the information requested by the
superintendent, the insurer shall provide the superintendent a
detailed explanation of the reason that the insurer cannot obtain
the information and the identity of the holder of information.
Whenever it appears to the superintendent that the detailed
explanation is without merit, the superintendent may require,
after notice and hearing, that the insurer pay a penalty of up to
ten thousand dollars per day, or the superintendent may suspend or
revoke the insurer's license.
(B) The superintendent may retain at the registered insurer's
expense such attorneys, actuaries, accountants, and other experts
not otherwise a part of the superintendent's staff as shall be
reasonably necessary to assist in the conduct of the examination
under division (A) of this section. Any persons so retained shall
be under the direction and control of the superintendent and shall
act in a purely advisory capacity.
(C) Each registered insurer producing for examination
records, books, and papers pursuant to division (A) of this
section shall be liable for and shall pay the expense of such
examination in accordance with section 3901.07 of the Revised
Code.
(D) If the insurer fails to comply with an order issued
pursuant to this section, the superintendent may examine the
affiliates to obtain the information. The superintendent also may
issue subpoenas, administer oaths, and examine under oath any
person for purposes of determining compliance with this section.
Upon the failure or refusal of any person to obey a subpoena, the
superintendent may petition the court of common pleas of Franklin
county for an order compelling the witness to appear and testify
or produce documentary evidence. Failure to obey the court order
shall be punishable as contempt of court. A person who receives a
subpoena issued pursuant to this division shall appear as a
witness at the place specified in the subpoena within the state.
The person is entitled to the same fees and mileage as a witness
in a civil action in the court of common pleas. Any fees, mileage,
or actual expenses necessarily incurred in securing the attendance
of a witness and their testimony shall be itemized and charged
against the insurer being examined.
Sec. 3901.351. (A) With respect to any insurer registered
under section 3901.33 of the Revised Code and in accordance with
division (C) of this section, the superintendent of insurance may
participate in a supervisory college for any domestic insurer that
is part of an insurance holding company system with international
operations in order to determine compliance by the insurer with
sections 3901.32 to 3901.37 of the Revised Code. In participating,
the superintendent may do all of the following:
(1) Initiate the establishment of a supervisory college;
(2) Clarify the membership and participation of other
supervisors in the supervisory college;
(3) Clarify the functions of the supervisory college and the
role of other regulators, including the establishment of a
group-wide supervisor;
(4) Coordinate the ongoing activities of the supervisory
college, including planning meetings, supervisory activities, and
processes for information sharing;
(5) Establish a crisis management plan.
(B) Each registered insurer subject to this section shall be
liable for and shall pay the reasonable expenses of the
superintendent's participation in a supervisory college in
accordance with division (C) of this section, including reasonable
travel expenses. The superintendent may establish a regular
assessment to the insurer for the payment of these expenses. A
supervisory college may be convened as either a temporary or
permanent forum for communication and cooperation between the
regulators charged with the supervision of the insurer or its
affiliates.
(C) In order to assess the business strategy, financial
position, legal and regulatory position, risk exposure, risk
management, and governance processes, and as part of the
examination of individual insurers in accordance with section
3901.35 of the Revised Code, the superintendent may participate in
a supervisory college with other regulators charged with
supervision of the insurer or its affiliates, including other
state, federal, and international regulatory agencies. The
superintendent may enter into agreements in accordance with
section 3901.36 of the Revised Code that provide the basis for
cooperation between the superintendent and the other regulatory
agencies, and the activities of the supervisory college.
(D) Nothing in this section shall delegate to the supervisory
college the authority of the superintendent to regulate or
supervise the insurer or its affiliates within its jurisdiction.
Sec. 3901.36. (A) All information, documents, and copies
thereof Documents, materials, or other information in the
possession or control of the department of insurance that are
obtained by or disclosed to the superintendent of insurance or any
other person in the course of an examination or investigation made
pursuant to section 3901.35 of the Revised Code and all
information reported pursuant to section 3901.33 of the Revised
Code shall be given confidential and privileged treatment and
shall not be subject to section 149.43 of the Revised Code,
subpoena, or be made public by the superintendent or any other
person.
(B) Notwithstanding division (A) of this section, the
discovery, and shall not be admissible in evidence in any private
civil action. The superintendent may do any of the following:
(1) Disclose documents and information that are the subject
of this section upon obtaining shall not make the documents,
materials, or other information public unless one of the following
applies:
(1) The superintendent uses the documents, materials, or
other information in furtherance of any regulatory or legal action
brought as a part of the superintendent's official duties.
(2) The superintendent has obtained the prior written consent
from of the insurer to which the documents and, materials, or
other information pertain; of the disclosure.
(2) Disclose documents and information that are the subject
of this section in such a manner as the superintendent considers
appropriate (3) The superintendent, after giving the insurer and
those affiliates that are the subject of the documents and,
materials, or other information notice and an opportunity to be
heard in accordance with Chapter 119. of the Revised Code, if the
superintendent determines that the interests of policyholders,
shareholders, or the public will be served by the disclosure;
(3) Share documents and information that are the subject of
this section with the chief deputy rehabilitator, the chief deputy
liquidator, other deputy rehabilitators and liquidators, and any
other person employed by, or acting on behalf of, the
superintendent pursuant to Chapter 3901. or 3903. of the Revised
Code, in which case the superintendent may make disclosures as the
superintendent considers appropriate.
(B) Neither the superintendent nor any person who receives
documents, materials, or other information while acting under the
authority of the superintendent or with whom such documents,
materials, or other information are shared pursuant to this
section shall be permitted or required to testify in any private
civil action concerning any confidential documents, materials, or
information subject to division (A) of this section.
(C) In order to assist in the performance of the
superintendent's duties under this section, the superintendent may
do either of the following:
(1) Share documents, materials, or other information,
including the confidential and privileged documents, materials, or
other information subject to division (A) of this section with
other local, state, federal, and international regulatory and law
enforcement agencies, with local, state, and federal prosecutors,
and with the national association of insurance commissioners and
its affiliates and subsidiaries, and with members of any
supervisory college described in section 3901.351 of the Revised
Code, provided that the recipient agrees to maintain the
confidential or privileged status of the confidential or
privileged document documents, materials, or other information and
has verified in writing the legal authority to do so;
(4) Disclose documents and information that are the subject
of this section in the furtherance of any regulatory or legal
action brought by or on behalf of the superintendent or the state,
resulting from the exercise of the superintendent's official
duties.
(C) Notwithstanding divisions (A) and (B) of this section,
the superintendent may authorize the national association of
insurance commissioners and its affiliates and subsidiaries by
agreement to share confidential or privileged documents or
information received pursuant to division (B)(3) of this section
with local, state, federal, and international regulatory and law
enforcement agencies and with local, state, and federal
prosecutors, provided that the recipient agrees to maintain the
confidential or privileged status of the confidential or
privileged document or information and has authority to do so.
(D) Notwithstanding divisions (A) and (B) of this section,
the chief deputy rehabilitator, the chief deputy liquidator, and
other deputy rehabilitators and liquidators may disclose documents
and information that are the subject of this section in the
furtherance of any regulatory or legal action brought by or on
behalf of the superintendent, the rehabilitator, the liquidator,
or the state resulting from the exercise of the superintendent's
official duties in any capacity.
(E) Nothing in this section shall prohibit the superintendent
from receiving documents and information in accordance with
section 3901.045 of the Revised Code. The superintendent may share
confidential and privileged documents, materials, or other
information reported pursuant to section 3901.33 of the Revised
Code only with superintendents of states having statutes or
regulations substantially similar to division (A) of this section
and who have agreed in writing not to disclose such information.
(2) Receive documents, materials, or information, including
otherwise confidential and privileged documents, materials, or
information from the national association of insurance
commissioners and its affiliates and subsidiaries and from
regulatory and law enforcement officials of other foreign or
domestic jurisdictions. The superintendent shall maintain as
confidential or privileged any such document, material, or
information received with notice or the understanding that it is
confidential or privileged under the laws of the jurisdiction that
is the source of the document, material, or information.
(D) The superintendent shall enter into written agreements
with the national association of insurance commissioners governing
sharing and use of information provided pursuant to sections
3901.32 to 3901.37 of the Revised Code consistent with division
(C) of this section. The written agreements shall do all of the
following:
(1) Specify procedures and protocols regarding the
confidentiality and security of information shared with the
national association of insurance commissioners and its affiliates
and subsidiaries pursuant to sections 3901.32 to 3901.37 of the
Revised Code, including procedures and protocols for sharing by
the national association of insurance commissioners with other
state, federal, or international regulators;
(2) Specify that ownership of information shared with the
national association of insurance commissioners and its affiliates
and subsidiaries pursuant to sections 3901.32 to 3901.37 of the
Revised Code remains with the superintendent and the national
association of insurance commissioners' use of the information is
subject to the direction of the superintendent;
(3) Require prompt notice to be given to an insurer whose
confidential information is in the possession of the national
association of insurance commissioners or its affiliates or
subsidiaries and is subject to a request or subpoena for
disclosure or production;
(4) Require the national association of insurance
commissioners and its affiliates and subsidiaries to consent to
intervention by an insurer in any judicial or administrative
action in which the national association of insurance
commissioners and its affiliates and subsidiaries may be required
to disclose confidential information about the insurer shared with
the national association of insurance commissioners and its
affiliates and subsidiaries pursuant to sections 3901.32 to
3901.37 of the Revised Code.
(E) The sharing of information by the superintendent pursuant
to sections 3901.32 to 3901.37 of the Revised Code shall not
constitute a delegation of regulatory or rule-making authority.
The superintendent is solely responsible for the administration,
execution, and enforcement of the provisions of sections 3901.32
to 3901.37 of the Revised Code.
(F) The superintendent may enter into agreements governing
the sharing and use of documents and information consistent with
the requirements of this section.
(G)(1) No waiver of any applicable privilege or claim of
confidentiality in the documents and, materials, or other
information described in this section shall occur as a result of
sharing or receiving documents and information as authorized in
divisions (B)(3), division (C), and (E) of this section.
(2) The disclosure of a document or information in connection
with a regulatory or legal action pursuant to divisions (B)(4) and
(D) of this section does not prohibit an insurer or any other
person from taking steps to limit the dissemination of the
document or information to persons not involved in or the subject
of the regulatory or legal action on the basis of any recognized
privilege arising under any other section of the Revised Code or
the common law. (G) Documents, materials, or other information in
the possession or control of the national association of insurance
commissioners pursuant to this section shall be given confidential
and privileged treatment and shall not be subject to section
149.43 of the Revised Code, subpoena, or discovery, and shall not
be admissible in evidence in any private civil action.
Sec. 3901.371. The purpose of sections 3901.371 to 3901.378
of the Revised Code is to provide the requirements for maintaining
a risk management framework and completing an own risk and
solvency assessment, and to provide guidance and instructions for
filing an own risk and solvency assessment summary report with the
superintendent of insurance. The requirements of these sections
shall apply to all insurers domiciled in this state unless exempt
pursuant to section 3901.376 of the Revised Code.
The general assembly finds and declares that the own risk and
solvency assessment summary report will contain confidential and
sensitive information related to an insurer or insurance group's
identification of risks material and relevant to the insurer or
insurance group filing the report. This information will include
proprietary and trade secret information that has the potential
for harm and competitive disadvantage to the insurer or insurance
group if the information is made public. It is the intent of the
general assembly that the own risk and solvency assessment summary
report shall be a confidential document filed with the
superintendent, that the own risk and solvency assessment summary
report will be shared only as stated in sections 3901.371 to
3901.378 of the Revised Code to assist the superintendent of
insurance in the performance of the superintendent's duties, and
that in no event shall the own risk and solvency assessment
summary report be subject to public disclosure.
Sec. 3901.372. For the purposes of sections 3901.371 to
3907.378 of the Revised Code:
(A) "Insurance group" means those insurers and affiliates
included within an insurance holding company system as defined in
section 3901.32 of the Revised Code.
(B) "Insurer" has the same meaning as set forth in section
3901.32 of the Revised Code.
(C) "Own risk and solvency assessment" means a confidential
internal assessment, appropriate to the nature, scale, and
complexity of an insurer or insurance group, conducted by that
insurer or insurance group of the material and relevant risks
associated with the insurer or insurance group's current business
plan, and the sufficiency of capital resources to support those
risks.
(D) "Own risk and solvency assessment guidance manual" means
the current version of the own risk and solvency assessment
guidance manual developed and adopted by the national association
of insurance commissioners and as amended from time to time. A
change in the own risk and solvency assessment guidance manual
shall be effective on the first day of January following the
calendar year in which the changes have been adopted by the
national association of insurance commissioners.
(E) "Own risk and solvency assessment summary report" means a
confidential high-level summary of an insurer or insurance group's
own risk and solvency assessment.
Sec. 3901.373. An insurer shall maintain a risk management
framework to assist the insurer with identifying, assessing,
monitoring, managing, and reporting on its material and relevant
risks. This requirement may be satisfied if the insurance group of
which the insurer is a member maintains a risk management
framework applicable to the operations of the insurer.
Sec. 3901.374. Unless exempted by section 3901.376 of the
Revised Code, an insurer, or the insurance group of which the
insurer is a member, shall regularly conduct an own risk and
solvency assessment consistent with a process comparable to the
own risk and solvency assessment guidance manual. The own risk and
solvency assessment shall be conducted not less than annually, but
also at any time when there are significant changes to the risk
profile of the insurer or the insurance group of which the insurer
is a member.
Sec. 3901.375. (A)(1) Upon the request of the superintendent
of insurance, and not more than once annually, an insurer shall
submit to the superintendent an own risk and solvency assessment
summary report, or any combination of reports that together
contain the information described in the own risk and solvency
assessment guidance manual, applicable to the insurer or the
insurance group of which it is a member.
(2) Notwithstanding any request from the superintendent, if
the insurer is a member of an insurance group, the insurer shall
submit the report required by division (A)(1) of this section if
the superintendent is the lead state commissioner of the insurance
group as determined by the procedures within the financial
analysis handbook adopted by the national association of insurance
commissioners.
(B) The report shall include a signature of the insurer or
insurance group's chief risk officer, or other executive having
responsibility for the oversight of the insurer's enterprise risk
management process, attesting to the best of the officer's or
executive's belief and knowledge that the insurer applies the
enterprise risk management process described in the own risk and
solvency assessment summary report, and that a copy of the report
has been provided to the insurer's board of directors or the
appropriate committee thereof.
(C) An insurer may comply with division (A) of this section
by providing the most recent and substantially similar report
provided by the insurer or another member of an insurance group of
which the insurer is a member to the commissioner of another state
or to a supervisor or regulator of a foreign jurisdiction, if that
report provides information that is comparable to the information
described in the own risk and solvency assessment guidance manual.
Any such report in a language other than English must be
accompanied by a translation of that report into the English
language.
Sec. 3901.376. (A)(1) An insurer shall be exempt from the
requirements of sections 3901.371 to 3901.378 of the Revised Code
if both of the following apply:
(a) The insurer has annual direct written and unaffiliated
assumed premium, including international direct and assumed
premium, less than five hundred million dollars.
(b) The insurance group of which the insurer is a member has
annual direct written and unaffiliated assumed premium, including
international direct and assumed premium, less than one billion
dollars.
(2) The annual direct written and unaffiliated assumed
premium described in divisions (A)(1)(a) and (b) of this section
does not include premiums reinsured with the federal crop
insurance corporation and federal flood program.
(B) If an insurer qualifies for exemption pursuant to
division (A)(1)(a) of this section, but the insurance group of
which the insurer is a member does not qualify for exemption
pursuant to division (A)(1)(b) of this section, and if an own risk
and solvency assessment summary report is required pursuant to
division (E) of this section, then the summary report shall
include every insurer within the insurance group. This requirement
may be satisfied if the insurer submits more than one own risk and
solvency assessment summary report for any combination of insurers
provided the combination of reports includes every insurer within
the insurance group.
(C) If an insurer does not qualify for exemption pursuant to
division (A)(1)(a) of this section, but the insurance group of
which it is a member qualifies for exemption pursuant to division
(A)(1)(b) of this section, then the insurer shall only file an own
risk and solvency assessment summary report if required pursuant
to division (E) of this section.
(D)(1) An insurer that does not qualify for exemption
pursuant to division (A) of this section may apply to the
superintendent of insurance for a waiver from the requirements of
sections 3901.371 to 3901.378 of the Revised Code based upon
unique circumstances. In deciding whether to grant the insurer's
request for waiver, the superintendent may consider any of the
following:
(a) The type and volume of business written;
(b) The ownership and organizational structure of the insurer
or insurance group of which the insurer is a member;
(c) Any other factor the superintendent considers relevant to
the insurer or insurance group of which the insurer is a member.
(2) If the insurer is part of an insurance group with
insurers domiciled in more than one state, the superintendent
shall coordinate with the lead state commissioner and with the
other domiciliary commissioners in considering whether to grant
the insurer's request for a waiver.
(E) Notwithstanding the exemptions stated in this section,
the superintendent may require that an insurer maintain a risk
management framework, conduct an own risk and solvency assessment,
and file an own risk and solvency assessment summary report in any
of the following circumstances:
(1) Based on unique circumstances, including the type and
volume of business written and the ownership and organizational
structure of the insurer or insurance group of which the insurer
is a member;
(2) At the request of a federal agency;
(3) At the request of an international supervisor;
(4) If the insurer has risk-based capital for a company
action level event as set forth in section 3903.83 of the Revised
Code, meets one or more of the standards set out in section
3903.09 or 3903.71 of the Revised Code, or otherwise exhibits
qualities of a troubled insurer as determined by the
superintendent.
(F) If an insurer that qualifies for an exemption pursuant to
division (A) of this section subsequently no longer qualifies for
that exemption due to changes in premium as reflected in the
insurer's most recent annual statement, or in the most recent
annual statements of the insurers within the insurance group of
which the insurer is a member, the insurer shall have one year
after the year the threshold is exceeded to comply with the
requirements of sections 3901.371 to 3901.378 of the Revised Code.
Sec. 3901.377. (A) The own risk and solvency assessment
summary report shall be prepared consistent with the own risk and
solvency assessment guidance manual, subject to the requirements
of division (B) of this section, and all documentation and
supporting information shall be maintained and made available for
examination upon request of the superintendent of insurance.
(B) The superintendent's review of the own risk and solvency
assessment summary report, and any additional requests for
information, shall be made using similar procedures used in the
analysis and examination of multi-state or global insurers and
insurance groups.
Sec. 3901.378. (A) Documents, materials, or other
information, including the own risk and solvency assessment
summary report, in the possession or control of the department of
insurance that are obtained by, created by, or disclosed to the
superintendent of insurance, or any other person under sections
3901.371 to 3901.378 of the Revised Code, are recognized by this
state as being proprietary and to contain trade secrets.
(B) The documents described in division (A) of this section
shall be confidential by law and privileged, and shall not be
admissible into evidence in any private civil action or subject to
section 149.43 of the Revised Code, subpoena, or discovery.
(C)(1) Notwithstanding division (B) of this section, the
superintendent may use the documents, materials, or other
information in furtherance of any regulatory or legal action
brought as a part of the superintendent's official duties.
(2) The superintendent shall not otherwise make the
documents, materials, or other information public without the
prior written consent of the insurer.
(D) Neither the superintendent nor any person who receives
documents, materials, or other own risk and solvency assessment
related information, through examination or otherwise, while
acting under the authority of the superintendent or with whom such
documents, materials, or other information are shared pursuant to
sections 3901.371 to 3901.378 of the Revised Code shall be
permitted or required to testify in any private civil action
concerning any confidential documents, materials, or information
subject to division (A) of this section.
(E)(1) In order to assist in the performance of the
superintendent's regulatory duties, the superintendent may do
either of the following:
(a) Upon request, share documents, materials, or other own
risk and solvency assessment related information, including
confidential and privileged documents, materials, or information
subject to division (A) of this section, and proprietary and trade
secret documents, with other state, federal and international
financial regulatory agencies, members of any supervisory college
as described in section 3901.351 of the Revised Code, the national
association of insurance commissioners, or any third-party
consultant designated by the superintendent;
(b) Receive documents, materials, or other own risk and
solvency assessment related information, including confidential
and privileged documents, materials, or information subject to
division (A) of this section, and proprietary and trade secret
documents, from regulatory officials of other foreign or domestic
jurisdictions, including members of any supervisory college as
described in section 3901.351 of the Revised Code, and from the
national association of insurance commissioners.
(2) The recipient of any information pursuant to division
(E)(1)(a) of this section shall agree in writing to maintain the
confidentiality and privileged status of the documents, materials,
or other information and verify in writing their legal authority
to maintain confidentiality. If the superintendent receives any
information pursuant to division (E)(1)(b) of this section, the
superintendent shall maintain as confidential or privileged any
documents, materials, or information received with notice or the
understanding that it is confidential or privileged under the laws
of the jurisdiction that is the source of the document, material,
or information.
(3) The superintendent shall enter into a written agreement
with the national association of insurance commissioners or a
third-party consultant governing sharing and use of information
provided pursuant to sections 3901.371 to 3901.378 of the Revised
Code. The written agreement shall do the all of the following:
(a) Specify procedures and protocols regarding the
confidentiality and security of information shared with the
national association of insurance commissioners or a third-party
consultant pursuant to sections 3901.371 to 3901.378 of the
Revised Code, including procedures and protocols for sharing by
the national association of insurance commissioners with other
state regulators from states in which the insurance group has
domiciled insurers;
(b) Provide that the recipient of information agrees in
writing to maintain the confidentiality and privileged status of
the own risk and solvency assessment related documents, materials,
or other information obtained pursuant to sections 3901.371 to
3901.378 of the Revised Code, and has verified in writing the
legal authority to maintain confidentiality;
(c) Specify that ownership of information shared with the
national association of insurance commissioners or a third-party
consultant pursuant to sections 3901.371 to 3901.378 of the
Revised Code remains with the superintendent and the national
association of insurance commissioners' or a third-party
consultant's use of the information is subject to the direction of
the superintendent;
(d) Prohibit the national association of insurance
commissioners or a third-party consultant from storing the
information obtained pursuant to sections 3901.371 to 3901.378 of
the Revised Code in a permanent database after the underlying
analysis is completed;
(e) Require prompt notice to be given to an insurer whose
confidential information in the possession of the national
association of insurance commissioners or a third-party consultant
pursuant to sections 3901.371 to 3901.378 of the Revised Code is
subject to a request or subpoena for disclosure or production of
the information;
(f) Require the national association of insurance
commissioners or a third-party consultant to consent to
intervention by an insurer in any judicial or administrative
action in which the national association of insurance
commissioners or a third-party consultant may be required to
disclose confidential information about the insurer that was
obtained pursuant to sections 3901.371 to 3901.378 of the Revised
Code;
(g) Require the notational association of insurance
commissioners or a third-party consultant to use documents,
materials, or other information, including the own risk solvency
assessment summary report, for the specific purposes as directed
by the superintendent;
(h) Prohibit the national association of insurance
commissioners or a third-party consultant from using, sharing, or
disclosing any documents, materials, or other information,
including the own risk and solvency assessment summary report,
beyond the scope of the responsibilities outlined by the
superintendent;
(i) Provide for the insurer's written consent in the case of
an agreement involving a third-party consultant.
(F) The sharing of information, materials, and documents by
the superintendent pursuant to sections 3901.371 to 3901.378 of
the Revised Code shall not constitute a delegation of regulatory
or rule-making authority, and the superintendent is solely
responsible for the administration, execution, and enforcement of
sections 3901.371 to 3901.378 of the Revised Code.
(G) No waiver of any applicable privilege or claim of
confidentiality in the documents, proprietary and trade-secret
materials, or other own risk and solvency assessment related
information shall occur as a result of disclosure of such own risk
and solvency assessment related information, materials, or
documents to the superintendent as a result of sharing authorized
in sections 3901.371 to 3901.378 of the Revised Code.
(H) Documents, materials, or other information in the
possession or control of the national association of insurance
commissioners or a third-party consultant pursuant to sections
3901.371 to 3901.378 of the Revised Code shall be confidential by
law and privileged, and shall not be subject to section 149.43 of
the Revised Code, subpoena, discovery, or admissible in evidence
in any private civil action.
Sec. 3901.41. (A) As used in this section:
(1) "Automated transaction" has the same meaning as in
section 1306.01 of the Revised Code, and includes electronic
transactions between two or more persons conducting business
pursuant to the laws of this state relating to insurance.
(2) "Contact point" means any electronic identification to
which messages can be sent, including, but not limited to, any of
the following:
(a) An electronic mail address;
(b) An instant message identity;
(c) A wireless telephone, or any other personal electronic
communication device;
(3) "Insured" means a certificate holder, contract owner,
customer, policyholder, or subscriber as those terms are used in
the laws of this state relating to insurance.
(4) "Insurer" has the same meaning as in section 3901.32 of
the Revised Code.
(5) "Laws of this state relating to insurance" has the same
meaning as in section 3901.04 of the Revised Code.
(6) "Personally identifiable information" means any
individually identifiable information gathered in connection with
an insurance transaction, including an individual's name, address,
social security number, and banking information.
(B) Notwithstanding any laws of this state relating to
insurance, sections 1306.01 to 1306.23 of the Revised Code, the
"Uniform Electronics Transactions Act," apply to the business of
insurance in this state by insurers.
(C)(1) If an insured affirmatively agrees to conduct the
business of insurance via an automated transaction, any
information issued or delivered in writing may be issued or
delivered electronically to a contact point provided by the
insured, as long as all of the following apply:
(a) The transmission of information is in compliance with
sections 1306.07 and 1306.14 of the Revised Code;
(b) The details of the automated transaction are fully
disclosed to the insured in the application, policy, certificate,
contract of insurance, or by another method that ensures notice to
the insured;
(c) The details of the automated transaction related to
notices of cancellation, nonrenewal, termination, or changes in
the terms or conditions in the policy, certificate, or contract of
insurance are approved or accepted by the superintendent of
insurance.
(2) At a minimum, the details of the automated transaction
shall include all of the following:
(a) A clear and conspicuous statement informing the insured
of any right or option of the insured to receive a record on
paper;
(b) The right of the insured to withdraw the insured's
consent, and any consequences or fees if the insured withdraws
consent;
(c) A description of the procedures the insured must use to
withdraw consent and to update the insured's contact point.
(3) Affirmative agreement to participate in a part of an
automated transaction shall not be used to confirm the insured's
consent to transact the entire business of insurance pursuant to
this section.
(D) The insurer shall send all notices of cancellation,
nonrenewal, termination, or changes in the terms or conditions in
the policy, certificate, or contract of insurance to the last
known contact point supplied by the insured. If the insurer has
knowledge that the insured's contact point is no longer valid, the
insurer shall send the information via regular mail to the last
known address furnished to the insurer by the insured.
(E) Any insurer conducting the business of insurance via an
automated transaction shall allow the insurer's insureds who agree
to participate in an automated transaction the option to transact
business with the insurer in a nonautomated transaction.
(F)(1) Notwithstanding any laws of this state relating to
insurance, any policy, certificate, or contract of insurance,
including any endorsements or amendments, that do not contain
personally identifiable information may be posted to the insurer's
web site that is accessible by the general public in lieu of any
other method of delivery. If the insurer elects to post any
policy, certificate, or contract of insurance to the insurer's web
site, all of the following apply:
(a) The policies, certificates, or contracts of insurance are
readily accessible by the insured and, once the policies,
certificates, or contracts of insurance are no longer used by the
insurer in this state, they are stored in a readily accessible
archive;
(b) The policies, certificates, or contracts of insurance are
posted in such a manner that the insured can easily identify the
insured's applicable policy, certificate, or contract and print or
download the insured's documents without charge, and without the
use of any special program or application that is not readily
available to the public without charge;
(c) The insurer provides written notice at the time of
issuance of the initial policy, certificate, contract, or any
renewal forms of a method by which the insured may obtain upon
request a paper or electronic copy of their policy, certificate,
or contract without charge;
(d) The insurer clearly identifies the exact policies,
certificates, or contracts of insurance purchased by the insured
on any declaration page, summary of benefits, or other evidence of
coverage issued to the insured;
(e) The insurer gives notice, in the manner it customarily
communicates with an insured, of any changes to the policies or
contracts of insurance, and of the insured's right to obtain upon
request a paper or electronic copy of such forms or endorsements
without charge.
(2) Insurers shall maintain all records of cancellation,
nonrenewal, termination, and changes in the terms or conditions in
the policy, certificate, or contract of insurance for a period of
eight years.
(G) This section only applies to the method of delivery of
notices or information to insureds and does not supersede any time
periods or content of notices otherwise required by the laws of
this state relating to insurance.
(H) The superintendent of insurance may adopt rules in
accordance with Chapter 119. of the Revised Code as the
superintendent considers necessary to carry out the purposes of
this section.
Sec. 3901.62. (A) Except as provided in sections 3901.63 and
3901.64 of the Revised Code, a domestic ceding insurer that is
authorized to do any insurance business in this state may take
credit for any reinsurance ceded as either an asset or a reduction
of liability only if one of the following applies:
(1) The reinsurance is ceded to an assuming insurer that is
authorized to do any insurance or reinsurance business in this
state.
(2) The reinsurance is ceded to an assuming insurer that is
accredited by the superintendent of insurance as a reinsurer in
this state in accordance with division (B) of this section.
(3) The reinsurance is ceded to an assuming insurer that is
not authorized to do any insurance or reinsurance business in this
state, provided the reinsurance is ceded to a reinsurance pool or
other risk-sharing entity in which participation is required by
law, rule, or regulation of the jurisdiction in which the pool or
entity is located.
(3)(4) The reinsurance is ceded to an assuming insurer that
maintains a trust fund in a qualified United States financial
institution, as defined in division (B)(2) of section 3901.63 of
the Revised Code, for the payment of the valid claims of its
United States policyholders and ceding insurers, and their assigns
and successors in interest in accordance with division (C) of this
section.
(5) The reinsurance is ceded to an assuming insurer that has
been certified by the superintendent as a reinsurer in this state
and that secures its obligations in accordance with division (D)
of this section.
(B)(1) In order to be eligible for accreditation under
division (A)(2) of this section, the assuming insurer shall do all
of the following:
(a) File with the superintendent evidence of its submission
to this state's jurisdiction;
(b) Submit to this state's authority to examine its books and
records;
(c) Maintain a license to transact insurance or reinsurance
in at least one state or, in the case of a United States branch of
a foreign or alien assuming insurer, be entered through and
licensed to transact insurance or reinsurance in at least one
state;
(d) File annually with the superintendent a copy of its
annual statement filed with the insurance department of its state
of domicile, and a copy of its most recent audited financial
statement;
(e) Demonstrate to the satisfaction of the superintendent
that it has adequate financial capacity to meet its reinsurance
obligations and is otherwise qualified to assume reinsurance from
domestic insurers.
(2) An assuming insurer is considered to meet the requirement
of division (B)(1)(e) of this section as of the time of its
application to the superintendent for accreditation if it
maintains a surplus with regard to policyholders in an amount not
less than twenty million dollars, and the superintendent has not
denied its accreditation within ninety days after submission of
its application.
(C)(1) A trust maintained by an assuming insurer under
division (A)(3)(4) of this section shall meet the following
requirements:
(1)(a) In the case of a single assuming insurer, the trust
shall consist of a trusteed account representing the assuming
insurer's liabilities attributable to business underwritten in the
United States. A trusteed surplus of not less than twenty million
dollars shall be maintained by the assuming insurer, except that
at any time after the assuming insurer has permanently
discontinued underwriting new business secured by the trust for at
least three full years, the superintendent with principal
regulatory oversight of the trust may authorize a reduction in the
required trusteed surplus, but only after a finding, based on an
assessment of the risk, that the new required surplus level is
adequate for the protection of ceding insurers within the United
States, policyholders, and claimants in light of reasonably
foreseeable adverse loss development.
The risk assessment may involve an actuarial review,
including an independent analysis of reserves and cash flows, and
shall consider all material risk factors, including when
applicable the lines of business involved, the stability of the
incurred loss estimates, and the effect of the surplus
requirements on the assuming insurer's liquidity or solvency.
The minimum required trusteed surplus shall not be reduced to
an amount less than thirty per cent of the assuming insurer's
liabilities attributable to reinsurance ceded by ceding insurers
within the United States covered by the trust.
(2)(b) In the case of a group of assuming insurers, including
incorporated and individual unincorporated underwriters, the trust
shall consist of a trusteed account representing the group's
liabilities attributable to business written in the United States.
A trusteed surplus shall be maintained by the group, of which
surplus one hundred million dollars shall be held jointly for the
benefit of the United States ceding insurers of any member of the
group. The following requirements apply to the group of assuming
insurers:
(a)(i) The incorporated members of the group shall not engage
in any business other than underwriting as a member of the group,
and shall be subject to the same level of solvency regulation and
control by the group's domiciliary regulator as are the
unincorporated members.
(b)(ii) The group shall make available to the superintendent
of insurance an annual certification of the solvency of each
underwriter in the group. The certification shall be provided by
the group's domiciliary regulator and its independent public
accountants.
(3)(c) In the case of a group of incorporated insurers under
common administration with aggregate policyholders' surplus of ten
billion dollars that has continuously transacted an insurance
business outside the United States for at least three years
immediately prior to assuming reinsurance, the trust shall be in
an amount equal to the group's several liabilities attributable to
business ceded by United States ceding insurers to any member of
the group pursuant to reinsurance contracts issued in the name of
the group. A joint trusteed surplus shall be maintained by the
group, of which surplus one hundred million dollars shall be held
jointly for the benefit of United States ceding insurers of any
member of the group as additional security for any such
liabilities. The following requirements apply to the group of
incorporated insurers:
(a)(i) The group shall comply with all filing requirements
contained in this section.
(b)(ii) The books and records of the group shall be subject
to examination by the superintendent in the same manner as the
books and records of insurers are subject to examination by the
superintendent in accordance with section 3901.07 of the Revised
Code. The group shall bear the expenses of these examinations in
the manner provided by that section.
(c)(iii) Each member of the group shall make available to the
superintendent an annual certification of the member's solvency by
the member's domiciliary regulator and an independent public
accountant.
(C)(2) A trust maintained by an assuming insurer under
division (A)(3)(4) of this section shall remain in effect for as
long as the assuming insurer has outstanding obligations due under
the reinsurance agreements subject to the trust. The trust shall
be in a form approved by the superintendent and shall include the
following:
(1)(a) The trust instrument shall provide that contested
claims are valid and enforceable upon the final order of any court
of competent jurisdiction in the United States.
(2)(b) The trust shall vest legal title to its assets in the
trustees of the trust for its United States policyholders and
ceding insurers, and their assigns and successors in interest.
(3)(c) The trust, and the assuming insurer maintaining the
trust, shall allow the superintendent to conduct examinations in
the same manner as the superintendent conducts examinations of
insurers under section 3901.07 of the Revised Code.
(D)(3) No later than the last day of February of each year,
the trustees of a trust maintained by an assuming insurer under
division (A)(3)(4) of this section shall provide the
superintendent with a written report setting forth the balance of
the trust and listing the trust's investments as of the preceding
thirty-first day of December. The trustees shall certify the date
of the termination of the trust, if termination of the trust is
planned, or shall certify that the trust does not expire prior to
the following thirty-first day of December.
(E)(4) To enable the superintendent to determine the
sufficiency of a trust maintained by an assuming insurer under
division (A)(3)(4) of this section, the assuming insurer shall
annually report information on the trust to the superintendent
that is substantially the same as that information licensed
insurers are required to report under sections 3907.19, 3909.06,
and 3929.30 of the Revised Code on forms adopted under section
3901.77 of the Revised Code.
(D)(1) In order to be eligible for certification under
division (A)(5) of this section, the assuming insurer shall do all
of the following:
(a) Be domiciled and licensed to transact insurance or
reinsurance in a qualified jurisdiction as determined by the
superintendent pursuant to division (D)(3) of this section;
(b) Maintain minimum capital and surplus, or its equivalent,
in an amount to be determined by the superintendent in rule or
regulation;
(c) Maintain financial strength ratings from two or more
rating agencies that meet criteria the superintendent sets forth
in rule or regulation;
(d) Agree to submit to the jurisdiction of this state,
appoint the superintendent as its agent for service of process in
this state, and agree to provide security for one hundred per cent
of the assuming insurer's liabilities attributable to reinsurance
ceded by ceding insurers in the United States if it resists
enforcement of a final judgment from the United States;
(e) Agree to meet applicable information filing requirements
as determined by the superintendent with respect to an initial
application for certification and on an ongoing basis;
(f) Satisfy any other requirements for certification
considered relevant by the superintendent.
(2) An association, including incorporated and individual
unincorporated underwriters, may be a certified reinsurer. In
order to be eligible for certification, an association, in
addition to satisfying the requirements of division (D)(1) of this
section, shall also meet the following requirements:
(a) The association shall satisfy its minimum capital and
surplus requirements through the capital and surplus equivalents,
or the net liabilities, of the association and its members which
shall include a joint central fund that may be applied to any
unsatisfied obligation of the association or any of its members,
in an amount determined by the superintendent in order to provide
adequate protection.
(b) The incorporated members of the association shall not be
engaged in any business other than underwriting as a member of the
association, and shall be subject to the same level of regulation
and solvency control by the association's domiciliary regulator as
the unincorporated members.
(c) The association shall provide the superintendent an
annual certification by the association's domiciliary regulator of
the solvency of each underwriter member within ninety days after
its financial statements are due to be filed with the
association's domiciliary regulator. If a certification is
unavailable, the association shall provide the superintendent with
financial statements prepared by independent public accountants of
each underwriter member of the association.
(3) The superintendent shall create and publish a list of
qualified jurisdictions under which an assuming insurer licensed
and domiciled in such jurisdiction is eligible to be considered by
the superintendent for certification as a certified reinsurer.
(a) The superintendent shall consider the list of qualified
jurisdictions published through the national association of
insurance commissioner's committee process in determining
qualified jurisdictions. If the superintendent approves a
jurisdiction as qualified that does not appear on the list, the
superintendent shall provide justification in accordance with
criteria to be developed by the superintendent under rule or
regulation.
(b) Jurisdictions within the United States that meet the
requirement for accreditation under the national association of
insurance commissioner's financial standards and accreditation
program shall be recognized as qualified.
(c) To determine if a domiciliary jurisdiction not located
within the United States is eligible to be recognized as a
qualified jurisdiction, the superintendent shall evaluate the
appropriateness and effectiveness of the reinsurance supervisory
system of the jurisdiction, both initially and on an ongoing
basis, and consider the rights, benefits, and the extent of
reciprocal recognition afforded by the jurisdiction to reinsurers
licensed and domiciled in the United States.
(d) A qualified jurisdiction shall agree to share information
and cooperate with the superintendent with respect to all
certified reinsurers domiciled within that jurisdiction.
(e) A jurisdiction shall not be recognized as a qualified
jurisdiction if the superintendent has determined that the
jurisdiction does not adequately and promptly enforce final
judgments and arbitration awards from the United States.
(f) If a certified reinsurer's domiciliary jurisdiction
ceases to be a qualified jurisdiction, the superintendent may
revoke the reinsurer's certification or suspend the reinsurer's
certification indefinitely.
(g) The superintendent may consider additional factors as the
superintendent considers appropriate.
(4) The superintendent shall assign a rating to each
certified reinsurer giving due consideration to the financial
strength ratings assigned by rating agencies pursuant to division
(D)(1)(c) of this section. The superintendent shall publish a list
of all certified reinsurers and their ratings.
(5) A certified reinsurer shall secure obligations assumed
from a ceding insurer within the United States at a level
consistent with its rating as specified by the superintendent in
rule or regulation.
(a) Except as otherwise provided in division (D)(5) of this
section, a certified reinsurer shall maintain security in a form
acceptable to the superintendent and consistent with section
3901.63 of the Revised Code, or in a multibeneficiary trust on
behalf of the ceding insurer in accordance with division (A)(4) of
this section, in order for a domestic ceding insurer to qualify
for full financial statement credit for reinsurance ceded to a
certified reinsurer.
(b) If a certified reinsurer chooses to secure its
obligations incurred as a certified reinsurer in the form of a
multibeneficiary trust for the benefit of the ceding insurer, the
certified reinsurer shall maintain separate trust accounts for its
obligations incurred under reinsurance agreements issued or
renewed as a certified reinsurer with reduced security as
permitted by this division or comparable laws of other
jurisdictions within the United States, and for its obligations
subject to division (A)(4) of this section.
(c) Upon termination of any such trust account described in
division (A)(4) of this section, a certified reinsurer shall be
bound by the language of the trust and agreement with the
superintendent that has principal regulatory oversight of each
trust account to fund any deficiency of any other trust account
out of the remaining surplus of such trust as a condition to
certification under division (D)(1) of this section.
(d) The minimum trusteed surplus requirements provided in
division (C) of this section are not applicable with respect to a
multibeneficiary trust maintained by a certified reinsurer for the
purpose of securing obligations incurred under division (A)(5) of
this section, except that such trust shall maintain a minimum
trusteed surplus of ten million dollars.
(e) With respect to obligations incurred by a certified
reinsurer under division (A)(5) of this section, if the security
is insufficient, the superintendent shall reduce the allowable
credit by an amount proportionate to the deficiency, and the
superintendent may impose further reductions in allowable credit
upon finding that there is a material risk that the certified
reinsurer's obligations will not be paid in full when due.
(f) Except as otherwise provided in division (D)(5) of this
section, a reinsurer whose certification has been terminated for
any reason shall be treated under this section as a certified
reinsurer required to secure one hundred per cent of its
obligations. The superintendent may continue to assign a higher
rating to the reinsurer if the reinsurer is in inactive status or
the reinsurer's certification has been suspended. As used in
division (D)(5)(f) of this section, "terminated" means revocation,
suspension, voluntary surrender, or inactive status.
(6) If an applicant for certification has been certified as a
reinsurer in a national association of insurance commissioners
accredited jurisdiction, the superintendent may defer to that
jurisdiction's certification and rating assignment, and the
assuming insurer shall be considered to be a certified reinsurer
in this state.
(7) A certified reinsurer that ceases to assume new business
in this state may request to maintain its certification in
inactive status in order to continue to qualify for a reduction in
security for its in-force business. An inactive certified
reinsurer shall continue to comply with all applicable
requirements of division (A)(5) of this section, and the
superintendent shall assign a rating that takes into account, if
relevant, the reasons why the reinsurer is not assuming new
business.
(F)(E) An assuming insurer shall file a written instrument
appointing an attorney as its agent in this state upon whom all
service of process may be served. Service of process upon this
agent shall bring the assuming insurer within the jurisdiction of
the courts of this state as if served upon an agent pursuant to
section 3927.03 of the Revised Code.
Sec. 3901.621. (A) If a reinsurer accredited pursuant to
division (B)(1) of section 3901.62 of the Revised Code or
certified pursuant to division (D)(1) of that section ceases to
meet the requirements for accreditation or certification, the
superintendent may suspend or revoke the reinsurer's accreditation
or certification after a hearing held pursuant to Chapter 119. of
the Revised Code. The suspension or revocation shall not take
effect until after the superintendent's order or hearing, unless
one of the following applies:
(1) The reinsurer waives its right to a hearing.
(2) The superintendent's order is based on regulatory action
by the reinsurer's domiciliary jurisdiction or the voluntary
surrender or termination of the reinsurer's eligibility to
transact insurance or reinsurance business in its domiciliary
jurisdiction or in the primary certifying state of the reinsurer
under division (D)(6) of section 3901.62 of the Revised Code.
(3) The superintendent finds that an emergency requires
immediate action, and a court of competent jurisdiction has not
stayed the superintendent's action.
(B) While a reinsurer's accreditation or certification is
suspended, no reinsurance contract issued or renewed after the
effective date of the suspension qualifies for credit except to
the extent that the reinsurer's obligations under the contract are
secured in accordance with section 3901.63 of the Revised Code.
(C) If the superintendent revokes a reinsurer's accreditation
or certification, no credit for reinsurance may be granted under
section 3901.62 or 3901.63 of the Revised Code after the effective
date of the revocation except to the extent that the reinsurer's
obligations under the contract are secured in accordance with
division (D)(5) of section 3901.62 or section 3901.63 of the
Revised Code.
Sec. 3901.63. (A) If section 3901.62 of the Revised Code
does not apply to the reinsurance ceded to an assuming insurer by
a domestic ceding insurer that is authorized to do any insurance
business in this state, the ceding insurer may take credit for the
reinsurance ceded as a reduction of liability in an amount not
exceeding the liabilities carried by the ceding insurer, if the
ceding insurer complies with section 3901.64 of the Revised Code,
and if funds are held directly by the ceding insurer or in trust
on behalf of the ceding insurer, in accordance with this section,
as security for the payment of obligations under the reinsurance
contract with the assuming insurer.
(B)(1) If the funds are held directly by the ceding insurer
under division (A) of this section, the funds shall be held in the
United States and shall be under the exclusive control of, and
subject to withdrawal solely by, the ceding insurer. If the funds
are held in trust on behalf of the ceding insurer under division
(A) of this section, the funds shall be held in the United States
in a qualified United States financial institution.
(2) For the purposes of division (B)(1) of this section, a
"United States financial institution" is qualified if both of the
following apply:
(a) The institution is organized under or, in the case of a
United States branch or agency office of a foreign banking
organization, is chartered under the laws of the United States or
any state thereof and has been granted authority to operate with
fiduciary powers.
(b) The institution is regulated, supervised, and examined by
federal or state officials that have regulatory authority over
banks and trust companies.
(C) The funds held directly by the ceding insurer or in trust
on behalf of the ceding insurer shall be in any of the following
forms:
(2) Securities that are listed by the securities valuation
office of the national association of insurance commissioners,
including those considered exempt from filing as defined by the
purposes and procedures manual of the securities valuation office,
and that qualify as admitted assets;
(3) Irrevocable, unconditional, and automatically renewable
letters of credit that are issued or confirmed by a qualified
United States financial institution. For purposes of division
(C)(3) of this section, a United States financial institution is
qualified if all of the following apply:
(a) It is organized under or, in the case of a United States
branch or agency office of a foreign banking organization, is
chartered under the laws of the United States or any state
thereof.
(b) It is regulated, supervised, and examined by federal or
state officials that have regulatory authority over banks and
trust companies.
(c) The superintendent of insurance or the securities
valuation office of the national association of insurance
commissioners has determined that it meets such standards of
financial condition and standing as are considered necessary and
appropriate for purposes of ensuring that its letters of credit
will be of a quality that is acceptable to the superintendent.
(4) Any other form of security the superintendent determines
to be acceptable.
(D) Notwithstanding any subsequent failure of an issuing or
confirming financial institution to meet the standards of issuer
acceptability set forth in division (C)(3) of this section, a
letter of credit issued or confirmed by a financial institution
that meets those standards on the date of the issuance or
confirmation shall continue to be acceptable as security until its
expiration, extension, renewal, modification, or amendment,
whichever occurs first.
Sec. 3901.631. (A) A domestic ceding insurer shall take
steps to manage its reinsurance recoverables proportionate to its
own book of business.
(1) A domestic ceding insurer shall notify the superintendent
within thirty days after reinsurance recoverables from any single
assuming insurer, or group of affiliated assuming insurers, exceed
fifty per cent of the domestic ceding insurer's last reported
surplus to policyholders, or after it has determined that
reinsurance recoverables are likely to exceed this limit.
(2) The notification required in division (A)(1) of this
section shall demonstrate that the exposure is safely managed by
the domestic ceding insurer.
(B) A domestic ceding insurer shall take steps to diversify
its reinsurance program.
(1) A domestic ceding insurer shall notify the superintendent
within thirty days after ceding to any single assuming insurer, or
group of affiliated assuming insurers, more than twenty per cent
of the ceding insurer's gross written premium in the prior
calendar year, or after it has determined that the reinsurance
ceded to any single assuming insurer, or group of affiliated
assuming insurers, is likely to exceed this limit.
(2) The notification required in division (B)(1) of this
section shall demonstrate that the exposure is safely managed by
the domestic ceding insurer.
Sec. 3901.64. (A) A domestic ceding insurer may take credit
for any reinsurance ceded as provided in sections 3901.61 to
3901.63 of the Revised Code only if the reinsurance agreement
contained in the reinsurance contract, and any agreement that
provides security for the payment of the obligations under the
reinsurance agreement, including any trust agreement, provide, in
substance, for the following:
(1) In the event of the insolvency of the ceding insurer, the
reinsurance, whether paid directly or from trust assets securing
the reinsurance agreement, shall be payable by the assuming
insurer on the basis of the liability of the ceding insurer under
the policy or contract reinsured, without any diminution because
the ceding insurer is insolvent or because the liquidator or
statutory receiver has failed to pay all or any portion of any
claims;
(2) The reinsurance payments, whether paid directly or from
trust assets securing the reinsurance agreement, shall be made by
the assuming insurer directly to the ceding insurer, or in the
event of its insolvency or liquidation, to its liquidator or
statutory receiver except where the reinsurance contract or other
written agreement specifically provides for direct payment of the
reinsurance to the insured or beneficiary of the insurance policy
in the event of the insolvency of the ceding insurer.
(B)(1) The reinsurance agreement may provide that the
domiciliary liquidator or statutory receiver shall give written
notice to the assuming insurer that a claim is pending against the
ceding insurer on the policy or contract reinsured. The notice
shall be given within a reasonable amount of time after the claim
is filed with the liquidator or statutory receiver. During the
pendency of the claim, any assuming insurer may investigate the
claim and interpose, at its own expense, in the proceeding where
the claim is to be adjudicated any defenses which it deems to be
available to the ceding insurer or its liquidator.
(2) The expense may be filed as a claim against the insolvent
ceding insurer to the extent of a proportionate share of the
benefit that may accrue to the ceding insurer solely as a result
of the defense undertaken by the assuming insurer. Where two or
more assuming insurers are involved in the same claim and a
majority in interest elect to interpose a defense to the claim,
the expense shall be apportioned in accordance with the terms of
the reinsurance agreement as though the expense had been incurred
by the ceding insurer.
(C) If the assuming insurer is not licensed, or accredited or
certified to transact insurance or reinsurance in this state, the
credit permitted by division (A)(4) of section 3901.62 of the
Revised Code shall not be allowed unless the assuming insurer
agrees to do both of the following in the reinsurance agreements:
(1)(a) If the assuming insurer fails to perform its
obligations under the terms of the reinsurance agreement, at the
request of the ceding insurer, the assuming insurer shall submit
to the jurisdiction of any court of competent jurisdiction in any
state within the United States, comply with all requirements
necessary to give the court jurisdiction, and abide by the final
decision of the court or of any appellate court in the event of an
appeal.
(b) The assuming insurer shall designate the superintendent
or a designated attorney as its true and lawful attorney upon whom
may be served any lawful process in any action, suit, or
proceeding instituted by or on behalf of the ceding insurer.
(2) This division is not intended to conflict with or
override the obligation of the parties to a reinsurance agreement
to arbitrate their disputes, if this obligation is created in the
agreement.
(D) If the assuming insurer does not meet the requirements of
division (A)(1), (2), or (3) of section 3901.62 of the Revised
Code, the credit permitted by divisions (A)(4) and (5) of that
section shall not be allowed unless the assuming insurer agrees in
the trust agreements to the following conditions:
(1) Notwithstanding any other provisions in the trust
instrument, if the trust fund is inadequate because it contains an
amount less than the amount required by division (D)(3) of this
section, or if the grantor of the trust has been declared
insolvent or placed into receivership, rehabilitation,
liquidation, or similar proceedings under the laws of its state or
country of domicile, the trustee shall comply with an order of the
superintendent with regulatory oversight over the trust or with an
order of a court of competent jurisdiction directing the trustee
to transfer to the superintendent with regulatory oversight all of
the assets of the trust fund.
(2) The assets shall be distributed by, and claims shall be
filed with and valued by, the superintendent with regulatory
oversight in accordance with the laws of the state, in which the
trust is domiciled, that are applicable to the liquidation of
domestic insurance companies.
(3) If the superintendent with regulatory oversight
determines that the assets of the trust fund, or any part thereof,
are not necessary to satisfy the claims of the ceding insurers
within the United States or the grantor of the trust, the
superintendent with regulatory oversight shall return the assets
or part thereof to the trustee for distribution in accordance with
the trust agreement.
(4) The grantor shall waive any right otherwise available to
it under the laws of the United States that are inconsistent with
this division.
Sec. 3906.01. As used in this chapter:
(A) "Annual financial statement" means an insurer's
statutorily required financial statement under the insurer's
respective authorizing chapter of the Revised Code.
(B) "Authorized control level risked-based capital" means
authorized control level RBC as defined in sections 1753.31 and
3903.81 of the Revised Code.
(C) "Cash equivalent" means a short-term, highly liquid
investment that is both readily convertible to known amounts of
cash and so near its maturity that it presents an insignificant
risk of change in value because of changes in interest rates, and
that has an original maturity date, to the entity holding the
investment, of three months or less.
(D) "Derivative instrument" means an item appropriately
reported in schedule DB, covering derivative instruments,
insurance futures and insurance futures options, of an insurer's
annual financial statement, or their successor schedules, pursuant
to applicable annual statement instructions or statutory
accounting guidelines.
(E) "Derivative transaction" means a transaction involving
the use of one or more derivative instruments.
(F) "Hedging transaction" means a derivative transaction that
is entered into and maintained to reduce either of the following:
(1) The risk of economic loss due to a change in the value,
yield, price, cash flow, or quantity of assets or liabilities that
the insurer has acquired or incurred or anticipates acquiring or
incurring;
(2) The currency exchange rate risk or the degree of exposure
as to assets or liabilities that an insurer has acquired or
incurred or anticipates acquiring or incurring.
(G) "Lower-grade investment" means a rated credit instrument
or debt-like preferred stock rated 4, 5, or 6 by the securities
valuation office.
(H) "Medium-grade investment" means a rated credit instrument
or debt-like preferred stock rated 3 by the securities valuation
office.
(I) "Minimum asset requirement" is the requirement that an
insurer maintain assets in an amount equal to the sum of the
insurer's liabilities and its minimum financial security
benchmark, as required by division (A) of section 3906.11 of the
Revised Code.
(J) "Minimum financial security benchmark" is the amount an
insurer is required to have under section 3906.03 of the Revised
Code.
(K) "Replication" means a derivative transaction used to
modify the cash flow characteristics of one or more investments
held by an insurer in a manner so that the aggregate cash flows of
the derivative instruments and investments reproduce the cash
flows of another investment having a higher risk-based capital
charge than the risk-based capital charge of the original
instruments or investments.
(L) "Securities valuation office" means the securities
valuation office of the national association of insurance
commissioners or any successor office.
(M) "Securities valuation office listed mutual fund" means a
money market mutual fund or short-term bond fund that is
registered with the United States securities and exchange
commission under the "Investment Company Act of 1940," 54 Stat.
789, 15 U.S.C. 80a-1 to 80a-64, and that has been determined by
the securities valuation office to be eligible for special reserve
and reporting treatment, rather than as common stock.
(N) "Securities valuation office exchange traded fund" means
a bond or preferred stock exchange traded fund that is registered
with the United States securities and exchange commission under
the "Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C.
80a-1 to 80a-64, and that has been rated 1 or 2 by the securities
valuation office and determined by the office to be eligible for
special reserve and reporting treatment, rather than as common
stock.
(O) "Superintendent" means the superintendent of insurance.
Sec. 3906.02. (A) This chapter, and any rules adopted under
it, apply to entities organized under Chapters 1731., 1751.,
3907., 3919., 3921., 3925., 3931., 3939., 3941., and 3953. of the
Revised Code.
(B) An insurer may apply to the superintendent for permission
to make investments under this chapter, in lieu of making
investments under any other section of the Revised Code.
(C) In determining whether to permit an entity to invest
pursuant to this chapter, the superintendent shall consider all of
the following:
(1) The character, reputation, and financial standing of the
officers of the entity;
(2) The character, reputation, and financial condition of the
entity;
(3) The adequacy of the expertise, experience, character, and
reputation of the person or persons who will manage the
investments on behalf of the entity;
(4) The quality of the enterprise risk management program
implemented by the entity to identify, assess, monitor, manage,
and report on its key investment and related risks;
(5) Any other factor the superintendent considers relevant.
(D) Separate accounts established in accordance with section
3907.15 of the Revised Code shall continue to be governed by that
section.
Sec. 3906.03. (A)(1) Unless otherwise established in
accordance with divisions (A)(2) and (3) of this section, the
amount of the minimum financial security benchmark for an insurer
shall be the greatest of the following:
(a) Three hundred per cent of the authorized control level
risk-based capital applicable to the insurer, as defined and set
forth by sections 1753.31 to 1753.43 or 3903.81 to 3903.93 of the
Revised Code, less the asset valuation reserve as defined in the
risk-based capital instructions defined in division (M) of section
3903.81 of the Revised Code;
(b) The minimum capital or minimum surplus required by
statute or rule for maintenance of an insurer's certificate of
authority in this state;
(c) All invested assets of an entity organized under Chapter
3919. or 3939. of the Revised Code;
(d) For title insurers, the quotient of annualized net earned
premiums divided by eight;
(e) For multiple employer welfare arrangements, the greater
of three hundred per cent of the risk-based capital amount
reported in the annual statement or the quotient of annualized net
earned premiums divided by twelve.
(2) The superintendent may, in accordance with division (B)
of this section, establish by order a minimum financial security
benchmark to apply to a specific insurer that exceeds the amount
arrived at under division (A)(1) of this section.
(3) The superintendent may by rule change the minimum
financial security benchmark that is a multiple of authorized
control level risk-based capital, or equivalent risk-based capital
calculation, to apply to any class of insurers provided the amount
established by the rule is not less than the amount arrived at
under division (A)(1) of this section.
(B) The superintendent shall determine the amount of minimum
capital or minimum surplus as specified in division (A)(1)(b) of
this section to determine an insurer's minimum financial security
benchmark. The amount shall be sufficient to provide reasonable
security against contingencies affecting the insurer's financial
position that are not fully covered by reserves or by reinsurance.
(1) In determining this amount, the superintendent shall
consider all of the following risks:
(a) Increases in the frequency or severity of losses beyond
the levels contemplated by the premium rates charged;
(b) Increases in expenses beyond those contemplated by the
premium rates charged;
(c) Decreases in the value of assets, or the return on
invested assets below those planned on;
(d) Changes in economic conditions that would make liquidity
more important than contemplated and would force untimely sale of
assets or prevent timely investments;
(e) Currency devaluation to which the insurer may be subject;
(f) Any other contingencies the superintendent identifies
that may affect the insurer's operations.
(2) In determining the minimum financial security benchmark,
the superintendent shall also take into account the following
factors:
(a) The most reliable information available as to the
magnitude of the various risks under division (B)(1) of this
section;
(b) The extent to which the risks in division (B)(1) of this
section are independent of each other or are related, and whether
any dependency is direct or inverse;
(c) The insurer's recent history of profits or losses;
(d) The extent to which the insurer has provided protection
against adverse contingencies in ways other than the establishment
of surplus, including redundancy of premiums, adjustability of
contracts under their terms, investment valuation reserves,
whether voluntary or mandatory, appropriate reinsurance, the use
of conservative actuarial assumptions to provide a margin of
security, reserve adjustments in recognition of previous rate
inadequacies, contingency or catastrophe reserves, diversification
of assets, and underwriting risks;
(e) Independent judgments on the soundness of the insurer's
operations, as evidenced by the ratings of reliable professional
financial reporting services;
(f) Any other factor the superintendent considers relevant.
Sec. 3906.04. (A) Subject to this chapter, an insurer making
investments under this chapter may loan or invest its funds, and
may buy, sell, hold title to, possess, occupy, pledge, convey,
manage, protect, insure, and deal with its investments, property,
and other assets to the same extent as any other person or
corporation under the laws of this state and of the United States.
(B) With respect to all of the insurer's investments, the
board of directors of an insurer making investments under this
chapter shall exercise the judgment and care, under the
circumstances then prevailing, that persons of reasonable
prudence, discretion, and intelligence would exercise in the
management of a like enterprise, not in regard to speculating but
in regard to the permanent disposition of their funds, considering
the probable income as well as the probable safety of their
capital. Investments shall be of sufficient value, liquidity, and
diversity to assure the insurer's ability to meet its outstanding
obligations based on reasonable assumptions as to new business
production for current lines of business. As part of its exercise
of judgment and care, the board of directors shall take into
account the prudence evaluation criteria of division (C) of
section 3906.05 of the Revised Code.
(C) An insurer making investments under this chapter shall
establish and implement internal controls and procedures to assure
compliance with investment policies and procedures to assure that
all of the following are met:
(1) The insurer's investment staff and any consultants used
are reputable and capable.
(2) A periodic evaluation and monitoring process occurs for
assessing the effectiveness of investment policy and strategies.
(3) Management's performance is assessed in meeting the
stated objectives within the investment policy through periodic
presentations to the board of directors.
(4) Appropriate analyses are undertaken on the degree to
which asset cash flows are adequate to meet liability cash flows
under different economic environments. These analyses shall be
conducted at least annually and make specific reference to the
economic conditions considered.
Sec. 3906.05. (A) An insurer making investments under this
chapter shall consider the factors listed in division (C) of this
section along with its business in determining whether an
investment portfolio or investment policy is prudent.
(B) The superintendent shall consider the factors listed in
division (C) of this section prior to making a determination that
an insurer's investment portfolio or investment policy is not
prudent.
(C) Insurers and the superintendent shall consider the
following factors according to divisions (A) and (B) of this
section:
(1) General economic conditions;
(2) The possible effect of inflation or deflation;
(3) The expected tax consequences of investment decisions or
strategies;
(4) The fairness and reasonableness of the terms of an
investment considering its probable risk and reward
characteristics and relationship to the investment portfolio as a
whole;
(5) The extent of the diversification of the insurer's
investments among all of the following:
(a) Individual investments;
(b) Classes of investments;
(c) Industry concentrations;
(6) The quality and liquidity of investments in affiliates;
(7) The investment exposure to all of the following risks,
quantified in a manner consistent with the insurer's acceptable
risk level as described in the insurer's written investment
policy, required under division (H) of section 3906.06 of the
Revised Code:
(e) Call, prepayment, and extension;
(8) The amount of the insurer's assets, capital and surplus,
premium writings, insurance in force, and other appropriate
characteristics;
(9) The amount and adequacy of the insurer's reported
liabilities;
(10) The relationship of the expected cash flows of the
insurer's assets and liabilities, and the risk of adverse changes
in the insurer's assets and liabilities;
(11) The adequacy of the insurer's capital and surplus to
secure the risks and liabilities of the insurer;
(12) Any other factors relevant to whether an investment is
prudent.
Sec. 3906.06. In acquiring, investing, exchanging, holding,
selling, and managing investments under this chapter, an insurer
shall establish and follow a written investment policy that shall
be reviewed and approved by the insurer's board of directors on at
least an annual basis. The content and format of an insurer's
investment policy are at the insurer's discretion, but shall
include written guidelines appropriate to the insurer's business
with regard to all of the following:
(A) The general investment policy of the insurer, containing
policies, procedures, and controls covering all aspects of the
investing function;
(B) Quantified goals and objectives regarding the composition
of classes of investments, including maximum internal limits;
(C) Periodic evaluations of the investment portfolio as to
its risk and reward characteristics;
(D) Professional standards for the individuals making
day-to-day investment decisions to assure that investments are
managed in an ethical, prudent, and capable manner;
(E) The types of investments that are allowed and that are
prohibited, based on their risk and reward characteristics and the
insurer's level of experience with the investments;
(F) The relationship of classes of investments to the
insurer's insurance products and liabilities;
(G) The manner in which the insurer intends to implement
section 3906.05 of the Revised Code;
(H) The level of risk, based on quantitative measures,
appropriate for the insurer given the level of capitalization and
expertise available to the insurer.
Sec. 3906.07. All of the following classes of investments
may be counted for the purposes specified in section 3906.11 of
the Revised Code, whether they are made directly or as a
participant in a partnership, joint venture, or limited liability
company:
(A) Cash, and cash equivalents, in the direct possession of
the insurer or on deposit with a financial institution regulated
by any federal or state agency of the United States;
(B) Bonds, debt-like preferred stock, and other evidences of
indebtedness of governmental units in the United States or Canada,
or the instrumentalities of the governmental units, or private
business entities domiciled in the United States or Canada,
including asset-backed securities, securities valuation office
listed mutual funds, and securities valuation office listed
exchange traded funds;
(C) Loans with a loan to value ratio of no greater than
eighty per cent that are secured by mortgages, trust deeds, or
other security interests in real property located in the United
States or Canada, or secured by insurance against default issued
by a government insurance corporation of the United States or
Canada or by an insurer authorized to do business in this state;
(D) Unaffiliated common stock, or equity-like preferred
stock, or equity interests in any United States or Canadian
business entity, or shares of securities valuation office listed
mutual funds registered with the securities and exchange
commission of the United States under the "Investment Company Act
of 1940," 54 Stat. 789, 15 U.S.C. 80a-1 to 80a-64, other than
mutual funds and exchange traded funds listed with the securities
valuation office;
(E) Real property necessary for the convenient transaction of
the insurer's business;
(F) Real property, together with the fixtures, furniture,
furnishings, and equipment pertaining thereto in the United States
or Canada, which produces, or after suitable improvement can
reasonably be expected to produce, substantial income;
(G) Loans, securities, or other investments of the types
described in divisions (A) to (F) of this section in countries
other than the United States and Canada;
(H) Bonds or other evidences of indebtedness of international
development organizations of which the United States is a member;
(I) Loans upon the security of the insurer's own policies in
amounts that are adequately secured by the policies and that in no
case exceed the surrender values of the policies;
(J) Subsidiary or affiliate equity investments, including
common stock, equity-like preferred stock, limited liability
partnerships, or limited liability membership interests, of
entities that are engaged exclusively in insurance, finance, or
investments, and investment management companies that are
registered with the securities and exchange commission under the
"Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C. 80a-1 to
80a-64, as amended;
(K) Investments not otherwise permitted by this section, not
specifically prohibited by statute, to which both of the following
apply:
(1) The assets do not exceed five per cent of the first five
hundred million dollars of the insurer's admitted assets plus ten
per cent of the insurer's admitted assets exceeding five hundred
million dollars.
(2) The assets qualified to meet the minimum asset
requirement at the time they were acquired.
Sec. 3906.08. (A) For the purposes of determining an
insurer's minimum asset requirement under section 3906.11 of the
Revised Code, the following limitations on classes of investments
shall apply:
(1) For investments authorized by division (B) of section
3906.07 of the Revised Code and investments authorized by division
(G) of section 3906.07 of the Revised Code that are of the types
described in division (B) of section 3906.07 of the Revised Code
the following limitations shall apply:
(a) The aggregate amount of medium- and lower-grade
investments shall be not more than twenty per cent of an insurer's
admitted assets.
(b) The aggregate amount of lower-grade investments shall be
not more than ten per cent of an insurer's admitted assets.
(c) The aggregate amount of investments rated 5 or 6 by the
securities valuation office shall be not more than five per cent
of the insurer's admitted assets.
(d) The aggregate amount of investments rated 6 by the
securities valuation office shall be not more than one per cent of
an insurer's admitted assets.
(e) The aggregate amount of medium- and lower-grade
investments that receive as cash income less than the yield for
treasury issues with a comparative average life shall be not more
than one per cent of an insurer's admitted assets.
(2) Investments authorized by division (C) of section 3906.07
of the Revised Code shall be not more than forty-five per cent of
an insurer's admitted assets in the case of life insurers and not
more than twenty-five per cent of an insurer's admitted assets in
the case of insurers that are not life insurers.
(3) Investments authorized by division (D) of section 3906.07
of the Revised Code shall be not more than twenty per cent of an
insurer's admitted assets in the case of life insurers and not
more than twenty-five per cent of an insurer's admitted assets in
the case of insurers that are not life insurers.
(4) Investments authorized by division (E) of section 3906.07
of the Revised Code shall be not more than ten per cent of an
insurer's admitted assets.
(5) Investments authorized by division (F) of section 3906.07
of the Revised Code shall be not more than ten per cent of an
insurer's admitted assets.
(6) Investments authorized by division (G) of section 3906.07
of the Revised Code shall be not more than twenty per cent of an
insurer's admitted assets.
(7) Investments authorized by division (H) of section 3906.07
of the Revised Code shall be not more than two per cent of an
insurer's admitted assets.
(8) Investments authorized by division (J) of section 3906.07
of the Revised Code shall be not more than ten per cent of an
insurer's admitted assets in the case of life insurers and not
more than three per cent of an insurer's admitted assets in the
case of insurers that are not life insurers.
(B)(1) For purposes of determining compliance with section
3906.11 of the Revised Code, securities issued by a single entity
and its affiliates, other than the government of the United
States, or agencies whose securities are backed by the full faith
and credit of the United States, and subsidiaries authorized under
division (J) of section 3906.07 of the Revised Code, shall be not
more than five per cent of an insurer's admitted assets in the
case of life insurers and shall be not more than five per cent of
an insurer's admitted assets in the case of insurers that are
non-life insurers.
(2) Notwithstanding division (B)(1) of this section,
investments in the voting securities of a depository institution,
or any company that controls a depository institution, shall not
exceed five per cent of an insurer's admitted assets.
(C) For purposes of determining compliance with this section,
the admitted portion of assets of subsidiaries of an insurer
invested in under division (J) of section 3906.07 of the Revised
Code shall be deemed to be owned directly by the insurer and any
other investors in proportion to the market value of their
interest in the subsidiaries. If interest in the subsidiary has no
market value, then the asset allocation proportion shall be
determined by the reasonable value of interest in the subsidiary
as determined under the national association of insurance
commissioners' accounting practices and procedures manual.
(D) If the superintendent considers it necessary to get a
proper evaluation of the investment portfolio of an insurer, the
superintendent may require that investments in mutual funds,
exchange traded funds, pooled investment vehicles, or other
investment companies be treated for purposes of this chapter as if
the investor owned directly its proportional share of the assets
owned by the mutual fund, exchange traded fund, pooled investment
vehicle, or investment company.
(E) Unless otherwise specified in this chapter, an insurer's
investment limitations shall be computed using the insurer's
general account admitted assets, capital, or surplus as reported
in the insurer's most recent annual financial statement required
to be filed with the superintendent.
Sec. 3906.09. An insurer investing under this chapter that
is doing business that requires the insurer to make payment in
different currencies shall have investments in securities in each
of these currencies in an amount that, independent of all other
investments, meets the requirements of this chapter, as applied
separately to the insurer's obligations in each currency. The
superintendent may, by order, exempt an insurer, or, by rule, a
class of insurers, from this requirement if the obligations in
other currencies are small enough that no significant problem for
financial solidity would be created by substantial fluctuations in
relative currency values.
Sec. 3906.10. (A) An insurer investing under this chapter
shall not invest in investments that are prohibited for an insurer
by statute or rules of this state.
(B) An insurer investing under this chapter shall not invest
in a partnership as a general partner.
(C) The superintendent shall set a reasonable amount of time,
not to exceed five years, for disposal of a prohibited investment
in hardship cases if the insurer demonstrates that the investment
was legal when made or the result of a mistake made in good faith,
or if the superintendent determines that the sale of the asset
would be contrary to the interests of insureds, creditors, or the
general public.
(D) Violation of division (A) of this section may be grounds
for regulatory action pursuant to divisions (A) and (I) of section
3903.12 of the Revised Code.
Sec. 3906.11. (A) An insurer investing under this chapter
shall maintain assets in an amount equivalent to the sum of its
liabilities and its minimum financial security benchmark at all
times.
(B) Assets invested under this chapter may be counted toward
satisfaction of the minimum asset requirement only so far as they
are invested in compliance with this chapter and any applicable
rules adopted, or orders issued, by the superintendent pursuant to
this chapter.
(C) The amount of admitted assets used to calculate the
minimum asset requirement shall be reduced by the amount of the
liability recorded on an insurer's statutory balance sheet for all
of the following:
(1) The return of acceptable collateral received in a reverse
repurchase transaction or a securities lending transaction;
(2) Cash received in a dollar roll transaction;
(3) Other amounts reported as borrowed money.
(D) Assets other than invested assets may be counted toward
satisfaction of the minimum asset requirement at admitted annual
financial statement value. However, loans to officers or directors
or their immediate families shall not be counted toward the
satisfaction of the minimum asset requirement.
(E) An investment held as an admitted asset by an insurer on
the effective date of this section that qualified under the
applicable insurance investment law of this state shall remain
qualified as an admitted asset under this chapter.
(F) Notwithstanding any provision of this chapter to the
contrary, an asset acquired in the bona fide enforcement of
creditors' rights or in bona fide workouts or settlements of
disputed claims may be counted toward the minimum asset
requirement for five years if the asset is real property and three
years if the asset is not real property.
(G) The superintendent may determine an insurer to be
financially hazardous under section 3903.09 of the Revised Code if
either of the following apply:
(1) The insurer does not own the amount of assets needed to
meet its minimum asset requirement.
(2) The insurer is unable to apply the amount of assets
needed to meet its minimum asset requirement toward compliance
with this chapter.
Sec. 3906.12. (A) Prior to an insurer entering into
derivative transactions, the board of directors of the insurer
investing under this chapter shall approve a derivative use plan.
(B) The derivative use plan shall require the insurer, when
entering into a derivative transaction that carries a risk of
losing more than the amount invested in a derivative, to establish
a liability in its financial statements for the full amount of
that potential loss.
(C) Prior to entering into derivative transactions, an
insurer shall file with the superintendent a copy of its
derivative use plan and internal controls, for informational
purposes. The insurer shall keep current the copy of its
derivative use plan and internal controls filed with the
superintendent. The insurer shall not enter into derivative
transactions until thirty calendar days after the date on which
the derivative use plan and internal controls is filed with the
superintendent. Such a thirty-calendar-day period is to begin on
the date that the superintendent receives the derivative use plan
and internal controls.
(D) The superintendent may adopt rules prescribing the form
and content of derivative use plans, as well as any internal
controls the superintendent considers necessary.
(E) An insurer that engages in hedging transactions or
replication transactions shall do both of the following:
(1) Maintain its position in any outstanding derivative
instrument used as part of a hedging transaction or replication
transaction for as long as the hedging transaction or replication
transaction remains in effect;
(2) Demonstrate to the superintendent, upon request, that any
derivative transaction entered into and involving hedging
transaction or replication transaction is an effective hedging
transaction or replication transaction. The insurer must be able
to demonstrate this at the time the derivative transaction is
entered into, and for as long as the transaction continues to be
in place.
Sec. 3906.13. (A) If the superintendent determines that an
insurer's investment practices do not meet the requirements of
this chapter, the superintendent may, after notification to the
insurer of the superintendent's findings, order the insurer to
make changes necessary to comply with this chapter.
(B) If the superintendent determines that the financial
condition, current investment practice, or current investment plan
of an insurer are or may endanger the interests of insureds,
creditors, or the general public, the superintendent may impose
reasonable additional restrictions upon the admissibility or
valuation of investments and may impose restrictions on the
investment practices of the insurer, including prohibiting an
investment or requiring the divestment of an investment.
(C) The superintendent may count toward satisfaction of the
minimum asset requirement any assets that an insurer is required
to invest under the laws of a country other than the United States
as a condition for doing business in that country if the
superintendent finds that counting them does not endanger the
interests of the insurer's insureds or creditors, or the general
public.
(D) If the superintendent is satisfied by evidence of the
solidity of an insurer and the competence of management and its
investment advisors, the superintendent, after a hearing, may, by
order, adjust the class limitations prescribed in section 3906.08
of the Revised Code for that insurer, to the extent that the
superintendent is satisfied that the interests of the insurer's
insureds and creditors and the general public are sufficiently
protected. Such adjustments, in aggregate, shall be limited to an
amount equal to ten per cent of the insurer's liabilities.
Sec. 3906.14. (A) An insurer subject to an order of the
superintendent under section 3906.03 or 3906.13 of the Revised
Code may request a hearing within thirty days of the date of the
order. The hearing shall be held in compliance with Chapter 119.
of the Revised Code.
(B) The superintendent shall hold hearings required under
this section privately unless the insurer requests a public
hearing, in which case the hearing shall be public.
Sec. 3906.15. (A) The superintendent may, in accordance with
section 119.03 of the Revised Code, adopt rules interpreting and
implementing the provisions of this chapter.
(B) The superintendent may, in accordance with section 119.03
of the Revised Code, adopt one or more of the following
restrictions on investments in rules:
(1) The superintendent may prescribe for defined classes of
insurers special procedural requirements, including special
reports and prior approval on investments, as well as disapproval
of investments subsequent to either.
(2) The superintendent may prescribe substantive restrictions
on investments of defined classes of insurers, including all of
the following:
(a) Specification of classes of assets that may not be
counted toward satisfaction of the minimum asset requirement even
though the assets may be counted for unrestricted insurers;
(b) Specification of maximum amounts of assets that an
insurer may invest in a single investment, issue, or class or
group of classes of investments that shall be expressed as
percentages of total assets, capital, surplus, legal reserves, or
other variables;
(c) Prescription of qualitative tests for investments and
conditions under which investments may be made, including
requirements of specified ratings from investment advisory
services, listing on specified stock exchanges, collateral,
marketability, currency matching, and the financial and legal
status of the issuer and its earnings capacity.
(C) If the superintendent is satisfied by evidence of the
solidity of an insurer and the competence of management and its
investment advisors, the superintendent, after a hearing, may by
order grant an exemption to that insurer from any restriction made
under division (B) of this section to the extent that the
superintendent is satisfied that the interests of the insurer's
insureds and creditors, as well as the general public, are
protected.
Sec. 3907.14. The capital, surplus, and all accumulations of
every domestic life insurance company shall be invested as
follows:
(A) A domestic company may acquire, hold, and convey real
estate:
(1) Which has been acquired or is acquired for its principal
offices, or which is used in connection therewith, provided that
it shall not invest more than five per cent of its admitted assets
on the preceding thirty-first day of December in such real estate;
(2) Which has been mortgaged to it in good faith by way of
security for loans previously contracted or for money due;
(3) Which has been conveyed to it in satisfaction of debts
previously contracted in the course of its dealings, or which it
may receive in or on account of an exchange for real estate
acquired in its operations;
(4) Which it has purchased at sales under mortgages and on
any legal process in connection with its investments or under
decrees obtained or made for such debts;
(5) Which is acquired, owned, or held for the purpose of
developing, improving, or otherwise utilizing such real estate for
the production of income, without restriction or limitation as to
time, and may acquire, lease, hold, and manage personal property
used in connection therewith. No investments in real estate to be
used primarily for recreational, agricultural, or mining purposes
shall be made under authority of division (A)(5) of this section
and except for investments authorized under divisions (A)(1), (2),
(3), and (4) of this section, no domestic life insurance company
shall invest in real estate under divisions (A)(5) and (R) of this
section a sum exceeding in the aggregate ten per cent of its
admitted assets on the preceding thirty-first day of December.
All real estate specified in divisions (A)(3) and (4) of this
section, which is not necessary for its accommodation in the
convenient transaction of its business, shall be sold by the
company and disposed of within five years after it has acquired
the title to such real estate or within five years after such real
estate has ceased to be necessary for the accommodation of its
business, unless the company procures the certificate of the
superintendent of insurance that its interests will suffer
materially by a forced sale of the real estate, in which event the
time for the sale may be extended to such time as the
superintendent directs in such certificate.
(B) A domestic company may acquire, hold, and convey tangible
personal property or interests therein for the production of
income, provided no domestic company shall invest in excess of two
per cent of its admitted assets as of the preceding thirty-first
day of December under this division.
(C) In loans and liens upon the security of its own policies,
not exceeding the reserve or present value of the policies,
computed according to any standard authorized by law or according
to such higher standard as the company has adopted and maintains
on the policy, the reserve being the amount of debts of the life
insurance company by reason of its outstanding policies in gross,
which may be so treated in the returns for taxation made by it;
(D) In bankers' acceptances and bills of exchange of the
kinds and maturities made eligible by law for rediscount with
federal reserve banks, provided that such acceptances and bills of
exchange are accepted by a bank or trust company incorporated
under the laws of the United States or of this state or any other
bank or trust company which is a member of the federal reserve
system;
(E) In equipment trust obligations or certificates, security
agreements, or other evidences of indebtedness entered into
directly or guaranteed by any company operating wholly or partly
within the United States or Canada, provided that the debt
obligation is secured by a first lien on tangible personal
property which is purchased or secured for payment thereof and the
debt obligation is repayable within twenty years from the date of
issue in annual, semiannual, or more frequent installments
beginning not later than the first year after such date;
(F) In bonds issued by or for federal land banks and any
debentures issued by or for federal intermediate credit banks
under the "Federal Farm Loan Act of 1916," 39 Stat. 360, 12
U.S.C.A. 641 as amended; any debentures issued by or for banks for
cooperatives under the "Farm Credit Act of 1933," 48 Stat. 257, 12
U.S.C.A. 131 as amended;
(G) In bonds issued under the "Home Owners' Loan Act of
1933," 48 Stat. 128, 12 U.S.C.A. 1461;
(H) In notes, bonds, debentures, or other such obligations
issued by the federal housing administrator;
(I)(1)(a) In bonds or other evidences of indebtedness, not in
default as to principal or interest, which are valid obligations
issued, assumed or guaranteed by the United States, by any state
thereof, by the Commonwealth of Puerto Rico, by any territory or
insular possession of the United States, or by the District of
Columbia, or which are valid obligations issued, assumed, or
guaranteed by any county, municipal corporation, district, or
political subdivision, or by any civil division or public
instrumentality of such governmental units, if by statutory or
other legal requirements such obligations are payable, as to both
principal and interest, from taxes levied upon all taxable
property within the jurisdiction of such governmental unit;
(b) In bonds or other obligations issued by or for account of
any such governmental unit having a population of five thousand or
more by the latest official federal or state census, which are
payable as to both principal and interest from revenues or
earnings from the whole or any part of a publicly owned utility
supplying water, gas, sewage disposal facility, or electricity, or
any or all of them, provided that by statute or other applicable
legal requirements, rates from the service or operation of such
utility must be fixed, maintained, and collected at all times so
as to produce sufficient revenues or earnings to pay both
principal and interest of such bonds or obligations as they become
due;
(c) In any bonds or obligations payable from and secured by
revenues of the United States, the Commonwealth of Puerto Rico, or
any state or instrumentality of any of them, or of the District of
Columbia or of any commission, board, or other instrumentality of
one or more of them, provided there is a specific pledge of
revenues, and provided that there is adequate provision for
payment of interest prior to completion of construction and that
rates, fees, tolls, or charges fixed are, after completion of
construction, sufficient to pay all expenses of operation and
maintenance and the principal and interest when due.
(2) In legally authorized and executed bonds, notes,
warrants, and securities which are the direct obligation of or are
guaranteed by Canada, or which are the direct obligation of or are
guaranteed as to both principal and interest by any province of
Canada, or which are the direct obligation of or are guaranteed as
to both principal and interest by any municipality of Canada
having a population of fifty thousand or more by the latest
official census, and which are not in default as to principal or
interest;
(3) In bonds or other evidence of indebtedness, not in
default as to principal or interest, which are valid obligations
issued, assumed, or guaranteed by the United States, by any state
thereof, the Commonwealth of Puerto Rico, or by the District of
Columbia, if by statutory or other legal requirements such
obligations are payable, as to both principal and interest, from
selective taxes levied by such governmental unit.
(J)(1) In mortgage bonds which are the direct obligation of a
railroad, and which are the first lien on a substantial portion of
its property, situated wholly in the United States or partly in
the United States and partly in Canada, the average net yearly
earnings of which, after deducting proper charges for maintenance
of way and equipment, for the five fiscal years preceding such
investments, have been at least one and one-half times the average
yearly interest for the same period on its mortgages, bonds, and
funded debts, and in the junior mortgage bond issues of such
railroad corporations of the same character and under the same
conditions where the average net yearly earnings for the five
fiscal years preceding such investment, after deducting proper
charges for maintenance of way and equipment, have been at least
three times the average yearly interest charges on such issues and
all prior liens; or in the mortgage bonds of any incorporated
railroad company which have been assumed or guaranteed, both as to
principal and interest, by any incorporated railroad company whose
bonds constitute a legal investment under division (J)(1) of this
section. In applying the earnings test to any issuing, assuming,
or guaranteeing company, whether or not in legal existence during
the whole of such five years next preceding the date of investment
by such insurer, which has at any time during such five-year
period acquired the assets of any other company by purchase,
merger, consolidation, or otherwise, substantially as an entirety,
or has been reorganized pursuant to the bankruptcy law, the
earnings of such other predecessor or constituent companies, or of
the company so reorganized, available for interest for such
portion of such period that has preceded such acquisition, or such
reorganization, may be included in the earnings of such issuing,
assuming, or guaranteeing company for such portion of such period
as is determined in accordance with adjusted or pro forma
consolidated earnings statements covering such portion of such
period. In such cases the requirements as to earnings shall be
based upon the mortgages, bonds, and funded debts as they exist
immediately after such acquisitions or such reorganizations.
(2) In mortgage bonds or other interest-bearing obligations
of terminal companies organized under the laws of the United
States or any state thereof, provided such bonds or obligations
have been assumed or guaranteed jointly or severally by two or
more railroad corporations whose bonds constitute legal
investments under division (J)(1) of this section;
(3) In loans to veterans guaranteed in whole or in part by
the United States pursuant to Title III of the "Servicemen's
Readjustment Act of 1944," 58 Stat. 284, 38 U.S.C.A. 693, as
amended, provided such guaranteed loans are liens upon real
estate;
(4) In mortgage bonds which are the direct obligation of and
first lien upon the property of a corporation engaged directly and
primarily in the production and sale of, or in the purchase and
sale of electricity or gas, or in the operation of telephone or
telegraph systems or waterworks, or in some combination of them,
and situated wholly in the United States, or the Commonwealth of
Puerto Rico, or partly in the United States and partly in Canada,
the average net yearly earnings of which, after deducting proper
charges for replacements, depreciation, and obsolescence, for the
five fiscal years preceding such investment, have been at least
one and one-half times the average yearly interest for the same
period on its mortgages, bonds, and funded debts;
(5) Any such corporation, or any of its predecessors,
constituent, or successor corporations, must have been in business
not less than ten years prior to the date of the purchase of such
bonds, and must not have defaulted on the interest or principal of
any of its bonds or funded debts outstanding during the five years
immediately preceding the date of purchase, provided that division
(J)(5) of this section does not preclude investments in mortgage
bonds of railroads reorganized through purchase of assets, merger,
consolidation, bankruptcy proceedings, or otherwise if such bonds
are eligible for investment under division (J)(1) of this section;
(6) No investment shall be made under division (J)(1), (2),
(4), or (5) of this section if such railroad or other utility
corporation and its business, and its issue of bonds, funded
debts, and stocks are not under the supervision and control of an
authorized state or federal official or commission, provided that
division (J)(6) of this section does not apply to the mortgage
bonds or other interest-bearing obligations of companies engaged
in the operation of telephone or telegraph systems.
(K)(1) In bonds or notes secured by mortgages or deeds of
trust which are a first lien upon unencumbered fee simple real
estate in any state, the Commonwealth of Puerto Rico, the District
of Columbia, or Canada, provided the amount loaned does not exceed
eighty per cent of the actual market value of such property.
The actual market value of any such property shall be shown
by a valuation and appraisement in writing by a qualified land
appraiser.
In the event the amount loaned under division (K)(1) of this
section exceeds eighty per cent of the actual market value of the
land, the structures on the land must be insured by an authorized
fire insurance company or covered by other comparable
indemnification, and the policies or indemnifications shall be
payable or assigned to the mortgagee or to a trustee in its behalf
and shall be held by the mortgagee or an agent of the mortgagee or
by such trustee; or in lieu of holding such policies or
indemnifications, the mortgagee may purchase a policy or policies
of mortgage protection insurance, payable to the mortgagee or a
trustee in its behalf, insuring the mortgagee against loss
resulting from the failure of the mortgagor to acquire and
maintain, from such an authorized fire insurance company or other
comparable source, insurance or indemnification.
(2) In bonds or notes secured by mortgages insured by the
federal housing administrator;
(3) In bonds or notes secured by mortgages or deeds of trust
which are a first lien on leasehold estates in wholly or partly
improved real property, unencumbered, except rentals accruing from
the property to the owner of the fee, provided that any loan
secured by a leasehold estate must provide for amortization by
repayment of principal at least once in each year in amounts
sufficient to repay the loan within a period of four-fifths of the
unexpired term of the leasehold but within a period of not more
than thirty years, and further provided that the amount loaned on
the leasehold estate does not exceed seventy-five per cent of
total market value of the leasehold estate determined by
appraisements in writing made under oath by two real estate
owners, residents of the county or local district in which the
real estate is located, or by a qualified land appraiser; if the
amount loaned exceeds seventy-five per cent of the value of that
portion of the leasehold estate represented by the value of the
land, exclusive of improvements on the land, such improvements
shall be insured against fire for the benefit of the mortgagee in
an amount not less than the difference between seventy-five per
cent of the value of such land, exclusive of buildings, and the
amount loaned; the policies for such amount shall be payable to
and held by the mortgagee or a trustee named in the lease who
shall be required by the terms of said lease to use and apply the
proceeds of such insurance for repairing, restoring, or rebuilding
such buildings;
(4) The following shall not be considered as prior liens or
encumbrances in the construction and application of this section:
leasehold estates of any duration, rights-of-way, servitudes,
joint driveways, easements, party wall agreements, current taxes
and assessments not delinquent, and restrictions as to building,
use, and occupancy.
(5) This section does not prohibit a domestic life insurance
company from renewing or extending a loan for the original or a
lesser amount nor does it prohibit a company from accepting as
part payment for real estate sold by it a mortgage on the real
estate for a greater percentage of the purchase price of the real
estate than is otherwise permitted by this section.
(L) In bonds, notes, or other evidences of indebtedness of
corporations, trusts, partnerships, or similar business entities
organized under the laws of the United States, or any state
thereof, the Commonwealth of Puerto Rico, the District of
Columbia, or Canada or any province of Canada, secured by
assignment of lease or leases or the rentals payable under such
leases, of real or personal property or both to (1) the United
States or any instrumentality thereof, or any state of the United
States, the Commonwealth of Puerto Rico, or the District of
Columbia, or any county, city, town, school, or water district,
authority, or other political subdivision in any such government,
or Canada, any province of Canada, or any municipal corporation of
Canada that has a population of fifty thousand or more by the
latest official census; or (2) one or more corporations, trusts,
partnerships, or similar business entities organized under the
laws of the United States, any state thereof, the Commonwealth of
Puerto Rico, the District of Columbia, or Canada or any province
of Canada, provided that (a) the fixed rentals assigned shall be
sufficient to repay the indebtedness within the unexpired term of
the lease, exclusive of the term which may be provided by an
enforceable option of renewal; (b) such lessee has not defaulted
in payment of interest or principal on any of its bonds, notes,
debentures, or other evidences of indebtedness during the five
years immediately preceding the date of the investment, and
provided the average net earnings available for fixed charges of
such lessee under division (L)(2) of this section for not less
than five fiscal years preceding such investment have been at
least one and one-half times average fixed charges for that period
and during either of the last two years of such period, the net
earnings available for fixed charges shall have been not less than
one and one-half times fixed charges for such year, except that
railroad companies and utility companies may qualify as lessees
herein by application of the earnings test provided for railroads
under division (J)(1) of this section and for utilities under
division (J)(4) of this section; and (c) a first lien on the
interest of the lessor in the unencumbered property so leased
shall be obtained as additional security for the indebtedness;
(M) In ground rents, land trust certificates, or fee
ownership certificates representing or evidencing beneficial
ownership of or interest in improved real estate under lease for
not less than twenty-five years from the date of such lease, in
which it must be provided that the lessee shall pay all taxes and
assessments levied on or assessed against said real estate, shall
maintain the improvements on the real estate in good repair, and
shall provide and maintain fire insurance in an amount equal to
the insurable value of the building on the real estate; provided:
(1) The value of the land and improvements shall be evidenced
by an appraisement made under oath by a disinterested appraiser
resident in and the owner of real estate in the city in which the
property is situated, and such appraisement shall not be less than
one and sixty-seven hundredths times the amount of such land trust
certificates, which amount shall be not less than twenty times the
net annual rental distributable to holders of outstanding
certificates;
(2) Such beneficial interests shall only be in properties on
which actual earning records for five years immediately preceding
are available;
(3) Such declaration of trust or other trust instrument shall
provide for a depreciation or other similar fund, in an amount
which is not less than nine per cent of the net annual
distributable rental, for the benefit of the holders of
outstanding certificates.
(N)(1) In certificates of deposit or other evidence of
indebtedness of a savings and loan association provided the
certificates or other evidence of deposit are insured pursuant to
the "Financial Institutions Reform, Recovery, and Enforcement Act
of 1989," 103 Stat. 183, 12 U.S.C.A. 1811, as amended;
(2) In interest-bearing obligations, including savings
accounts and time certificates of deposit of a national bank or
state bank provided such bank is a member of the federal deposit
insurance corporation created pursuant to the "Banking Act of
1933," 92 Stat. 624, 12 U.S.C.A. 624, as amended.
(O) In obligations issued, assumed, or guaranteed by the
international finance corporation or by the international bank for
reconstruction and development, the Asian development bank, the
inter-American development bank, the African development bank, or
other similar development bank in which the president, as
authorized by congress and on behalf of the United States, has
accepted membership;
(P)(1) In the preferred stocks of any company organized under
the laws of the United States or of any state thereof engaged
directly and primarily in the production and sale of, or in the
purchase and sale of electricity or gas, or in the operation of
telephone or telegraph systems or water works, or in some
combination of them, if the average annual net earnings of such
company, for not less than five fiscal years preceding purchase
thereof, after deduction of interest on all mortgages, bonds,
debentures, and funded debts and after deduction of the proper
charges for replacements, depreciation, and obsolescence, have
been at least two times the average yearly amount which is
required to pay the dividends or distributions on all preferred
stocks; and in which the mortgages, bonds, debentures, funded
debts, and preferred stocks shall not in the aggregate exceed
seventy per cent of the total capitalization of such company,
including mortgages, bonds, debentures, funded debts, and
preferred and common stocks;
(2) In the preferred stocks of any other company organized
under the laws of the United States, or of any state thereof if
the average annual net earnings of such company for a period of
not less than five fiscal years preceding purchase thereof, after
deduction of interest on all mortgages, bonds, debentures, and
funded debts and after deduction of the proper charges for
replacements, depreciation, and obsolescence, have been at least
four times the amount which is required to pay the dividends or
distributions on all preferred stocks, and in which the mortgages,
bonds, debentures, funded debts, and preferred stocks shall not in
the aggregate exceed sixty per cent of the total capitalization of
such company, including mortgages, bonds, debentures, funded
debts, and preferred and common stocks;
(3) A domestic life insurance company shall not purchase any
preferred stocks when the total market values of such stocks then
owned with those purchased exceed in the aggregate of book values
and purchase price the capital, surplus, and contingency funds,
excluding all reserves required by law, of such company on the
thirty-first day of December preceding the date of such purchase,
or contemplated purchase, provided that in case of appreciations
in values of stocks owned the cost rather than the market values
shall be used in arriving at such aggregate; the purpose being to
restrict the investments of such company in all preferred stocks
to capital, surplus, and contingency funds.
(4) In the bonds, notes, debentures, or other evidences of
indebtedness of a solvent corporation, trust, partnership, or
similar business entity existing under the laws of the United
States, of any state thereof, the Commonwealth of Puerto Rico, or
Canada or any province of Canada, provided that either:
(a) The bonds, notes, debentures, or other evidences of
indebtedness of such corporation, trust, partnership, or similar
business entity are rated 1 or 2 by the securities valuation
office of the national association of insurance commissioners;
(b) The corporation, trust, partnership, or similar business
entity has not defaulted in payment of interest or principal on
any of its bonds, notes, debentures, or other evidences of
indebtedness during the five years immediately preceding the date
of purchase, and the average annual net earnings of such
corporation, trust, partnership, or similar business entity that
are available for fixed charges for not less than five fiscal
years preceding such purchase have been at least one and one-half
times the average fixed charges of such corporation, trust,
partnership, or similar business entity for that period and during
either of the last two years of such period, the net earnings
available for fixed charges shall have been not less than one and
one-half times the fixed charges of such corporation, trust,
partnership, or similar business entity for such year.
(5) In common stocks or shares of any solvent incorporated
company organized under the laws of the United States, or of any
state, district, or territory thereof, or the Commonwealth of
Puerto Rico, provided that a dividend or distribution has been
paid by the corporation in the preceding twelve months upon such
stock to be purchased, or that such corporation, together with its
predecessor corporation or corporations, has been in existence for
a period of at least five years. No domestic company shall invest
in common stock or shares under divisions (P)(5) and (R) of this
section a sum exceeding in the aggregate ten per cent of its
admitted assets on the preceding thirty-first day of December.
(6) In the stocks, limited liability company membership
interests, limited partnership interests, or limited liability
partnership interests of insurance, financial, investment, and
investment management companies, which investment management
companies are registered with the securities and exchange
commission under the "Investment Company Act of 1940," 54 Stat.
789, 15 80a-1, as amended, or the stocks, limited liability
company membership interests, limited partnership interests, or
limited liability partnership interests in an entity wholly owned
by a domestic company or by a domestic company and its affiliates,
that is formed and maintained to acquire or hold specific assets
or liabilities for bankruptcy remoteness or limitation of
liability purposes, except its own stock, but no domestic life
insurance company shall invest in such stocks, limited liability
company membership interests, or limited liability partnership
interests under division (P)(6) of this section, exclusive of its
investments in stocks or limited liability company membership
interests of insurance company subsidiaries or subsidiaries
engaged exclusively in the ownership of insurance company
subsidiaries, a sum exceeding the lesser of fifty per cent of its
policyholder surplus or ten per cent of its admitted assets as of
the preceding thirty-first day of December unless the approval of
the superintendent of insurance is first obtained. Whenever the
superintendent has reason to believe that the retention,
investment, or acquisition of the stock, limited liability company
membership interest, limited partnership interest, or limited
liability partnership interest of any such company substantially
lessens competition generally in the business of insurance or
creates a monopoly therein the superintendent shall proceed under
section 3901.13 of the Revised Code to cause such domestic
insurance company to divest itself of such stock, limited
liability company membership interest, limited partnership
interest, or limited liability partnership interest.
(7)(a) In bonds, notes, debentures, or other evidences of
indebtedness issued, assumed, or guaranteed by a solvent
corporation, trust, or partnership formed or existing under the
laws of a foreign jurisdiction, provided each such foreign
investment is of the same kind and quality as United States
investments authorized under this section; or in common or
preferred stock, shares, membership interest, or partnership
interest of any solvent business entity formed or existing under
the laws of a foreign jurisdiction provided each such foreign
investment is of the same kind and quality as United States
investments authorized under this section; or in bonds or other
evidences of indebtedness issued, assumed, or guaranteed by a
foreign jurisdiction.
An insurer shall not invest in foreign investments under
division (P)(7) of this section, including investments denominated
in foreign currency, a sum exceeding in the aggregate fifteen per
cent of its admitted assets as of the preceding thirty-first day
of December. The aggregate amount of investments held by an
insurer in a single foreign jurisdiction shall not exceed three
per cent of its admitted assets as of the preceding thirty-first
day of December.
As used in division (P)(7)(a) of this section, "foreign
jurisdiction" means a jurisdiction outside the United States,
Puerto Rico, or canada Canada, whose bonds are rated 1 by the
securities valuation office of the national association of
insurance commissioners.
(b) An insurer may acquire investments denominated in foreign
currency whether or not they are foreign investments.
An insurer shall not invest in investments denominated in
foreign currency a sum exceeding in the aggregate ten per cent of
its admitted assets as of the preceding thirty-first day of
December. The aggregate amount of investments denominated in a
single foreign currency held by an insurer shall not exceed three
per cent of an insurer's admitted assets as of the preceding
thirty-first day of December.
(c) As used in division (P)(7) of this section, "foreign
currency" means a currency other than that of the United States.
(8) An insurer may invest without limitation in investments
of government money market funds. As used in division (P)(8) of
this section, "government money market fund" means a mutual fund
that at all times invests in obligations issued, guaranteed, or
insured by the federal government of the United States, or
collateralized repurchase agreements comprised of these
obligations, and that qualifies for investment without a reserve
pursuant to the purposes and procedures of the securities
valuation office of the national association of insurance
commissioners.
(Q) In loans upon the pledge of any securities in which such
companies are authorized by this section to invest, provided that
any loan upon such a pledge shall not exceed eighty per cent of
the cash market value of the collateral at the time of the making
of such loan and at the end of each twelve-month period
thereafter, and such company, through the collateral pledged to
it, shall not exceed the amounts which it may, under this section,
invest in one corporation so that, in the stocks and securities
which may be owned and those which are pledged to it, the
limitations in this section might be indirectly evaded;
(R)(1) Any domestic legal reserve life insurance company may
loan or invest its funds, to an extent not exceeding in the
aggregate five per cent of its total admitted assets, in loans or
investments not permitted under this section. Any such company may
also invest up to an additional five per cent of its total
admitted assets, in loans or investments in small businesses
having more than half of their assets or employees in this state
and in venture capital firms having an office within this state,
provided that, as a condition of a company making an investment in
a venture capital firm, the firm must agree to use its best
efforts to make investments, in an aggregate amount at least equal
to the investment to be made by the company in that venture
capital firm, in small businesses having their principal offices
within this state and having either more than one-half of their
assets within this state or more than one-half of their employees
employed within this state.
As used in division (R) of this section:
(a) "Small businesses" means any corporation, partnership,
proprietorship, or other entity that either does not have more
than four hundred employees, or would qualify as a small business
for the purpose of receiving financial assistance from small
business investment companies licensed under the "Small Business
Investment Act of 1958," 72 Stat. 689, 15 U.S.C.A. 661, as
amended, and rules of the small business administration.
(b) "Venture capital firms" means any corporation,
partnership, proprietorship, or other entity, the principal
business of which is or will be the making of investments in small
businesses.
(c) "Investments" means any equity investment, including
limited partnership interests and other equity interests in which
liability is limited to the amount of the investment, but does not
include general partnership interests or other interests involving
general liability.
(2) In the event that, subsequent to being made under
provisions of division (R) of this section, an investment is
determined to have become qualified as an investment for a
domestic life insurance company as provided for in this section,
the company may consider such investment as held under the
applicable provisions of the foregoing divisions (A) to (Q) of
this section and such investment shall no longer be considered as
having been made under the provisions of this division.
(S)(1) No domestic life insurance company shall subscribe to
or participate in any underwriting for the purchase or sale of
securities or property, nor shall it enter into any such
transaction for purchase or sale on account of said company
jointly with any other person, nor shall any such company enter
into any agreement to withhold from sale any of its property, but
the disposition of its property shall be at all times within the
control of its board of directors. Nothing contained in division
(S)(1) of this section shall be construed to invalidate or
prohibit an agreement by an insurance company for the purchase for
its own account of an entire issue of the securities of a
corporation or to invalidate or prohibit an agreement by an
insurance company and one or more other investors to join and
share in the purchase of investments for their individual accounts
and for bona fide investment purposes.
(2) In the determination of capitalization in this section
the value of all bonds, debentures, and funded debts, and
nonconvertible or nonparticipating preferred stocks shall be
figured at par. Participating or convertible preferred shares
shall be figured at par or market on the preceding thirty-first
day of December, whichever is higher, and the value of all common
shares shall be figured at the market on the preceding
thirty-first day of December.
(3) As used in this section:
(a) "Funded debt" means all interest-bearing obligations
maturing in more than one year from their issuance and all
guaranteed or assumed interest-bearing obligations or stock.
Securities or stock of a corporation pledged to secure other
funded debt of the corporation are not included in the funded
debt.
(b) "Fixed charges" include actual interest incurred in each
year on funded and unfunded debt and annual apportionment of debt
discount or premium. Where interest is partially or entirely
contingent upon earnings, "fixed charges" include contingent
interest payments.
(c) "Net earnings available for fixed charges" means income
after deducting operating and maintenance expenses, taxes other
than income taxes, depreciation, and depletion. Extraordinary,
nonrecurring items of income or expense shall be excluded.
(4) Except as provided in a plan of mutualization adopted
pursuant to the provisions of sections 3913.01 to 3913.10 of the
Revised Code, no domestic life insurance company may invest in or
loan upon its own stock, either directly or indirectly.
(5) If the investments of any domestic life insurance company
are at the time of the making thereof or on October 13, 1953,
otherwise than as authorized in this section, such investments
shall not be admitted or accepted as authorized investments for
such company.
(6) Any earnings test provided for in this section shall be
deemed to have been met if the requirements of such earnings test
are met by any company which assumes or guarantees the investment
or which assumes or guarantees the performance of any lease which
is the security for the investment. In applying any such earnings
test, the operations of a company's predecessor companies, if any,
for the stipulated period shall be included.
(7) No domestic life insurance company shall at any time have
invested in or loaned upon the security of the obligations,
property, or securities of a particular corporation, trust,
partnership, or similar business entity a sum exceeding the
greater of two per cent of its admitted assets as of the preceding
thirty-first day of December or twenty-five per cent of that
portion of its capital and surplus, or its surplus in the case of
a mutual company, that exceeds the minimum required capital and
surplus under section 3907.05 of the Revised Code unless the
approval of the superintendent of insurance is first obtained. The
restrictions of division (S)(7) of this section do not apply to
divisions (C), (F), (G), (H), (P)(6), and (R) of this section or
to any valid obligation issued, assumed, or guaranteed by the
United States, or any state thereof, the Commonwealth of Puerto
Rico, the District of Columbia, or Canada or any province of
Canada. For purposes of division (S)(7) of this section, such
company may, at its option, consider either the lessor or the
lessee under division (L) of this section to be the person to whom
any such investment or loan is made.
(8) This section does not affect the propriety or legality of
an investment made by a domestic life insurance company which was
in accordance with the laws in force at the time of the making of
the investment.
(T) A domestic life insurance company may seek permission
from the superintendent of insurance to invest funds under Chapter
3906. of the Revised Code and may invest funds under that chapter
if such permission is granted.
Sec. 3913.34. (A) Sections 3913.11 to 3913.13 and 3913.20 to
3913.23 of the Revised Code shall apply to a mutual insurance
holding company as if the mutual insurance holding company were a
domestic mutual insurance company. The members of the mutual
insurance holding company are deemed to be members of a domestic
mutual insurance company for all purposes of such sections.
(B) A reorganization of a domestic mutual life insurance
company subject to sections 3913.25 to 3913.38 of the Revised Code
also is subject to sections 3907.09 to 3907.11 of the Revised
Code, if applicable, but is not subject to sections 3901.32 to
3901.323 of the Revised Code.
(C) Notwithstanding division (B) of this section, for a
period of five years following the effective date of a
reorganization under sections 3913.25 to 3913.38 of the Revised
Code, no person shall acquire control of a reorganized stock
company without compliance with sections 3901.32 to 3901.323 of
the Revised Code. For purposes of this division, "control" has the
same meaning as in division (B) of section 3901.32 of the Revised
Code, except that control is presumed to exist if any person,
directly or indirectly, owns, controls, holds with the power to
vote, or holds proxies representing five per cent or more of the
voting securities of any other person.
(D) An intermediate holding company or, if there is no such
company, a reorganized stock company shall not issue shares of
stock, in addition to the shares issued pursuant to the
reorganization plan under which the company was formed, without
the prior approval of the mutual insurance holding company as its
majority shareholder. The prior approval of the mutual insurance
holding company must be evidenced by a resolution of the board of
directors of the mutual insurance holding company delivered to the
board of directors of the intermediate holding company or the
reorganized stock company prior to the issuance of the additional
shares.
(E) A mutual insurance holding company, and an intermediate
holding company, if any, are deemed to be insurers subject to
sections 3901.07, 3901.071, and 3901.48 of the Revised Code.
Sec. 3921.21. A (A) Except as provided in division (B) of
this section, a fraternal benefit society shall invest its funds
only in such investments as are authorized by section 3907.14 of
the Revised Code for the investment of assets of life insurers and
subject to the limitations thereon. Any foreign or alien society
permitted or seeking to do business in this state that invests its
funds in accordance with the laws of the state, district,
territory, country, or province in which it is incorporated, is
held to meet the requirements of this section for the investment
of funds.
(B) A fraternal benefit society may seek permission from the
superintendent of insurance to invest funds under Chapter 3906. of
the Revised Code and may invest funds under that chapter if such
permission is granted.
Sec. 3925.08. Funds accumulated in the course of business,
or surplus money above the capital stock, of any company organized
under any law of this state, for the purpose provided in section
3925.01 of the Revised Code, shall only be loaned or invested in
the securities listed in sections 3925.05 and 3925.06 of the
Revised Code, or in the following:
(A)(1) Bonds and mortgages on unencumbered real estate within
this or any other state worth twenty-five per cent more than the
sum loaned thereon, exclusive of buildings, unless such buildings
are insured in some company authorized to do business in this
state, and the policy is transferred to the company making the
investment; or, in lieu of transferring such policies, the
mortgagee may purchase a policy or policies of mortgage protection
insurance, payable to the mortgagee or a trustee in its behalf,
insuring the mortgagee against loss resulting from the failure of
the mortgagor to acquire and maintain, from such an authorized
insurance company, insurance in the amount required by this
section;
(2) Bonds or notes secured by mortgages insured by the
federal housing administrator;
(3) Loans to veterans guaranteed in whole or in part by the
United States pursuant to Title III of the "Servicemen's
Readjustment Act of 1944," 58 Stat. 284, 38 U.S.C. 693, as
amended, provided such guaranteed loans are liens upon real
estate.
(B)(1) Legally authorized and executed bonds, notes,
warrants, and securities which are the direct obligation of or are
guaranteed as to both principal and interest by Canada, or which
are the direct obligation of or are guaranteed as to both
principal and interest by any province of Canada, or which are the
direct obligation of or are guaranteed as to both principal and
interest by any municipal corporation of Canada having a
population of one hundred thousand or more by the latest official
census, and which are not in default as to principal or interest;
(2) Obligations issued, assumed, or guaranteed by the
international finance corporation or by the international bank for
reconstruction and development, the Asian development bank, the
inter-American development bank, the African development bank, or
similar development bank in which the president, as authorized by
congress and on behalf of the United States, has accepted
membership.
(C) Bonds or other evidences of indebtedness, not in default
as to principal or interest, which are valid obligations issued,
assumed, or guaranteed by the United States, by any state thereof,
the Commonwealth of Puerto Rico, by any territory or insular
possession of the United States, or by the District of Columbia,
or which are valid obligations issued, assumed, or guaranteed by
any county, municipal corporation, district, or political
subdivision, or by any civil division or public instrumentality of
such governmental units, if by statutory or other legal
requirements such obligations are payable, as to both principal
and interest, from taxes levied upon all taxable property within
the jurisdiction of such governmental unit, or in bonds or other
obligations issued by or for account of any such governmental unit
having a population of five thousand or more by the latest
official federal or state census, which are payable as to both
principal and interest from revenues or earnings from the whole or
any part of a publicly owned utility, provided that by statute or
other applicable legal requirements, rates from the service or
operation of such utility must be fixed, maintained, and collected
at all times so as to produce sufficient revenues or earnings to
pay both principal and interest of such bonds or obligations as
they become due, and in any bonds or obligations issued or
guaranteed by the United States, any state, the District of
Columbia, the Commonwealth of Puerto Rico, any county, municipal
corporation, district, political subdivision, civil division,
commission, board, authority, agency, or other instrumentality of
one or more of them, provided there is a specific pledge of
revenues, earnings, or other adequate security and provided that
no prior or parity obligation of the same issuer, payable from
revenues or earnings from the same source, has been in default as
to principal or interest during the five years next preceding the
date of such investment, but such issuer need not have been in
existence for that period, and obligations acquired under this
section may be newly issued, and further provided that there is
adequate provision for payment of expenses of operation and
maintenance and the principal and interest on all obligations when
due;
(D)(1) Bonds or other evidences of indebtedness, bearing or
accruing interest, issued, assumed, or guaranteed by any solvent
corporation, trust, partnership, or similar business entity
organized and existing under the laws of this or any other state,
or of the United States, the Commonwealth of Puerto Rico, or of
the District of Columbia, or of Canada or any province of Canada,
upon which there is no existing interest or principal default,
provided that either:
(a) The bonds or other evidences of indebtedness are rated 1
or 2 by the securities valuation office of the national
association of insurance commissioners;
(b) The corporation, together with its predecessor
corporation or corporations, or the trust, partnership, or similar
business entity, has been in existence for a period of at least
five years.
(2) Stocks, limited liability company membership interests,
limited partnership interests, or limited liability partnership
interests of any insurance, financial, investment, or investment
management companies, which investment management companies are
registered with the securities and exchange commission under the
"Investment Company Act of 1940," 54 Stat. 789, 15 U.S.C. 80a-1,
as amended, or the stocks, limited liability company membership
interests, limited partnership interests, or limited liability
partnership interests in an entity wholly owned by a domestic
company or by a domestic company and its affiliates, that is
formed and maintained to acquire or hold specific assets or
liabilities for bankruptcy remoteness or limitation of liability
purposes, except its own stock, and stocks, limited liability
company membership interests, limited partnership interests,
limited liability partnership interests, bonds, notes, and
debentures of any company which is organized for, and limited in
its operations to, the financing of insurance premiums, upon
approval of such investments by the superintendent of insurance;
except that approval shall not be required for the purchase of the
outstanding stocks, limited liability company membership
interests, limited partnership interests, or limited liability
partnership interests of any such company, if investment in each
such company does not exceed in the aggregate two and one-half per
cent of the total admitted assets of the company making the
investment as of the preceding thirty-first day of December.
Whenever the superintendent has reason to believe that the
retention, investment, or acquisition of the stock, limited
liability company membership interest, limited partnership
interest, or limited liability partnership interest of any such
company substantially lessens competition generally in the
business of insurance or creates a monopoly therein the
superintendent shall proceed under section 3901.13 of the Revised
Code to cause such domestic insurance company to divest itself of
such stock, limited liability company membership interest, limited
partnership interest, or limited liability partnership interest.
(3) Other stocks, limited liability company membership
interests, or limited partnership interests, or limited liability
partnership interests of any solvent corporation organized under
the laws of this or any other state, or of the United States, or
of the District of Columbia, or of Canada or any province of
Canada, provided that a dividend or distribution has been paid by
the business entity in the preceding twelve months upon the stock,
membership interest, or partnership interest to be purchased or
such business entity, together with its predecessor entity or
entities, has been in existence for a period of at least five
years.
(4) A domestic company may acquire, hold, and convey tangible
personal property or interests therein for the production of
income, provided no domestic company shall invest in excess of two
per cent of its admitted assets as of the preceding thirty-first
day of December under this division.
(5) In equipment trust obligations or certificates, security
agreements, or other evidences of indebtedness entered into
directly or guaranteed by any company operating wholly or partly
within the United States or Canada, provided that such debt
obligation is secured by a first lien on tangible personal
property which is purchased or secured for payment thereof and
such debt obligation is repayable within twenty years from the
date of issue in annual, semiannual, or more frequent installments
beginning not later than the first year after such date.
(6) An insurer may invest without limitation in investments
of government money market funds. As used in division (D)(6) of
this section, "government money market fund" means a fund that at
all times invests in obligations issued, guaranteed, or insured by
the federal government of the United States or collateralized
repurchase agreements comprised of such obligations, and that
qualifies for investment without a reserve pursuant to the
purposes and procedures of the securities valuation office of the
national association of insurance commissioners.
(E) Negotiable promissory notes maturing in not more than six
months from the date thereof, secured by collateral security
through the transfer of any of the classes of securities described
in this section or in sections 3925.05 and 3925.06 of the Revised
Code, with absolute power of sale within twenty days after default
in payment at maturity;
(F)(1) Repurchase agreements with, and interest-bearing
obligations, including savings accounts and time certificates of
deposit of, a national bank of the United States, a commonwealth
bank of Puerto Rico, a chartered bank of Canada, or a state bank,
provided such bank is either a member of the federal deposit
insurance corporation created pursuant to the "Banking Act of
1933," as amended, or the Canada deposit insurance corporation
created pursuant to the act of parliament known as the "Canada
Deposit Insurance Corporation Act," as amended.
(2) Certificates of deposit, savings share accounts,
investment share accounts, stock deposits, stock certificates, or
other evidences of indebtedness of a savings and loan association,
provided all such evidences of indebtedness are insured pursuant
to the "Financial Institutions Reform, Recovery, and Enforcement
Act of 1989," 103 Stat. 183, 12 U.S.C.A. 1811, as amended;
(3) Bankers' acceptances and bills of exchange of the kinds
and maturities made eligible by law for rediscount with the
federal reserve banks, provided that the same are accepted by a
bank or trust company incorporated under the laws of the United
States or of this state or any other bank or trust company which
is a member of the federal reserve system.
(G) Any securities issued as a result of any reorganization,
or capital or debt adjustment, in whole or in part, in exchange
for securities acquired by it prior to such reorganization, or
capital or debt adjustment;
(H)(1) In bonds, notes, debentures, or other evidences of
indebtedness issued, assumed, or guaranteed by a solvent
corporation, trust, or partnership formed or existing under the
laws of a foreign jurisdiction, provided each such foreign
investment is of the same kind and quality as United States
investments authorized under this section; or in common or
preferred stock, shares, membership interests, or partnership
interests of any solvent business entity formed or existing under
the laws of a foreign jurisdiction, provided each such foreign
investment is of the same kind and quality as United States
investments authorized under this section; or in bonds or other
evidences of indebtedness issued, assumed, or guaranteed by a
foreign jurisdiction.
An insurer shall not invest in foreign investments under
division (H) of this section, including investments denominated in
foreign currency, a sum exceeding in the aggregate fifteen per
cent of its admitted assets as of the preceding thirty-first day
of December. The aggregate amount of investments held by an
insurer in a single foreign jurisdiction shall not exceed three
per cent of its admitted assets as of the preceding thirty-first
day of December.
As used in division (H)(1) of this section, "foreign
jurisdiction" means a jurisdiction outside the United States,
Puerto Rico, or Canada whose bonds are rated 1 by the securities
valuation office of the national association of insurance
commissioners.
(2) An insurer may acquire investments denominated in foreign
currency whether or not they are foreign investments.
An insurer shall not invest in investments denominated in
foreign currency a sum exceeding in the aggregate fifteen per cent
of its admitted assets as of the preceding thirty-first day of
December. The aggregate amount of investments denominated in a
single foreign currency held by an insurer shall not exceed three
per cent of an insurer's admitted assets as of the preceding
thirty-first day of December.
(3) As used in division (H) of this section, "foreign
currency" means a currency other than that of the United States.
(I)(1) Any securities or other property not permitted under
section 3925.05, 3925.06, 3925.08, or 3925.20 of the Revised Code
to an extent not exceeding in the aggregate six per cent of the
total admitted assets of such company on the preceding
thirty-first day of December, within the limitations prescribed in
division (J) of this section. Any such company may also invest up
to an additional five per cent of the total admitted assets of
such company on the preceding thirty-first day of December, within
the limitations prescribed in division (J) of this section, in
loans or investments in small businesses having more than half of
their assets or employees in this state and in venture capital
firms having an office within this state, provided that, as a
condition of a company making an investment in a venture capital
firm, the firm must agree to use its best efforts to make
investments, in an aggregate amount at least equal to the
investment to be made by the company in that venture capital firm,
in small businesses having their principal offices within this
state and having either more than one-half of their assets within
this state or more than one-half of their employees employed
within this state.
As used in division (I) of this section:
(a) "Small businesses" means any corporation, partnership,
proprietorship, or other entity that either does not have more
than four hundred employees, or would qualify as a small business
for the purpose of receiving financial assistance from small
business investment companies licensed under the "Small Business
Investment Act of 1958," 72 Stat. 689, 15 U.S.C.A. 661, as
amended, and rules of the small business administration.
(b) "Venture capital firms" means any corporation,
partnership, proprietorship, or other entity, the principal
business of which is or will be the making of investments in small
businesses.
(c) "Investments" means any equity investment, including
limited partnership interests and other equity interests in which
liability is limited to the amount of the investment, but does not
include general partnership interests or other interests involving
general liability.
(2) In the event that, subsequent to being made under this
division, a loan or investment is determined to have become
qualified as a loan or investment under any of the divisions (A)
to (F) of this section or under section 3925.05, 3925.06, or
3925.20 of the Revised Code, the company may consider such loan or
investment as held under such other statutory provision and such
loan or investment shall no longer be considered as having been
made under this division.
(J) No domestic insurance company shall at any time have
invested a sum exceeding five per cent of its admitted assets as
of the preceding thirty-first day of December in the bonds, notes,
debentures, other evidences of indebtedness, and stocks of a
particular corporation, trust, partnership, or similar business
entity, except for investments authorized under divisions (A) and
(D)(2) of this section, and no domestic insurance company together
with its subsidiary, if any, shall at any time own directly or
indirectly more than twenty-five per cent of the outstanding
bonds, notes, debentures, other evidences of indebtedness, and
stocks of any corporation, except for investments authorized under
divisions (A) and (D)(2) of this section.
This section does not affect the propriety or legality of an
investment made by such domestic insurance company which was in
accordance with the laws in force at the time of the making of the
investment.
A business entity organized for the purpose provided in
section 3925.01 of the Revised Code may seek permission from the
superintendent of insurance to invest funds under Chapter 3906. of
the Revised Code and may invest funds under that chapter if such
permission is granted.
Sec. 3939.01. (A) Any number of persons of lawful age, not
less than ten in number, owning insurable property in this state,
may associate themselves together for the purpose of insuring each
other against the risk of direct physical loss or damage to
property in this state, including theft of property in this state,
except loss or damage to motor vehicles caused by collision. Any
association organized under this section shall file with the
department of insurance all policy forms currently in use by the
association and all additions, deletions, or amendments to the
policy forms at least thirty days prior to the use of the policy
forms, additions, deletions, or amendments. Each filing under this
division is deemed approved thirty days after the filing is
received by the superintendent of insurance, unless the filing is
disapproved by the superintendent during that thirty-day period.
(B) Any association organized under this section, from time
to time, may assess upon and collect from its members or other
responsible parties sums of money that are necessary to pay
expenses and losses that occur, or are anticipated to occur, from
those covered perils. The assessment and collection of those sums
of money shall be regulated by the constitution of the association
adopted under section 3939.06 of the Revised Code. The
constitution shall require the assessments to be made directly and
specifically upon the members or other responsible parties, and to
be paid by them out of any funds paid to or deposited with the
association in anticipation of assessments. Any association
organized under this section may borrow money for the payment of
losses and associated expenses, but those loans shall not be made
for a period of time that extends beyond the collection of the
association's next assessment.
(C) Any association organized under this section may
accumulate a surplus from its assessments. That Except as provided
in division (D) of this section, that surplus and all other funds
received or accumulated in the course of business shall be
invested under sections 3925.05 and 3925.08 of the Revised Code.
Upon prior approval of the superintendent of insurance, the
association may invest that surplus and those other funds in real
estate for the association's convenient accommodation in the
transaction of its business. The association shall not have at any
one time more than ten per cent of its admitted assets invested in
real estate.
(D) An association organized under this section may seek
permission from the superintendent of insurance to invest funds
under Chapter 3906. of the Revised Code and may invest funds under
that chapter if such permission is granted.
(E) Any association organized under this section may insure
farm buildings, residential and detached dwellings, outbuildings,
churches, township buildings, grange buildings, farm machinery,
equipment, and other farm personal property, household goods and
personal effects, pleasure and utility vehicles, and other similar
property, except motor vehicles titled or capable of being titled
for use on public roads and property used exclusively for
commercial or industrial purposes.
The property described in this division may be classified
only for the purpose of determining and levying assessments, and
that property may be located within or without the limits of any
municipal corporation.
(E)(F) Any association organized under this section may
collect a charge on each contract of insurance in accordance with
its constitution adopted under section 3939.06 of the Revised
Code.
(F)(G) Any association organized under this section may make
contracts of reinsurance for the kinds of insurance authorized by
sections 3939.01 to 3939.11 of the Revised Code or accept
reinsurance on any portion of that insurance.
Sec. 3953.15. The (A) Except as provided in division (B) of
this section, the unearned premium reserve of a title insurance
company shall be invested in accordance with sections 3925.05 to
3925.08, inclusive, of the Revised Code.
(B) A title insurance company may seek permission from the
superintendent of insurance to invest funds under Chapter 3906. of
the Revised Code and may invest funds under that chapter if such
permission is granted.
Section 2. That existing sections 1751.25, 3901.043, 3901.17,
3901.32, 3901.321, 3901.33, 3901.34, 3901.341, 3901.35, 3901.36,
3901.62, 3901.63, 3901.64, 3907.14, 3913.34, 3921.21, 3925.08,
3939.01, and 3953.15, and sections 3907.09, 3907.10, 3907.11, and
3907.13 of the Revised Code are hereby repealed.
Section 3. Sections 3901.371 to 3907.378 of the Revised
Code, as enacted in this act, shall take effect on January 1,
2015. The first filing of the own risk and solvency assessment
summary report, as required by section 3901.375 of the Revised
Code, shall be in 2015.
Section 4. The intent of the General Assembly, in enacting
this act is to protect and to further the interests of insureds,
creditors, and the general public by providing, with minimum
interference with management initiative and judgment, prudent
standards for the development and administration of insurer
investment programs.
Section 5. This act shall be known as the "Ohio Insurer
Investment Act."
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