130th Ohio General Assembly
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S. B. No. 140  As Introduced
As Introduced

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


Senator Bacon 



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;
(d) A facsimile number.
(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:
(1) Cash;
(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;
(d) Dates of maturity;
(e) Geographic areas.
(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:
(a) Liquidity;
(b) Credit and default;
(c) Systemic or market;
(d) Interest rate;
(e) Call, prepayment, and extension;
(f) Currency;
(g) Foreign sovereign.
(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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