A.R.S. § 20-510 — Arizona Code / Title 20 / Chapter 3 / Article 1 / Section 510
20-510 Standard valuation law; operative date; definitions
Status: in_force

20-510. Standard valuation law; operative date; definitions

A. This section may be cited as the standard valuation law.

B. For the purposes of this section, the following definitions apply on or after the operative date of the valuation manual:

1. "Accident and health insurance" means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness or medical conditions and as may be specified in the valuation manual.

2. "Appointed actuary" means a qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required in subsection F of this section.

3. "Company" means an entity that either:

(a) Has written, issued or reinsured life insurance contracts, accident and health insurance contracts or deposit-type contracts in this state and that has at least one such policy in force or on claim.

(b) Has written, issued or reinsured life insurance contracts, accident and health insurance contracts or deposit-type contracts in any state and that is required to hold a certificate of authority to write life insurance, accident and health insurance or deposit-type contracts in this state.

4. "Deposit-type contract" means contracts that do not incorporate mortality or morbidity risks and as may be specified in the valuation manual.

5. "Life insurance" means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual.

6. "Policyholder behavior" means any action a policyholder, a contract holder or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this section, including lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization or benefit elections prescribed by the policy or contract but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract.

7. "Principle-based valuation" means a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and that is required to comply with subsection S of this section as specified in the valuation manual.

8. "Qualified actuary" means an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American academy of actuaries qualification standards for actuaries signing those statements and who meets the requirements specified in the valuation manual.

9. "Reserves" means reserve liabilities.

10. "Tail risk" means a risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude.

11. "Valuation manual" means the manual of valuation instructions adopted by the national association of insurance commissioners as specified in this section.

C. The following apply to reserve valuation for policies and contracts issued before the operative date of the valuation manual:

1. The director shall annually value, or cause to be valued, the reserves for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this state that are issued before the operative date of the valuation manual. In calculating reserves, the director may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves required of a foreign or alien insurer, the director may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction if the valuation complies with the minimum standard provided by this section.

2. Subsections G, H, I, J, K, L, M, N, O, P and Q of this section apply to all policies and contracts, as appropriate, subject to this section issued on or after the operative date of section 20-1231 and before the operative date of the valuation manual and subsections R, S and T of this section do not apply to those policies and contracts.

3. The minimum standard for the valuation of policies and contracts issued before the operative date of section 20-1231 is the standard provided by the laws in effect immediately before that date.

D. The following apply to reserve valuation for policies and contracts issued on or after the operative date of the valuation manual:

1. The director shall annually value, or cause to be valued, the reserves for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts and deposit-type contracts of every company issued on or after the operative date of the valuation manual.  In lieu of the valuation of the reserves required of a foreign or alien company, the director may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction if the valuation complies with the minimum standard provided by this section.

2. Subsections R, S and T of this section apply to all policies and contracts issued on or after the operative date of the valuation manual.

E. The following apply to actuarial opinion of reserves before the operative date of the valuation manual:

1. Every life insurance company doing business in this state shall annually submit the opinion of a qualified actuary. The opinion shall state whether the reserves and related actuarial items that are held in support of the policies and contracts specified by the director are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with the applicable laws of this state. The director shall define the specifics of this opinion and shall add any other items to the scope of the opinion as the director deems necessary.

2. For actuarial analysis of reserves and assets supporting reserves:

(a) Every life insurance company, unless exempted by rule, shall annually include in the opinion required by paragraph 1 of this subsection an opinion of the same qualified actuary as to whether, if considered in light of the assets held by the company with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, the reserves and related actuarial items held in support of the policies and contracts specified by the director make adequate provision for the company's obligations under the policies and contracts, including but not limited to the benefits under and expenses associated with the policies and contracts.

(b) The director may provide for a transition period for establishing any higher reserves that the qualified actuary may deem necessary in order to render the opinion required by this section.

3. The following apply to each opinion required by paragraph 2 of this subsection:

(a) The insurance company shall prepare a memorandum to support each actuarial opinion. The memorandum shall be in a form and substance specified by the director.

(b) If the insurance company fails to provide a supporting memorandum on the request of the director and in the period of time specified by rule or if the director determines that the supporting memorandum does not meet the standards prescribed by rule or is otherwise unacceptable, the director may engage a qualified actuary at the expense of the insurance company to review the opinion and the basis for the opinion and to prepare any supporting memorandum that the director requires.

4. The following apply to each opinion required by paragraph 1 of this subsection:

(a) The company shall submit the opinion with the annual statement reflecting the valuation of the reserves for each year ending on or after December 31, 1996.

(b) The opinion applies to all business in force, including individual and group health insurance plans, and shall be in a form and substance that the director specifies.

(c) The opinion shall be based on standards that are adopted from time to time by the actuarial standards board and on any other additional standards that the director prescribes.

(d) If an opinion is required to be submitted by an alien or foreign company, the director may accept the opinion that is filed by that company with the insurance supervisory official of another state if the director determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

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

(f) The director shall define by rule what disciplinary actions the director may take against an insurance company or qualified actuary.

(g) Except as provided in subdivisions (k), (l) and (m) of this paragraph, documents, materials or other information in the possession or control of the department that are a memorandum in support of the opinion, and any other material provided by the company to the director in connection with the memorandum, are confidential by law and privileged and are not subject to public records requests, are not subject to subpoena and are not subject to discovery or admissible in evidence in any private civil action. The director is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as part of the director's official duties.

(h) The director or any person who received documents, materials or other information while acting under the authority of the director is not allowed or required to testify in any private civil action concerning any confidential documents, materials or information subject to subdivision (g) of this paragraph.

(i) In order to assist in the performance of the director's duties, the director may:

(i) Share documents, materials or other information, including the confidential and privileged documents, materials or information subject to subdivision (g) of this paragraph, with other state, federal and international regulatory agencies, with the national association of insurance commissioners and its affiliates and subsidiaries, and with state, federal and international law enforcement authorities, if the recipient agrees to maintain the confidentiality and privileged status of the document, material or other information.

(ii) 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, and shall maintain as confidential or privileged any 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.

(iii) Enter into agreements governing sharing and use of information consistent with subdivision (g) of this paragraph and this subdivision.

(j) No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the director under this subsection or as a result of sharing as authorized in subdivision (i) of this paragraph.

(k) A memorandum in support of the opinion, and any other material provided by the company to the director in connection with the memorandum, may be subject to subpoena for the purpose of defending an action seeking damages from the actuary submitting the memorandum by reason of an action required by this section or by rules adopted under this section.

(l) The memorandum or other material may otherwise be released by the director with the written consent of the company or to the American academy of actuaries on request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the director for preserving the confidentiality of the memorandum or other material.

(m) Once any portion of the confidential memorandum is cited by the company in its marketing, is cited before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum are no longer confidential.

5. For the purposes of this subsection, "qualified actuary" means a member in good standing of the American academy of actuaries who meets the requirements set forth by the director.

F. The following apply to actuarial opinion of reserves after the operative date of the valuation manual:

1. Every company with outstanding life insurance contracts, accident and health insurance contracts or deposit-type contracts in this state and subject to regulation by the director shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this state.  The valuation manual will prescribe the specifics of this opinion including any items deemed to be necessary to its scope.

2. Every company with outstanding life insurance contracts, accident and health insurance contracts or deposit-type contracts in this state and subject to regulation by the director, except as exempted in the valuation manual, shall also annually include in the opinion required by paragraph 1 of this subsection an opinion of the same appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including the benefits under and expenses associated with the policies and contracts.

3. The following apply to each opinion required by paragraph 2 of this subsection:

(a) A memorandum, in form and substance as specified in the valuation manual, and acceptable to the director, shall be prepared to support each actuarial opinion.

(b) If the insurance company fails to provide a supporting memorandum at the request of the director within a period specified in the valuation manual or the director determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the valuation manual or is otherwise unacceptable to the director, the director may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the director.

4. The following apply to all opinions subject to this subsection:

(a) The opinion shall be in form and substance as specified in the valuation manual and acceptable to the director.

(b) The opinion shall be submitted with the annual statement reflecting the valuation of the reserves for each year ending on or after the operative date of the valuation manual.

(c) The opinion shall apply to all policies and contracts subject to this subsection, plus other actuarial liabilities as may be specified in the valuation manual.

(d) The opinion shall be based on standards adopted from time to time by the actuarial standards board or its successor, and on any additional standards as may be prescribed in the valuation manual.

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

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

(g) Disciplinary action by the director against the company or the appointed actuary shall be defined by the director in rule.

G. Except as otherwise provided in subsections H, I, J and Q of this section, the minimum standard for the valuation of all policies and contracts that were issued before the operative date of section 20-1231 is that provided by the laws in effect immediately before January 1, 1955. Except as otherwise provided in subsections H, I, J and Q of this section, the minimum standard for the valuation of all policies and contracts that are issued on or after January 1, 1955 is the commissioners reserve valuation methods defined in subsections K, L, O and P of this section, three and one-half per cent interest or, in the case of life insurance policies and contracts, other than annuity and pure endowment contracts, that are issued on or after July 1, 1974, four per cent interest for those policies that are issued before January 1, 1979, five and one-half per cent interest for single premium life insurance policies and four and one-half per cent interest for all other policies that are issued on and after January 1, 1979, and the following tables:

1. For all ordinary policies of life insurance that are issued on the standard basis, excluding any disability and accidental death benefits in those policies, the commissioners 1941 standard ordinary mortality table for those policies issued before the operative date of section 20-1231, subsection F, paragraph 5, subdivision (b) and the commissioners 1958 standard ordinary mortality table for those policies that are issued on or after the operative date of section 20-1231, subsection F, paragraph 5, subdivision (b) and before the operative date as provided in section 20-1231.01. If any category of these policies is issued on female risks, modified net premiums and present values referred to in this section may be calculated according to an age not more than six years younger than the actual age of the insured. For policies that are issued on or after the operative date of section 20-1231.01, the following tables may be used:

(a) The commissioners 1980 standard ordinary mortality table.

(b) At the election of the insurer for any one or more specified plans of life insurance, the commissioners 1980 standard ordinary mortality table with ten year select mortality factors.

(c) Any ordinary mortality table that is adopted after 1980 by the national association of insurance commissioners and that is approved by the director for use in determining the minimum standard of valuation for those policies.

2. For all industrial life insurance policies that are issued on the standard basis, excluding any disability and accidental death benefits in those policies, the 1941 standard industrial mortality table for those policies that are issued before the operative date of section 20-1231, subsection F, paragraph 5, subdivision (d) and for those policies that are issued on or after the operative date of section 20-1231, subsection F, paragraph 5, subdivision (d) the commissioners 1961 standard industrial mortality table or any industrial mortality table that is adopted after 1980 by the national association of insurance commissioners and that is approved by the director for use in determining the minimum standard of valuation for those policies.

3. For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in those policies, the 1937 standard annuity mortality table or, at the option of the insurer, the annuity mortality table for 1949, ultimate, or any modification of either of these tables that the director approves.

4. For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in those policies, the group annuity mortality table for 1951, any modification of the group annuity mortality table that is approved by the director or, at the option of the insurer, any of the tables or modifications of tables that are specified for individual annuity and pure endowment contracts.

5. For total and permanent disability benefits in or supplementary to ordinary policies or contracts:

(a) For policies or contracts that are issued on or after January 1, 1966, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the society of actuaries with due regard to the type of benefit or any tables of disablement rates and termination rates, adopted after 1980 by the national association of insurance commissioners, that are approved by the director for use in determining the minimum standard of valuation for those policies.

(b) For policies or contracts that are issued on or after January 1, 1961 and before January 1, 1966, either of the tables that are specified in subdivision (a) of this paragraph, or at the option of the insurer, the class three disability table (1926).

(c) For policies or contracts that are issued before January 1, 1961, the class three disability table (1926).

(d) For active lives, any table that is used pursuant to subdivision (a), (b) or (c) of this paragraph shall be combined with a mortality table that is allowed for calculating the reserves for life insurance policies.

6. For accidental death benefits in or supplementary to policies:

(a) For policies that are issued on or after January 1, 1966, the 1959 accidental death benefits table or any accidental death benefits table that was adopted after 1980 by the national association of insurance commissioners and that the director approves for use in determining the minimum standard of valuation for those policies.

(b) For policies that are issued on or after January 1, 1961 and before January 1, 1966, either table provided by subdivision (a) of this paragraph or, at the option of the insurer, the intercompany double indemnity mortality table.

(c) For policies that are issued before January 1, 1961, the intercompany double indemnity mortality table.

(d) A table that is allowed under subdivision (a), (b) or (c) of this paragraph shall be combined with a mortality table that is allowed for calculating the reserves for life insurance policies.

7. For group life insurance, life insurance issued on the substandard basis and other special benefits, any tables that the director approves as sufficient with relation to the benefits provided by those policies.

H. Except as provided in subsection I of this section, the minimum standard for the valuation for individual annuity and pure endowment contracts issued on or after the operative date of this subsection and annuities and pure endowments purchased on or after the operative date of this subsection under group annuity and pure endowment contracts shall be the commissioners reserve valuation methods defined in subsections K and L of this section and the following tables and interest rates:

1. For individual annuity and pure endowment contracts that are issued before January 1, 1979, excluding any disability and accidental death benefits in those contracts, the 1971 individual annuity mortality table or any modification of the table that the director approves, and six per cent interest for single premium immediate annuity contracts, and four per cent interest for all other individual annuity and pure endowment contracts.

2. For individual single premium immediate annuity contracts that are issued on or after January 1, 1979, excluding any disability and accidental death benefits in those contracts, the 1971 individual annuity mortality table or any individual annuity mortality table adopted after 1980 by the national association of insurance commissioners and that the director approves for use in determining the minimum standard valuation for those contracts, or any modification of these tables that the director approves, and seven and one-half per cent interest.

3. For individual annuity and pure endowment contracts that are issued on or after January 1, 1979, other than single premium immediate annuity contracts and excluding any disability and accidental death benefits in those contracts, the 1971 individual annuity mortality table or any individual annuity mortality table that is adopted after 1980 by the national association of insurance commissioners and that the director approves for use in determining the minimum standard of valuation for those contracts, or any modification of these tables that the director approves, and five and one-half per cent interest for single premium deferred annuity and pure endowment contracts and four and one-half per cent interest for all other individual annuity and pure endowment contracts.

4. For all annuities and pure endowments that are purchased before January 1, 1979 under group annuity and pure endowment contracts, excluding any disability and accidental death benefits in those contracts, the 1971 group annuity mortality table, or any modification of this table that the director approves, and six per cent interest.

5. For all annuities and pure endowments that are purchased on or after January 1, 1979 under group annuity and pure endowment contracts, excluding any disability and accidental death benefits that are purchased under those contracts, the 1971 group annuity mortality table or any group annuity mortality table that is adopted after 1980 by the national association of insurance commissioners and that the director approves for use in determining the minimum standard of valuation for those annuities and pure endowments, or any modification to these tables that the director approves, and seven and one-half per cent interest.

I. After July 1, 1974, any insurer may file with the director a written notice of its election to comply with subsection H of this section on a specified date before January 1, 1979, which shall be the operative date of subsection H of this section for that insurer if the insurer elects a different operative date for individual annuity and pure endowment contracts from the date that is elected for group annuity and pure endowment contracts. If an insurer does not make an election pursuant to this subsection, the operative date of subsection L of this section shall be January 1, 1979.

J. The minimum standard by calendar year of issue shall be computed as follows:

1. The interest rates that are used in determining the minimum standard for the valuation of the following shall be the calendar year statutory valuation interest rates as defined in this subsection:

(a) All life insurance policies that are issued in a particular calendar year on or after the operative date of section 20-1231.01.

(b) All individual annuity and pure endowment contracts that are issued in a particular calendar year on or after January 1, 1983.

(c) All annuities and pure endowments that are purchased in a particular calendar year on or after January 1, 1983 under group annuity and pure endowment contracts.

(d) The net increase, if any, in a particular calendar year after January 1, 1983 in the amounts that are held under guaranteed interest contracts.

2. As used in this paragraph:

(a) R1 is the lesser of R and 0.09, R2 is the greater of R and 0.09, R is the reference interest rate defined in this subsection and W is the weighting factor defined in this subsection, the calendar year statutory valuation interest rates, or I, shall be determined as follows and the results shall be rounded to the nearer one-quarter of one per cent:

(i) For life insurance:

I = .03 + W(R1 - .03) + W/2 (R2 - .09).

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

I = .03 + W(R - .03).

(iii) Except pursuant to item (ii) of this subdivision, for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options that are valued on an issue year basis, the formula for life insurance under item (i) of this subdivision applies to annuities and guaranteed interest contracts with guarantee durations of more than ten years and the formula for single premium immediate annuities under item (ii) of this subdivision applies to annuities and guaranteed interest contracts with guarantee durations of ten years or less.

(iv) For other annuities with no cash settlement options and guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities under item (ii) of this subdivision applies.

(v) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options that are valued on a change in fund basis, the formula for single premium immediate annuities under item (ii) of this subdivision applies.

(b) If the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this subdivision differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one per cent, the calendar year statutory valuation interest rate for those life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For the purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980 using the reference interest rate defined in 1979 and shall be determined for each subsequent calendar year regardless of the operative date of section 20-1231.01.

3. For the purposes of this subsection, the weighting factors referred to in the formulas stated above are given in the following tables:

(a) Weighting factors for life insurance:

Guarantee

Duration    Weighting

(Years)     Factors

Ten years or less .50

More than ten years, but not more than 20 years .45

More than twenty years  .35

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

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

(d) Except pursuant to subdivision (c) of this paragraph, weighting factors for other annuities and for guaranteed interest are as specified and in accordance with this subdivision:

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

Guarantee   Weighting Factor

Duration    for plan type

(Years)     A   B   C

Five years or less      .80  .60  .50

More than five years, but not more than ten years     .75  .60  .50

More than ten years, but not more than twenty years   .65  .50  .45

More than twenty years  .45  .35  .35

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

Plan type

A      B     C

.15  .25  .05

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

Plan type

A       B     C

.05  .05  .05

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

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

4. "Plan type" as used in paragraph 3, subdivision (d) of this subsection means:

(a) Plan type A: A policyholder may withdraw funds at any time only with an adjustment to reflect changes in interest rates or asset values since the insurance company received the funds, without an adjustment but in installments over a period of five years or more, as an immediate life annuity, or a policyholder may not withdraw funds.

(b) Plan type B: Before the interest rate guarantee expires, a policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since the insurance company received the funds, without an adjustment but in installments over a period of five years or more, or a policyholder may not withdraw funds. At the end of the interest rate guarantee, a policyholder may withdraw funds without an adjustment in a single sum or in installments over a period of less than five years.

(c) Plan type C: A policyholder may withdraw funds before the interest rate guarantee expires in a single sum or in installments over a period of less than five years either without an adjustment to reflect changes in interest rates or asset values since the insurance company received the funds or subject only to a fixed surrender charge that is stipulated in the contract as a percentage of the fund.

5. For the purposes of this subsection, "reference interest rate" means:

(a) For all life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June 30 of the calendar year next preceding the year of issue, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated.

(b) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve months, ending on June 30 of the calendar year of issue or year of purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated.

(c) Except pursuant to subdivision (b) of this paragraph, for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options that are valued on an issue year basis, with guarantee duration of more than ten years, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated.

(d) Except pursuant to subdivision (b) of this paragraph, for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options that are valued on a year of issue basis, with guaranteed duration of ten years or less, the average over a period of twelve months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated.

(e) For other annuities with no cash settlement options and guaranteed interest contracts with no cash settlement options, the average over a period of twelve months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated.

(f) Except pursuant to subdivision (b) of this paragraph, for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options that are valued on a change in fund basis, the average over a period of twelve months, ending on June 30 of the calendar year of the change in the fund, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated.

6. If Moody's investors service, incorporated no longer publishes the monthly average of the composite yield on seasoned corporate bonds or if the national association of insurance commissioners determines that the monthly average of the composite yield on seasoned corporate bonds as published by Moody's investor service, incorporated is no longer appropriate for the determination of the reference interest rate, an alternative method for determination of the reference interest rate that the national association of insurance commissioners adopts and the director approves may be substituted.

K. The reserve valuation method for life insurance and endowment benefits shall be determined as follows:

1. Except as otherwise provided in subsections L, O and Q of this section, reserves according to the commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, are the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by those policies, over the present value of any future modified net premiums. The modified net premiums for any one policy shall be the uniform percentage of the respective contract premiums for the benefits that the present value, at the date of issue of the policy, of all the modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the policy and the excess of subdivision (a) over subdivision (b) of this paragraph as follows:

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

(b) A net one year term premium for the benefits that are provided for in the first policy year.

2. Any life insurance policy that is issued on or after January 1, 1986 for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess and that provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than the excess premium, the reserve according to the commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined for the purposes of this paragraph as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than the excess premium, except as otherwise provided in subsection O of this section, shall be the greater of the reserve as of the policy anniversary calculated as described in paragraph 1 of this subsection and the reserve as of the policy anniversary calculated as described in that paragraph, but with:

(a) The value defined in paragraph 1, subdivision (a) of this subsection being reduced by fifteen per cent of the amount of the excess first year premium.

(b) All present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date.

(c) The policy being assumed to mature on the date as an endowment.

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

In making the above comparison the mortality and interest bases stated in subsections G and J of this section shall be used.

3. Reserves according to the commissioners reserve valuation method for:

(a) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums.

(b) Group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation that is established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the internal revenue code, as amended.

(c) Disability and accidental death benefits in all policies and contracts.

(d) All other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of paragraphs 1 and 2 of this subsection.

L. The reserve valuation method for annuity and pure endowment benefits shall be determined as follows:

1. This subsection applies to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation that is established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the internal revenue code, as amended.

2. Reserves according to the commissioners annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in those contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits that are provided for by the contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of the contract, that become payable before the end of the respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate or rates specified in the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values.

M. A company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, that are issued on or after the operative date of section 20-1231, shall not be less than the aggregate reserves calculated in accordance with the methods set forth in subsections K, L, O and P of this section and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the policies. The aggregate reserves for all policies, contracts and benefits shall not be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required by subsection E of this section.

N. Optional reserves may be calculated as follows:

1. At the option of the insurer, reserves for all policies and contracts that are issued before the operative date of section 20-1231 may be calculated according to any standards that produce greater aggregate reserves for all the policies and contracts than the minimum reserves required by the laws in effect immediately before that date.

2. At the option of the insurer, reserves for any category of policies, contracts or benefits that the director establishes and that are issued on or after the operative date of section 20-1231 may be calculated according to any standards that produce greater aggregate reserves for that category than those calculated according to the minimum standard provided in this section, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for in the policy or contract.

3. An insurer that at any time has adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided by this section, with the director's approval, may adopt any lower standard of valuation, but not lower than the minimum provided by this section. For the purposes of this section, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion required by subsection E of this section shall not be deemed to be the adoption of a higher standard of valuation.

O. Reserves when the valuation net premium exceeds the gross premium charged shall be calculated as follows:

1. If in any contract year the gross premium charged by a company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for the policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for the policy or contract, or the reserve calculated by the method actually used for the policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this subsection are those standards stated in subsections G and J of this section.

2. For any life insurance policy that is issued on or after January 1, 1986, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for that excess and that provides an endowment benefit or a cash surrender value or a combination in an amount greater than the excess premium, this subsection applies as if the method actually used in calculating the reserve for the policy was the method described in subsection K, paragraphs 1 and 3 of this section. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with subsection K of this section, including paragraph 2 of that subsection, and the minimum reserve calculated in accordance with this subsection.

P. If a plan of life insurance provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or if the minimum reserves of a plan of life insurance or annuity cannot be determined by the methods described in subsections K, L and O of this section, the reserves that are held under any plan must:

1. Be appropriate in relation to the benefits and the pattern of premiums for that plan.

2. Be computed by a method that is consistent with the principles of this section, as determined by rules adopted by the director related to the minimum standards applicable to the valuation of health plans.

Q. For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under subsection D, paragraph 1 of this section.  For disability insurance contracts issued on or after the operative date of section 20-1231 and before the operative date of the valuation manual, the minimum standard of valuation is the standard adopted by the director by rule.

R. The following apply to the valuation manual for policies issued on or after the operative date of the valuation manual:

1. For policies issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under subsection D, paragraph 1 of this section, except as provided under paragraph 5 or 7 of this subsection.

2. The operative date of the valuation manual is January 1 of the first calendar year following the first July 1 as of which all of the following have occurred:

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

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

(c) The standard valuation law, as amended by the national association of insurance commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least forty-two of the following fifty-five jurisdictions:

(i) The fifty states of the United States.

(ii) American Samoa.

(iii) The United States Virgin Islands.

(iv) The District of Columbia.

(v) Guam.

(vi) The Commonwealth of Puerto Rico.

3. Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual shall be effective on January 1 following the date when all of the following have occurred:

(a) The change to the valuation manual has been adopted by the national association of insurance commissioners by an affirmative vote representing the following:

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

(ii) Members of the national association of insurance commissioners representing jurisdictions totaling greater than seventy-five per cent of the direct premiums written as reported in the following annual statements most recently available before the vote in item (i) of this subdivision: life, accident and health annual statements, health annual statements, or fraternal annual statements.

(b) The valuation manual becomes effective pursuant to an order of the director.

4. The valuation manual must specify all of the following:

(a) Minimum valuation standards for and definitions of the policies or contracts subject to subsection D, paragraph 1 of this section.  The minimum valuation standards shall include all of the following:

(i) The director's reserve valuation method for life insurance contracts, other than annuity contracts, subject to subsection D, paragraph 1 of this section.

(ii) The director's annuity reserve valuation method for annuity contracts subject to subsection D, paragraph 1 of this section.

(iii) Minimum reserves for all other policies or contracts subject to subsection D of this section.

(b) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in subsection S of this section and the minimum valuation standards consistent with those requirements.

(c) For policies and contracts subject to a principle-based valuation under subsection S of this section:

(i) Requirements for the format of reports to the director under subsection T, paragraph  3 of this section and that shall include information necessary to determine if the valuation is appropriate and in compliance with this section.

(ii) Assumptions shall be prescribed for risks over which the company does not have significant control or influence.

(iii) Procedures for corporate governance and oversight of the actuarial function and a process for appropriate waiver or modification of the procedures.

(d) For policies not subject to a principle-based valuation under subsection S of this section the minimum valuation standard shall either:

(i) Be consistent with the minimum standard of valuation before the operative date of the valuation manual.

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

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

(f) The data and form of the data required under subsection T of this section, with whom the data must be submitted, and other requirements including data analyses and reporting of analyses.

5. In the absence of a specific valuation requirement or if a specific valuation requirement in the valuation manual is not, in the opinion of the director, in compliance with this section, the company, with respect to the requirements, shall comply with minimum valuation standards prescribed by the director by rule.

6. The director may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a company's compliance with any requirement of this section.  The director may rely on the opinion, regarding provisions contained in this section, of a qualified actuary engaged by the director of another state, district or territory of the United States.  For the purposes of this paragraph, engage includes employment and contracting.

7. The director may require a company to change any assumption or method that in the opinion of the director is necessary in order to comply with the requirements of the valuation manual or this section, and the company shall adjust the reserves as required by the director.  The director may take other disciplinary action as allowed pursuant to section 20-152.

S. A company must establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:

1. Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts, and for policies or contracts with significant tail risk, that reflects conditions appropriately adverse to quantify the tail risk.

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

3. Incorporate assumptions that are derived in one of the following manners:

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

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

(i) Be established utilizing the company's available experience to the extent it is relevant and statistically credible.

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

4. Provide margins for uncertainty including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.

T. A company using a principle-based valuation for one or more policies or contracts subject to this section as specified in the valuation manual shall:

1. Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.

2. Provide to the director and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation.  The controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets subject to the valuation are included in the valuation, and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year.

3. Develop, and file with the director on request, a principle-based valuation report that complies with standards prescribed in the valuation manual. A principle-based valuation may include a prescribed formulaic reserve component.

U. A company shall submit mortality, morbidity, policyholder behavior or expense experience and other data as prescribed in the valuation manual.

V. The following apply to confidentiality:

1. For the purposes of this subsection, "confidential information" means:

(a) A memorandum in support of an opinion submitted under subsection F of this section and any other documents, materials and other information, including all working papers, and copies thereof, created, produced or obtained by or disclosed to the director or any other person in connection with the memorandum.

(b) All documents, materials and other information, including all working papers, and copies thereof, created, produced or obtained by or disclosed to the director or any other person in the course of an examination made under subsection R of this section.  If an examination report or other material prepared in connection with an examination made under section 20-156 is not held as private and confidential information under section 20-156, an examination report or other material prepared in connection with an examination made under subsection R, paragraph 6 of this section is not confidential information to the same extent as if the examination report or other material had been prepared under section 20-156.

(c) Any reports, documents, materials and other information developed by a company in support of or in connection with an annual certification by the company under subsection T, paragraph 2 of this section evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials and other information, including all working papers, and copies thereof, created, produced or obtained by or disclosed to the director or any other person in connection with the reports, documents, materials and other information.

(d) Any principle-based valuation report developed under subsection T, paragraph 3 of this section and any other documents, materials and other information, including all working papers, and copies thereof, created, produced or obtained by or disclosed to the director or any other person in connection with the report.

(e) Any documents, materials, data and other information submitted by a company under subsection U of this section (collectively, "experience data") and any other documents, materials, data and other information, including all working papers, and copies thereof, created or produced in connection with the experience data, in each case that include any potentially company-identifying or personally identifiable information that is provided to or obtained by the director (together with any "experience data", the "experience materials") and any other documents, materials, data and other information, including all working papers, and copies thereof, created, produced or obtained by or disclosed to the director or any other person in connection with the experience materials.

2. The following apply to the privilege for and confidentiality of confidential information:

(a) Except as provided in this subsection, a company's confidential information is confidential by law and privileged, and is not subject to public records requests or subpoenas and shall not be subject to discovery or admissible in evidence in any private civil action. The director is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the director's official duties.

(b) Neither the director nor any person who received confidential information while acting under the authority of the director shall be allowed or required to testify in any private civil action concerning any confidential information.

(c) In order to assist in the performance of the director's duties, the director may share confidential information:

(i) With other state, federal and international regulatory agencies and with the national association of insurance commissioners and its affiliates and subsidiaries.

(ii) In the case of confidential information specified in paragraph 1, subdivisions (a) and (d) of this subsection only, with the actuarial board for counseling and discipline or its successor on request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal and international law enforcement officials.

(iii) In the case of items (i) and (ii) of this subdivision, if the recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of the documents, materials, data and other information in the same manner and to the same extent as required for the director.

(d) The director may receive documents, materials, data and other information, including otherwise confidential and privileged documents, materials, data or information, from the national association of insurance commissioners and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions and from the actuarial board for counseling and discipline or its successor and shall maintain as confidential or privileged any document, material, data or other 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 other information.

(e) The director may enter into agreements governing sharing and use of information consistent with this paragraph.

(f) No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure to the director under this section or as a result of sharing as authorized in subdivision (c) of this paragraph.

(g) Privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this paragraph shall be available and enforced in any proceeding in and in any court of this state.

3. Notwithstanding paragraph 2 of this subsection, any confidential information specified in paragraph 1, subdivisions (a) and (d) of this subsection:

(a) May be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under subsection F, paragraph 1 of this section or principle-based valuation report developed under subsection T, paragraph 3 of this section by reason of an action required by this section or by rules adopted under this section.

(b) May otherwise be released by the director with the written consent of the company.

(c) Once any portion of a memorandum in support of an opinion submitted under subsection F, paragraph 1 of this section or a principle-based valuation report developed under subsection T, paragraph 3 of this section is cited by the company in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of the memorandum or report are no longer confidential.

4. For the purposes of this subsection, "regulatory agency", "law enforcement agency" and "national association of insurance commissioners" include the employees, agents, consultants and contractors of those entities.

W. The following apply to single state exemption:

1. The director may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in this state from the requirements of subsection R of this section if:

(a) The director has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing.

(b) The company computes reserves using assumptions and methods used before the operative date of the valuation manual in addition to any requirements established by the director and adopted by rule.

2. For any company granted an exemption under this section, subsections D, E, F, G, H, I, J, K, L, M, N, O, P and Q of this section apply.  For any company applying this exemption, any reference to subsection R found in subsections D, E, F, G, H, I, J, K, L, M, N, O, P and Q of this section does not apply.
A.R.S. § 20-709 — Arizona Code / Title 20 / Chapter 4 / Article 1 / Section 709
20-709 Formation of mutual insurer; applications for insurance
Status: in_force

20-709. Formation of mutual insurer; applications for insurance

A. Upon issuance of its certificate of incorporation by the corporation commission, the directors and officers of a domestic mutual corporation formed for the purpose of becoming a mutual insurer may open books for the registration of such requisite applications for insurance policies as they may accept, and may receive deposits of premiums thereon.

B. All such applications shall be in writing signed by the applicant, covering subjects of insurance resident, located or to be performed in this state.

C. All such applications shall provide that:

1. Issuance of the policy is contingent upon completion of organization of the insurer and issuance to it of a proper certificate of authority.

2. No insurance is provided until the certificate of authority has been so issued.

3. The prepaid premium or deposit, and membership or policy fee, if any, shall be refunded in full to the applicant if the organization is not completed and the certificate of authority issued before a specified reasonable date, which date shall be not later than one year following date of issuance of the certificate of incorporation.

D. All qualifying premiums collected shall be in cash.

E. Solicitation for qualifying applications for insurance shall be by licensed agents of the corporation, and the director shall upon application therefor issue temporary agent's licenses expiring on the date specified pursuant to paragraph 3 of subsection C of this section to individuals appointed by the corporation and qualified as for a resident agent's license except as to the taking of an examination. The director may suspend or revoke any such license for the same causes and pursuant to the same procedures applicable to suspension or revocation of licenses of agents in general under article 3 of chapter 2 of this title.
A.R.S. § 20-830 — Arizona Code / Title 20 / Chapter 4 / Article 3 / Section 830
20-830 Expenses and investments
Status: in_force

20-830. Expenses and investments

A. The operating and administrative expenses of any such corporation, including all costs in connection with solicitation of subscribers to the corporation and capital expenditures, shall not exceed thirty per cent of paid subscriptions during the first year of operation, twenty-five per cent of paid subscriptions during the second year of operation, and twenty per cent of paid subscriptions in any year thereafter.

B. All funds not set aside for operating expenses shall be placed in a reserve that may be expended only for payment to participating hospitals, physicians, dentists, optometrists, certified registered nurses, registered nurse practitioners, psychologists and chiropractors for services to subscribers, for payment to subscribers for coverage on prescription drugs when provision is so made in subscription contracts, or as a refund to the subscribers. The funds of the corporation shall be invested as prescribed by article 2, chapter 3 of this title for domestic insurers.
A.R.S. § 20-1605 — Arizona Code / Title 20 / Chapter 6 / Article 10 / Section 1605
20-1605 Maximum amount of credit life insurance
Status: in_force

20-1605. Maximum amount of credit life insurance

A. The initial amount of credit life insurance shall not exceed the gross debt.

B. If a debt is repayable in substantially equal installments, the amount of insurance shall at no time exceed the scheduled or actual amount of the gross debt, whichever is greater.

C. Notwithstanding subsections A and B, credit life insurance in connection with a loan not exceeding one year in duration, or pursuant to a bank or financial institution loan checking account or revolving line of credit plan, may be issued or made effective on a nondecreasing or level term plan in an amount not in excess of the loan.  Credit life insurance on an educational transaction commitment may be issued or made effective in an amount which includes that portion of the commitment not yet advanced by the creditor.
A.R.S. § 20-293 — Arizona Code / Title 20 / Chapter 2 / Article 3 / Section 293
20-293 Insurance vending machines
Status: in_force

20-293. Insurance vending machines

A. Only a licensed insurance producer who is authorized by the director may solicit applications for and issue policies by means of mechanical vending machines. The insurance producer shall supervise each machine and shall issue policies only of insurers authorized to transact business in this state. A policy shall not be solicited and issued through a machine if the director finds that the kind of insurance or form of policy to be sold is unsuitable for sale and issuance through vending machines, that use of a vending machine may pose a risk of harm to the public or that the proposed type of vending machine is not reasonably suitable and practical for the purpose.

B. The insurance producer shall display on or near each vending machine evidence of the producer's authority to solicit applications and issue policies in a manner and form as the director may reasonably require. The evidence of authority shall specify the name and address of both the insurer and the insurance producer, the kind of insurance and type of policy to be sold, the place where the machine is to be in operation and the machine's identification number. The authority granted pursuant to this section expires coincident with the insurance producer's license. The director shall suspend, revoke or otherwise terminate the authority to operate a vending machine coincidentally with that of the insurance producer.
A.R.S. § 20-362 — Arizona Code / Title 20 / Chapter 2 / Article 4 / Section 362
20-362 Notice to director of changes in rating organization
Status: in_force

20-362. Notice to director of changes in rating organization

Every rating organization shall notify the director promptly of every change in:

1. Its constitution, its articles of agreement or association, or its certificate of incorporation, and its bylaws, rules and regulations governing the conduct of its business.

2. Its list of members and subscribers.

3. The name and address of the resident of this state designated by it upon whom notices or orders of the director or process affecting the rating organization may be served.
A.R.S. § 20-1510 — Arizona Code / Title 20 / Chapter 6 / Article 7 / Section 1510
20-1510 Homeowner's or renter's insurance; dog breeds; prohibitions; definitions
Status: in_force

20-1510. Homeowner's or renter's insurance; dog breeds; prohibitions; definitions

A. The breed of a dog may not be the sole factor considered or used for any of the following purposes:

1. Underwriting or actuarial processes for determining risk, liability or actual or potential losses related to claims involving dogs under a policy of insurance.

2. Questionnaires, surveys or other means of gathering information regarding ownership or possession of a dog or the presence of a dog on premises insured or to be insured under a policy of insurance.

B. For the purposes of this section:

1. "Breed" means the actual or perceived breed or mixture of breeds of a dog.

2. "Policy of insurance" means a homeowner's or renter's policy of insurance.
A.R.S. § 20-3406 — Arizona Code / Title 20 / Chapter 26 / Article 1 / Section 3406
20-3406 Uniform prior authorization request forms; definition
Status: in_force

20-3406. Uniform prior authorization request forms; definition

A. Notwithstanding any other law, on or before January 1, 2022, the department shall approve a uniform prior authorization request form for prescription drugs, devices or durable medical equipment and a uniform prior authorization request form for all other health care procedures, treatments and services.  On or before January 1, 2023, all providers shall use only the approved uniform prior authorization request forms and all health care services plans and utilization review agents shall accept and process prior authorization requests submitted using the approved uniform prior authorization request forms.  Prior authorization requests that are submitted on or after January 1, 2023 are invalid unless the requests are submitted on the approved uniform prior authorization request forms.  The uniform prior authorization request forms shall both:

1. Not exceed two printed pages.  This two-page limit does not apply to or include a provider's notes or documentation that the provider submits in support of a prior authorization request.

2. Meet the electronic submission and acceptance requirements prescribed in section 20-3403.

B. In approving the uniform prior authorization request forms, the department shall both:

1. Consider the following:

(a) Any existing prior authorization request forms that the centers for medicare and medicaid services or the United States department of health and human services has developed.

(b) Any national standards relating to electronic prior authorization.

(c) Any other form adopted by the director or another state agency.

2. Seek input from interested stakeholders, including providers, health care services plans, utilization review agents, pharmacists and pharmacy benefit managers.

C. This section does not prohibit a payor or any entity acting for a payor under contract with the payor from using a prior authorization methodology that uses an internet webpage, an internet webpage portal or a similar electronic, internet and web-based system if the methodology is consistent with the uniform prior authorization request forms approved by the director pursuant to this section.

D. For the purposes of this section, "provider" includes a health professional as defined in section 32-3218 or a health care institution that is licensed under title 36.
A.R.S. § 20-696.04 — Arizona Code / Title 20 / Chapter 3 / Article 8 / Section 696.04
20-696.04 Description of actuarial memorandum including an asset adequacy analysis and regulatory asset adequacy issues summary
Status: in_force

20-696.04. Description of actuarial memorandum including an asset adequacy analysis and regulatory asset adequacy issues summary

A. Pursuant to section 20-510, subsection E or F, the appointed actuary shall prepare a memorandum to the company describing the analysis in support of the appointed actuary's opinion regarding the reserves.

B. The director may examine the memorandum pursuant to this section and shall return the memorandum to the company after the examination.  The memorandum is not a record of the department and is not subject to automatic filing with the director.

C. The appointed actuary may rely on and include as a part of the memorandum other memoranda that are prepared and signed by other actuaries who are qualified pursuant to section 20-696.02, subsection B. The memorandum shall state that the appointed actuary relied on other qualified actuaries to prepare the memorandum.

D. If the director requests a memorandum and no such memorandum exists, or if the director finds that the analysis described in the memorandum fails to meet the standards of the actuarial standards board or the standards and requirements of this article, the director may designate a qualified actuary to review the opinion and prepare a supporting memorandum as is required for review. The company shall pay any reasonable and necessary expenses of the independent review.  The director shall direct and control the review.

E. The reviewing actuary who is designated under subsection D of this section has the same status as an examiner for the purposes of obtaining data from the company. The director shall retain the work papers and documentation of the reviewing actuary. The director shall keep the work papers and documentation confidential.  The reviewing actuary shall not be an employee of a consulting firm that is involved with the preparation of any prior actuarial memorandum or opinion for the insurer pursuant to this article during the current year or the preceding three years.

F. The appointed actuary shall prepare a regulatory asset adequacy issues summary pursuant to subsection H of this section. The regulatory asset adequacy issues summary shall be submitted no later than March 15 of the year following the year for which a statement of actuarial opinion based on asset adequacy is required.  The director shall keep the regulatory asset adequacy issues summary confidential to the same extent and under the same conditions as the actuarial memorandum.

G. If an actuarial opinion is provided the memorandum shall demonstrate that the analysis was conducted pursuant to the standards for asset adequacy prescribed pursuant to section 20-696.03 and any additional standards prescribed pursuant to this article.  The memorandum shall specify:

1. For reserves:

(a) Product descriptions, including market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant.

(b) Source of liability in force.

(c) Reserve method and basis.

(d) Investment reserves.

(e) Reinsurance arrangements.

(f) Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis.

(g) Documentation of assumptions, including documentation to allow an actuary reviewing the actuarial memorandum to form a conclusion about the reasonableness of the assumptions, to test reserves for the following:

(i) Base lapse rates and excess lapse rates.

(ii) Interest crediting rate strategy.

(iii) Mortality.

(iv) Policyholder dividend strategy.

(v) Competitor or market interest rate.

(vi) Annuitization rates.

(vii) Commissions and expenses.

(viii) Morbidity.

2. For assets:

(a) Portfolio descriptions, including a risk profile that discloses the quality, distribution and types of assets.

(b) Investment and disinvestment assumptions.

(c) Source of asset data.

(d) Asset valuation bases.

(e) Documentation of assumptions, including documentation to allow an actuary reviewing the actuarial memorandum to form a conclusion about the reasonableness of the assumptions, made for:

(i) Default costs.

(ii) Bond call function.

(iii) Mortgage prepayment function.

(iv) Determining market value for assets sold due to disinvestment strategy.

(v) Determining yield on assets acquired through the investment strategy.

3. For the analysis basis:

(a) Methodology.

(b) Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed.

(c) Rationale for degree of rigor in analyzing different blocks of business.

(d) Criteria for determining asset adequacy.

(e) Impact of federal income taxes and the method of treating reinsurance in the asset adequacy analysis.

4. A summary of material changes in methods, procedures or assumptions from a prior year's asset adequacy analysis.

5. A summary of results.

6. Conclusions.

H. The regulatory asset adequacy issues summary shall include:

1. Descriptions of the scenarios tested, including whether those scenarios are stochastic or deterministic, and the sensitivity testing done relative to those scenarios. If negative ending surplus results under certain tests in the aggregate, the appointed actuary shall describe those tests and the amount of additional reserve as of the valuation date that, if held, would eliminate the negative aggregate surplus values.  Ending surplus values shall be determined either by extending the projection period until the in force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force.

2. The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different than the assumptions used in the previous asset adequacy analysis.

3. The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but that were not subject to analysis for the current opinion.

4. Comments on any interim results that may be of significant concern to the appointed actuary.

5. The methods used by the appointed actuary to recognize the impact of reinsurance on the company's cash flows, including both assets and liabilities, under each of the scenarios tested.

6. The extent to which the appointed actuary is satisfied that all options, whether explicit or embedded, in any asset or liability and equity-like features in any investments are appropriately considered in the asset adequacy analysis.

7. The name of the company for which the regulatory asset adequacy issues summary is being supplied.

8. The signature of the appointed actuary and the date of the signature.

I. The memorandum shall include the following statement:

Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate actuarial standards of practice as promulgated by the actuarial standards board that form the basis for this memorandum.

J. An appropriate allocation of assets in the amount of the interest maintenance reserve whether positive or negative, shall be used in any asset adequacy analysis.  Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the asset valuation reserve. These asset valuation reserve assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support.

K. The amount of the assets used for the asset valuation reserve shall be disclosed in the table of reserves and liabilities of the opinion and in the memorandum.  The method used for selecting particular assets or allocated portions of assets shall be disclosed in the memorandum.

L. The appointed actuary shall retain on file, for at least seven years, sufficient documentation to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained.
A.R.S. § 20-584 — Arizona Code / Title 20 / Chapter 3 / Article 3 / Section 584
20-584 Trust companies as depositaries
Status: in_force

20-584. Trust companies as depositaries

Upon request of the insurer, the state treasurer may designate any solvent trust company or other solvent financial institution having trust powers domiciled in this state as the treasurer's depositary to receive and hold any such deposit. Any such deposit so held shall be at the expense of the insurer.
A.R.S. § 20-2330 — Arizona Code / Title 20 / Chapter 13 / Article 1 / Section 2330
20-2330 Continuation of small group coverage; notice; duration; definitions
Status: in_force

20-2330. Continuation of small group coverage; notice; duration; definitions

A. For health benefit plans issued or renewed after December 31, 2018, a health benefits plan shall provide that an enrollee and any qualified dependent may continue coverage under the plan as provided in this section.

B. A small employer shall notify the enrollee in writing of the enrollee's qualifying event and right to continue the enrollee's and any qualified dependent's coverage within thirty days after the qualifying event.  A written communication or a notice postmarked within forty-four days after a qualifying event mailed by the employer to the enrollee's last known address satisfies this notice requirement.  Notice to the enrollee constitutes notice to any qualified dependent unless the employer knows there is a qualified dependent who does not live at the same address and knows the dependent's address, in which case a separate notice shall be sent to the qualified dependent.  The notice shall inform the enrollee and any qualified dependent of the following information:

1. The enrollee's and any qualified dependent's right to continue coverage at the full cost of the coverage, which includes the employer's contribution and the enrollee's contribution and an administrative fee for the employer that may not exceed five percent of the premium.

2. The amount of the full cost of the coverage, stated separately for the enrollee and qualified dependent.

3. The process and deadline for the enrollee to elect continuation coverage for the enrollee and any qualified dependent.

4. The date and time by which the enrollee must submit the initial and ongoing payments to the employer to continue coverage.

5. The loss of continuation coverage if the enrollee fails to pay the premium and administrative fee in a timely manner.

C. The department shall prepare a sample notice of coverage continuation form and make the form available on its website.  Use of the department's form, if properly completed, is presumed to satisfy the requirements in subsection B of this section.

D. To continue coverage, the enrollee or a qualified dependent shall elect continuation coverage in writing for the enrollee and any qualified dependent within sixty days after the date of the notice to elect continuation coverage and submit the first month premium to the employer within forty-five days after the date of election to continue coverage.  If the enrollee or qualified dependent elects coverage pursuant to this section, coverage continues as if there had been no interruption.

E. Notwithstanding subsection D of this section, if the employer fails to provide complete, accurate and timely notice of the right to continue coverage as specified in subsection B of this section, the enrollee has one hundred twenty days after the date of the notice to elect continuation coverage and pay the required premium and administrative fee.

F. If an insurance renewal occurs during the enrollee's or qualified dependent's period of eligibility for continuation coverage, the employer shall notify the enrollee or qualified dependent of any change to the premium due at least thirty days before the change is effective through the process prescribed in subsections B, C, D and E of this section.

G. This section does not apply if continuation coverage benefits are available to enrollees or qualified dependents pursuant to 29 United States Code sections 1161 through 1169 or 42 United States Code sections 300bb-1 through 300bb-8 or if the enrollee or qualified dependent seeking to continue coverage is eligible for medicare.

H. Continuation coverage ends on the earliest of the following:

1. Eighteen months after the date the continuation coverage begins.

2. The date on which coverage ceases under the health benefits plan due to the enrollee's failure to timely pay the premium and administrative fee.

3. The date on which the enrollee or a qualified dependent becomes eligible for medicare or medicaid or obtains any other health care coverage, with respect only to that person.

4. The date on which the employer terminates coverage under the health benefits plan for all employees. If the employer terminates coverage under the health benefits plan for all employees and replaces the plan with coverage under another plan, the enrollee and any qualified dependents who have continuation coverage have the right to become covered under the new plan for the balance of the period that the enrollee or qualified dependent could have remained covered under the continuation coverage.

5. As to a dependent child of the enrollee, the date the dependent child would otherwise lose coverage under the terms of the health benefits plan due to attaining a certain age.

I. A qualified dependent who is determined to have a disability, under title II or title XVI of the social security act, at the time of a qualifying event may be eligible to continue coverage for an additional eleven months if the qualified dependent provides the written determination of disability from the social security administration to the employer within sixty days after the date of that determination and before the end of the eighteen-month continuation period.  The health benefits plan may charge up to one hundred fifty percent of the group rate during the eleven-month disability extension. The qualified dependent shall notify the employer within thirty days after the social security administration determines that the qualified dependent no longer has a disability under title II or title XVI of the social security act.

J. If a qualifying event as defined in subsection N, paragraph 3, subdivision (b), (c), (d) or (e) of this section occurs during the eighteen-month continuation period, a qualified dependent may be eligible to continue coverage for an additional eighteen months.

K. If an enrollee is in the military reserve or national guard and is called to active duty and the enrollee's employment is terminated either after or during the active duty period, the termination is a separate qualifying event, distinct from the qualifying event that may have occurred when the enrollee was called to active duty, and the enrollee and any qualified dependent are eligible for a new eighteen-month benefit period beginning on the later of the date active duty ends or the date of employment termination.

L. If an enrollee is in the military reserve or national guard and is called to active duty, the following events are qualifying events distinct from the qualifying event that may have occurred when the enrollee was called to active duty:

1. The enrollee dies during the period of active duty.

2. A divorce or legal separation of the enrollee from the enrollee's spouse occurs.

3. A dependent child ceases to be a dependent child under the requirements of the employer's health benefits plan.

M. Notwithstanding subsection H of this section, if an enrollee who is in the military reserve or national guard has elected to continue coverage and is thereafter called to active duty and the coverage under the employer's health benefits plan is terminated by the enrollee or the health benefits plan due to the enrollee becoming eligible for a health care program provided by the United States department of defense, the eighteen-month period or any other applicable maximum time period for which the enrollee would otherwise be entitled to continuation coverage is tolled during the time that the enrollee is covered under the health care program.  Within sixty-three days after the federal health care program coverage terminates, the enrollee may elect to continue coverage under the employer's health benefits plan retroactively to the date coverage terminated under the federal health care program for the remainder of the eighteen-month period or any other applicable time period, subject to termination of coverage at the earliest of the conditions specified in subsection H of this section.

N. For the purposes of this section:

1. "Enrollee" means an employee who is covered under an employer's health benefits plan for at least three months before a qualifying event.

2. "Qualified dependent" means a person who is covered under an enrollee's health benefits plan immediately before a qualifying event and who is the spouse or dependent child of the enrollee.

3. "Qualifying event" means the date coverage ends due to:

(a) Voluntary or involuntary termination of employment for a reason other than gross misconduct or reduction of hours required to qualify for health benefits under the employer's health benefits plan.

(b) Divorce or separation from the enrollee.

(c) Death of the enrollee.

(d) The enrollee becoming eligible for medicare.

(e) A dependent child ceasing to be a dependent child under the generally applicable requirements of the employer's health benefits plan.

(f) A retired enrollee or the spouse or dependent child of a retiree losing coverage within one year before or after commencement of a bankruptcy proceeding under title XI of the United States Code by the employer from whose employment the retired enrollee retired.

4. "Small employer" means an employer that employs an average of at least one but fewer than twenty eligible employees during the preceding calendar year.
A.R.S. § 20-359 — Arizona Code / Title 20 / Chapter 2 / Article 4 / Section 359
20-359 Deviations from filed workers' compensation rates
Status: in_force

20-359. Deviations from filed workers' compensation rates

A. Every insurer shall adhere to the filings made by the rating organization of which it is a member, except that any member insurer may file with the director:

1. Up to six uniform percentage deviations that decrease or increase the statewide rate portion of the rating organization's rate filing. If more than one deviation is filed by an insurer, each deviation must be established consistent with the underwriting rules that are based on criteria that would lead to a logical distinction of potential risk.

2. A subclassification rate related rule that deviates from the rules or schedule rating plan filed by the insurer's rating organization.  An insurer shall not simultaneously apply a deviation and a schedule rating to the same insured risk.

B. In addition to the six uniform percentage deviations authorized under subsection A, paragraph 1 of this section, insurers covering firefighters and fire investigators may file one uniform percentage deviation that increases the statewide rates under the rating organization's rate filing for the class codes associated with firefighters and fire investigators to address the anticipated increase in losses and expenses for claims that are compensable pursuant to section 23-901.09.  The deviation filing shall be accompanied by analysis from an actuary that substantively illustrates the basis for the rate increase, including information made available by the industrial commission of Arizona pursuant to section 23-971 and the anticipated and, when available, actual combined loss ratio, claim frequency and claim severity associated with these claims.  The supporting documentation submitted with the filing must be sufficient to allow the department to assess the reasonableness of the insurer's assumptions and justification for the deviation and shall include data related to workers' compensation indemnity and medical claims and administrative expenses associated specifically with presumptive coverage related to workers' compensation claims. The insurer may use data or analysis from any of the following sources:

1. The insured or insurer.

2. Self-funded employers providing workers' compensation.

3. The industrial commission of Arizona.

4. A risk retention pool.

5. Studies and information illustrating the state and national frequency of cancer among firefighters and fire investigators.

6. The assigned risk pool or assigned risk.

7. Claims and expense data from other relevant lines of insurance such as long-term disability insurance, group or individual major medical insurance or long-term care insurance.

8. Other available cancer-related statistics.

9. Relevant incurred but not reported workers' compensation claims data.

C. The director may use independent contractor examiners to analyze the supporting justification of a requested deviation under subsection B of this section pursuant to section 20-358, subsection D.

D. Notwithstanding subsection A, paragraph 2 of this section, in addition to the deviation filing authorized under subsection B of this section, insurers may file and apply a schedule rating plan to adjust premiums associated with firefighters and fire investigators class codes, based on loss control programs or activities undertaken by the insurer to reduce losses associated with section 23-901.09.  The schedule rating plan must be filed with and approved by the director and shall be in addition to and separate from any other schedule rating plan available to the insurer.

E. Each deviation filed shall be on file with the director for a waiting period of at least thirty days before it becomes effective, except that a deviation filed pursuant to subsection B of this section shall be on file with the director for at least sixty days before it becomes effective. On written application by the insurer making the filing, the director may authorize a filing to become effective before the waiting period expires. A deviation that is filed pursuant to subsection A, paragraph 1 of this section and that is not disapproved by the director expires the following December 31 at midnight in this state unless the director terminates the deviation sooner. A deviation that is filed pursuant to subsection A, paragraph 2 of this section continues until the insurer withdraws the deviation or the director determines that the deviation no longer meets the standards prescribed in section 20-356, paragraph 1. At any time the director may require an insurer to actuarially support a deviation. The insurer that files the deviation shall simultaneously send a copy of the filing to the rating organization of which it is a member and to any designated rating organization.

F. A rating organization shall notify the director if the organization disapproves any deviation relating to workers' compensation insurance. The director shall notify the industrial commission of Arizona of the disapproval within ten days after receipt of the disapproval from the rating organization.
A.R.S. § 20-536.01 — Arizona Code / Title 20 / Chapter 3 / Article 2 / Section 536.01
20-536.01 Separate accounts
Status: in_force

20-536.01. Separate accounts

A. Except as may be provided with respect to reserves for guaranteed benefits referred to in section 20-651, subsection C, amounts allocated to any separate account established pursuant to section 20-651 and accumulations thereon may be invested and reinvested in any class of investments, having due regard for the kind of investments permitted and the qualitative requirements prescribed by the laws of this state governing the investments of life insurance companies, but without regard to the quantitative restrictions or limitations applicable to those investments, provided that separate account investments shall not be acquired through bulk reinsurance, merger or consolidation unless acquired with the specific consent of the director, and shall not include the investments described in section 20-556, paragraph 1. Notwithstanding any other law, section 20-549 applies to and governs investments in each separate account based on the value of its assets. The investments in such separate account or accounts shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.

B. Investments in separate accounts shall be kept unencumbered and otherwise unimpaired. No sale, exchange or other transfer of assets may be made by a company between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made, and unless such transfer, whether into or from a separate account, is made by a transfer of cash, or by a transfer of securities having a readily determinable market value, provided that such transfer of securities is approved by the director. The director may approve other transfers among such accounts if, in the director's opinion, such transfers would not be inequitable.

C. Notwithstanding any other law, if approved by the director investments in separate accounts may be pledged as collateral to secure the commitment of a third party to pay in full the obligations of the life insurance company to contract holders of the separate account or separate accounts if the life insurance company becomes insolvent as defined in section 20-611 or is subject to an order of liquidation pursuant to sections 20-616 and 20-621 or if the investments in the separate account or separate accounts are not adequate to discharge the life insurance company's obligations to the contract holders under contracts that are supported by the separate account or separate accounts. The director shall issue an order after a hearing. The order shall establish criteria for the third parties who are eligible to provide credit enhancement for a separate account or separate accounts and to accept assets that are pledged pursuant to this subsection, except that the director may approve any specific transaction regardless of the criteria set forth in the order.

D. Notwithstanding any other law and except as may be provided with respect to reserves for guaranteed benefits under section 20-651, subsection C, amounts that are allocated to any separate account established for variable life contracts, variable annuity contracts and guaranteed investment contracts pursuant to section 20-651, and accumulations on the accounts, may be invested or reinvested in any class of investments permitted under this article subject to the qualitative, but without regard to the quantitative, restrictions or limitations prescribed by the laws of this state. Separate account investments shall not be acquired by bulk reinsurance, merger or consolidation unless the director specifically consents and shall not include investments described in section 20-556, paragraph 1. Section 20-549 applies to and governs investments in each separate account unless the director prescribes standards by order after hearing to allow investments in each separate account to exceed the limits prescribed in section 20-549.
A.R.S. § 20-492.05 — Arizona Code / Title 20 / Chapter 2 / Article 16 / Section 492.05
20-492.05 Third-party consultants; confidentiality standards
Status: in_force

20-492.05. Third-party consultants; confidentiality standards

A. The director may retain, at the insurer's expense, third-party consultants, including attorneys, actuaries, accountants and other experts not otherwise a part of the director's staff, as may be reasonably necessary to assist the director in reviewing the CGAD and related information or the insurer's compliance with this article.

B. Persons who are retained under subsection A of this section are under the direction and control of the director and shall act in a purely advisory capacity.

C. The national association of insurance commissioners and third-party consultants are subject to the same confidentiality standards and requirements as the director.

D. As part of the retention process, a third-party consultant shall verify to the director, with notice to the insurer, that the third-party consultant does not have a conflict of interest and that the third-party consultant has internal procedures in place to monitor compliance with a conflict and to comply with the confidentiality standards and requirements of this article.

E. A written agreement with the national association of insurance commissioners or a third-party consultant governing sharing and use of information provided pursuant to this article shall contain all of the following provisions and expressly require the written consent of the insurer before making public information provided under this article:

1. Specific procedures and protocols for maintaining the confidentiality and security of CGAD-related information that is shared with the national association of insurance commissioners or a third-party consultant pursuant to this article.

2. Procedures and protocols for sharing by the national association of insurance commissioners only with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agree in writing to maintain the confidentiality and privileged status of the CGAD-related documents, materials or other information and verify in writing the legal authority to maintain confidentiality.

3. A provision that specifies that ownership of the CGAD-related information that is shared with the national association of insurance commissioners or a third-party consultant remain with the department and that the national association of insurance commissioners' or third-party consultant's use of the information is subject to the direction of the director.

4. A provision that prohibits the national association of insurance commissioners or a third-party consultant from storing the information shared pursuant to this article in a permanent database after the underlying analysis is completed.

5. A provision that requires the national association of insurance commissioners or a third-party consultant to provide prompt notice to the director and to the insurer or insurance group regarding a subpoena, request for disclosure or request for production of the insurer's CGAD-related information.

6. A requirement that the national association of insurance commissioners or a third-party consultant 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 shared with the national association of insurance commissioners or a third-party consultant pursuant to this article.
A.R.S. § 20-1107 — Arizona Code / Title 20 / Chapter 5 / Article 1 / Section 1107
20-1107 Application for insurance
Status: in_force

20-1107. Application for insurance

No life or disability insurance contract upon an individual, except a contract of group life insurance or of group or blanket disability insurance, shall be made or effectuated unless at the time of making the contract the individual insured, being of competent legal capacity to contract, applies therefor or consents thereto, except in the following cases:

1. A spouse may effectuate such insurance upon the other spouse.

2. Any person having an insurable interest in the life of a minor, or any person upon whom a minor is dependent for support and maintenance, may effectuate insurance upon the life of or pertaining to the minor.
A.R.S. § 20-2537 — Arizona Code / Title 20 / Chapter 15 / Article 2 / Section 2537
20-2537 External independent review; expedited external independent review
Status: in_force

20-2537. External independent review; expedited external independent review

(Conditionally Rpld.)

A. If the utilization review agent denies the member's request for a covered service or claim for a covered service at all applicable internal levels of review or if the member has exhausted the health care insurer's internal levels of review pursuant to section 20-2533, subsection F, the member may initiate an external independent review.

B. Except as provided in subsection N of this section, a member may initiate an external independent review within four months after the member receives written notice by the utilization review agent of an adverse determination made pursuant to section 20-2534 or 20-2536 by sending to the utilization review agent a written request for an external independent review, including any material justification or documentation to support the member's request for the covered service or claim for a covered service.

C. Except as provided in subsection N of this section, within five business days after the utilization review agent receives a request for an external independent review from the member pursuant to subsection B of this section or the director pursuant to subsection J of this section, or if the utilization review agent initiates an external independent review pursuant to section 20-2536, subsection F, the utilization review agent shall:

1. Send a written acknowledgment to the director, the member, the member's treating provider and the health care insurer. The acknowledgement shall include notice to the member that the member has five business days after receiving the notice to submit additional written evidence to the department for consideration by the assigned independent review organization.

2. Forward to the director the request for review, the terms of agreement in the member's policy, evidence of coverage or a similar document and all medical records and supporting documentation used to render the determination pertaining to the member's case, a summary description of the applicable issues including a statement of the utilization review agent's determination, the basis, criteria used, clinical reasons and rationale for that determination, the relevant portions of the utilization review agent's utilization review plan and the name and credentials of the licensed health care provider who reviewed the case as required by section 20-2533, subsection L.

D. Except as provided in subsection N of this section, within five days after the director receives all of the information prescribed in subsection C, paragraph 2 of this section and if the case involves an issue of medical necessity or appropriateness, including health care setting, level of care or effectiveness of a covered benefit, or is experimental or investigational under the coverage document, the director shall choose an independent review organization procured pursuant to section 20-2538 and forward to the organization all of the information required by subsection C, paragraph 2 of this section.

E. Within one business day after the director receives additional written evidence submitted by the member pursuant to subsection C, paragraph 1 of this section, the director shall provide a copy of the evidence to the health care insurer and the independent review organization. The independent review organization shall consider the evidence in making its determination and in its discretion may consider evidence submitted after five business days.

F. Except as provided in subsection N of this section, for cases involving an issue of medical necessity or appropriateness, including health care setting, level of care or effectiveness of a covered benefit, or is experimental or investigational under the coverage document, within twenty-one days after the date of receiving a case for independent review from the director, the independent review organization shall evaluate and analyze the case and, based on all information required under subsection C, paragraph 2 of this section, render a determination that is consistent with the utilization review plan on whether or not the service or claim for the service is medically necessary or appropriate, including health care setting, level of care or effectiveness of a covered benefit, or is experimental or investigational and send the determination to the director.

G. The independent review organization's determination pursuant to subsection F of this section shall be consistent with the utilization review plan and in accordance with the following:

1. The independent review organization reviewer shall consider the following information in rendering a determination, as appropriate and available under the circumstances:

(a) The member's pertinent medical records.

(b) The treating provider's recommendation.

(c) Any consulting report from a health care professional.

(d) Any document submitted by a health care insurer or member.

(e) For claims or requests for services denied for reasons other than as experimental or investigational, the independent review organization shall also consider:

(i) The most appropriate practice guidelines, which shall include applicable evidence-based standards and may include any other practice guidelines developed by the federal government, national or professional medical societies, boards and associations.

(ii) Any applicable clinical review criteria developed and used by the health carrier or its designee utilization review organization.

(iii) The opinion of the independent review organization's clinical reviewer or reviewers after considering subdivisions (a) through (d) and subdivision (e), items (i) and (ii) of this paragraph to the extent the information or documents are available and the clinical reviewer or reviewers consider appropriate.

(f) For claims or requests for services denied as experimental or investigational, the independent review organization shall also consider the terms of coverage under the member's policy with the health care insurer to ensure that except for a health care insurer's determination for an experimental or investigational service, the reviewer's opinion is not contrary to the terms of coverage and any of the following:

(i) Whether the service has been approved by the United States food and drug administration for the condition.

(ii) Whether the medical or scientific evidence or evidence-based standards demonstrate that the expected benefit of the service is more likely than not to be beneficial to the member than any available standard service and that any adverse risk is not substantially increased over adverse risks of available standard services.

2. The independent review organization reviewer's written determination shall include:

(a) A description of the covered person's medical condition.

(b) A description of the indicators relevant to determining whether there is sufficient evidence to demonstrate that the expected benefit of the service is more likely than not to be beneficial to the member than any available standard service and that any adverse risk is not substantially increased over adverse risks of available standard services.

(c) A description and analysis of any medical or scientific evidence considered in reaching the determination.

(d) A description and analysis of any evidence-based standard.

(e) Information on whether the reviewer's rationale for the determination is based on paragraph 1, subdivision (e), items (i) and (ii) of this subsection.

H. Within five business days after receiving a notice of determination from the independent review organization, the director shall send notice of the determination to the utilization review agent, the health care insurer, the member and the member's treating provider. The determination is a final administrative decision pursuant to title 41, chapter 6, article 10 and is subject to judicial review pursuant to title 12, chapter 7, article 6. The health care insurer shall provide any service or pay any claim determined to be covered and medically necessary by the independent review organization for a case under review without delay regardless of whether judicial review is sought.

I. Except as provided in subsection N of this section, for cases involving an issue of coverage, within fifteen business days after receipt of all of the information prescribed in subsection C, paragraph 2 of this section from the utilization review agent, the director shall determine if the service or claim is or is not covered and if the adverse determination made pursuant to section 20-2536 conforms to the utilization review agent's utilization review plan and this article and shall send a notice of determination to the utilization review agent, the health care insurer, the member and the member's treating provider.

J. If the director finds that the case involves a medical issue or is unable to determine issues of coverage, the director shall submit the member's case to the external independent review organization in accordance with subsections F and N of this section.

K. After a determination is made pursuant to subsection F, I, J or N of this section, the appeals and administrative processes are completed and the department's role is ended, except:

1. To transmit, when necessary, a record of the proceedings to superior court or to the office of administrative hearings.

2. To issue a final administrative decision pursuant to section 41-1092.08.

L. Except as provided in subsection N of this section, on written request by the independent review organization, the member or the utilization review agent, the director may extend the twenty-one day time period prescribed in subsection F of this section for up to an additional ten days if the requesting party demonstrates good cause for an extension.

M. A determination made by the director or an independent review organization pursuant to this section is admissible in proceedings involving a health care insurer or utilization review agent.

N. If the utilization review agent denies the member's request for a covered service or claim for a covered service at the expedited medical review level presented and resolved pursuant to section 20-2534, subsections A and E, denies a health care service for which the member received emergency services but has not been discharged or denies, reduces or terminates coverage for a member's admission, the availability of care, a continued stay for a course of treatment before the end of the period of time or number of treatments recommended by the treating provider, or if a member exhausted or the health care insurer has waived the health care insurer's internal levels of review pursuant to section 20-2533, subsections F and G, the member may initiate an expedited external independent review in accordance with the following:

1. Within four months after the member receives written notice by the utilization review agent of the adverse determination made pursuant to section 20-2534, if the member decides to initiate an external independent review, the member shall send to the utilization review agent a written request for an expedited external independent review, including any material justification or documentation to support the member's request for the covered service or claim for a covered service. For an adverse determination involving an experimental or investigational service, a member may make an oral request if the member's treating physician certifies in writing that the recommended service or treatment would be significantly less effective if not promptly initiated.

2. Within one business day after the utilization review agent receives a request for an expedited external independent review from the member pursuant to this subsection or if the utilization review agent initiates an expedited external independent review pursuant to section 20-2534, subsection D, the utilization review agent shall:

(a) Send a written acknowledgment to the director, the member, the member's treating provider and the health care insurer.

(b) Forward to the director the request for an expedited independent external review, the terms of agreement in the member's policy, evidence of coverage or a similar document and all medical records and supporting documentation used to render the determination pertaining to the member's case, a summary description of the applicable issues including a statement of the utilization review agent's determination, the basis, criteria used clinical reasons and rationale for that determination, the relevant portions of the utilization review agent's utilization review plan and the name and credentials of the licensed health care provider who reviewed the case as required by section 20-2534, subsection B.

3. Within two business days after the director receives all of the information prescribed in this subsection and if the case involves an issue of medical necessity or appropriateness, including health care setting, level of care or effectiveness of a covered benefit, or is experimental or investigational, the director shall choose an independent review organization procured pursuant to section 20-2538 and forward to the organization all of the information required by this subsection.

4. For cases involving an issue of medical necessity or appropriateness, including health care setting, level of care or effectiveness of a covered benefit, or is experimental or investigational, within seventy-two hours from the date of receiving a case for expedited external independent review from the director, the independent review organization shall evaluate and analyze the case and, based on all information required under subsection C, paragraph 2 of this section, render a determination that is consistent with the utilization review plan on whether or not the service or claim for the service is medically necessary or appropriate, including health care setting, level of care or effectiveness of a covered benefit, or is experimental or investigational and send the determination to the director.  Within one business day after receiving a notice of determination from the independent review organization, the director shall send a notice of the determination to the utilization review agent, the health care insurer, the member and the member's treating provider.  The determination by the independent review organization is a final administrative decision pursuant to title 41, chapter 6, article 10 and, except as provided in section 41-1092.08, subsection H, is subject to judicial review pursuant to title 12, chapter 7, article 6. The health care insurer shall provide any service or pay any claim determined to be covered and medically necessary by the independent review organization for the case under review regardless of whether judicial review is sought.

5. For cases involving an issue of coverage, within two business days after receipt of all of the information prescribed in subsection C of this section from the utilization review agent, the director shall determine if the service or claim is or is not covered and if the adverse determination made pursuant to section 20-2534 conforms to the utilization review agent's utilization review plan and this article and shall send a notice of determination to the utilization review agent, the health care insurer, the member and the member's treating provider.

O. Notwithstanding title 41, chapter 6, article 10 and section 12-908, if a party to a decision issued under this section seeks further administrative review, the department shall not be a party to the action unless the department files a motion to intervene in the action.

P. The independent review organization, the director or the office of administrative hearings may not order the health care insurer to provide a service or to pay a claim for a benefit or service that is excluded from coverage by the contract.

Q. The health care insurer shall provide any service or pay any claim determined in a final administrative decision to be covered and medically necessary for the case under review regardless of whether judicial review is sought. Any proceedings before the office of administrative hearings that involve an expedited external independent review and that are subject to subsection N of this section shall be promptly instituted and completed.
A.R.S. § 20-375 — Arizona Code / Title 20 / Chapter 2 / Article 4 / Section 375
20-375 Making of title insurance rates
Status: in_force

20-375. Making of title insurance rates

A. Every title insurer that shall make its own rates, and every title insurance rating organization, shall make rates that are not excessive nor inadequate for the safety and soundness of any title insurer, that do not unfairly discriminate between risks in this state which involve essentially the same exposure to loss and expense elements, and that give due consideration to all of the following matters:

1. The desirability for stability of rate structures.

2. The necessity, by encouraging growth in assets of title insurers in periods of high business activity, of assuring the financial solvency of title insurers in periods of economic depression.

3. The necessity for paying dividends on the capital stock of title insurers sufficient to induce capital to be invested therein.

B. Every title insurer that shall make its own rates, and every title insurance rating organization, shall adopt basic classifications of policies or contracts of title insurance which shall be used as the basis for rates.

C. Rates within each rate classification may, at the discretion of the title insurer which files its own rates, or at the discretion of the title insurance rating organization, be less than the cost of the expense elements in the case of smaller insurance policies or contracts, and the excess may be charged against the larger insurance policies or contracts without rendering the rates unfairly discriminatory.

D. There shall be no combined rate for the issuance of title insurance policies and escrow services rendered in connection with such insurance.
A.R.S. § 20-3602 — Arizona Code / Title 20 / Chapter 30 / Article 1 / Section 3602
20-3602 Credit allowed a domestic ceding insurer; definition
Status: in_force

20-3602. Credit allowed a domestic ceding insurer; definition

A. A domestic ceding insurer shall be allowed a credit for reinsurance as either an asset or a reduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of subsection C, D, E, F, G, H or M of this section. The director may adopt rules pursuant to section 20-3604 that specify additional requirements relating to or setting forth any of the following:

1. The valuation of assets or reserve credits.

2. The amount and forms of security supporting reinsurance arrangements described in section 20-3603, subsection B.

3. The circumstances pursuant to which credit will be reduced or eliminated.

B. Credit shall be allowed under subsection C, D or E of this section only for cessions of those kinds or classes of business that the assuming insurer is licensed or otherwise allowed to write or assume in its state of domicile or, in the case of a United States branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under subsection E or F of this section only if the applicable requirements of subsection N have been satisfied.

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

D. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited by the director as a reinsurer in this state. To be eligible for accreditation, a reinsurer shall do all of the following:

1. File with the director evidence of its submission to this state's jurisdiction.

2. Submit to this state's authority to examine its books and records.

3. Be licensed to transact insurance or reinsurance in at least one state or, in the case of a United States branch of an alien assuming insurer, be entered through and licensed to transact insurance or reinsurance in at least one state.

4. File annually with the director 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.

5. Demonstrate to the satisfaction of the director that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders of at least $20,000,000 and its accreditation has not been denied by the director within ninety days after submission of its application.

E. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled in or, in the case of a United States branch of an alien assuming insurer, is entered through a state that employs standards regarding credit for reinsurance substantially similar to those applicable under this article and the assuming insurer or United States branch of an alien assuming insurer does both of the following:

1. Maintains a surplus as regards policyholders of at least $20,000,000. This requirement does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.

2. Submits to the authority of this state to examine its books and records.

F. The following apply when credit is allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund for the payment of claims:

1. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified United States financial institution as defined in section 20-3601, subsection B for the payment of the valid claims of its United States ceding insurers, their assigns and successors in interest. To enable the director to determine the sufficiency of the trust fund, the assuming insurer shall report annually to the director information that is substantially the same as the information licensed insurers are required to report on the national association of insurance commissioners annual statement form. The assuming insurer shall submit to examination of its books and records by the director and bear the expense of examination.

2. Credit for reinsurance may not be granted under this subsection unless the form of the trust and any amendments to the trust have been approved by either:

(a) The insurance commissioner of the state where the trust is domiciled.

(b) The insurance commissioner of another state who, pursuant to the terms of the trust instrument, has accepted principal regulatory oversight of the trust.

3. The form of the trust and any trust amendments also shall be filed with the insurance commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument shall provide that contested claims shall be valid and enforceable on the final order of any court of competent jurisdiction in the United States.  The trust shall vest legal title to its assets in its trustees for the benefit of the assuming insurer's United States ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the director.

4. The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. Not later than February 28 of each year, the trustee of the trust shall report to the director in writing the balance of the trust and listing the trust's investments at the preceding year end and shall certify the date of termination of the trust, if so planned, or certify that the trust will not expire before the following December 31.

5. The following requirements apply to the following categories of assuming insurer:

(a) The trust fund for a single assuming insurer shall consist of monies in trust in an amount not less than the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers, and, in addition, the assuming insurer shall maintain a trusteed surplus of at least $20,000,000, except as provided in subdivision (b) of this paragraph.

(b) At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the insurance commissioner 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 United States ceding insurers, 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 may not be reduced to an amount that is less than thirty percent of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust.

(c) In the case of a group, including incorporated and individual unincorporated underwriters, all of the following apply:

(i) For reinsurance ceded under reinsurance agreements with an inception, amendment or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an amount that is not less than the respective underwriters' several liabilities attributable to business ceded by United States domiciled ceding insurers to any underwriter of the group.

(ii) For reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992, and not amended or renewed after that date, notwithstanding any other provision of this article, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several insurance and reinsurance liabilities attributable to business written in the United States.

(iii) In addition to the trusts described in items (i) and (ii) of this subdivision, the group shall maintain in trust a trusteed surplus of which $100,000,000 shall be held jointly for the benefit of the United States domiciled ceding insurers of any member of the group for all years of account.

(iv) The incorporated members of the group may not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the group's domiciliary regulator as are the unincorporated members.

(v) Within ninety days after its financial statements are due to be filed with the group's domiciliary regulator, the group shall provide to the director an annual certification by the group's domiciliary regulator of the solvency of each underwriter member, or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the group.

(d) In the case of a group of incorporated underwriters under common administration, the group shall meet the following requirements:

(i) Have continuously transacted an insurance business outside the United States for at least three years immediately before making application for accreditation.

(ii) Maintain aggregate policyholders' surplus of at least $10,000,000,000.

(iii) Maintain a trust fund in an amount not less than the group's several liabilities attributable to business ceded by United States domiciled ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of the group.

(iv) Maintain a joint trusteed surplus of which $100,000,000 shall be held jointly for the benefit of United States domiciled ceding insurers of any member of the group as additional security for these liabilities.

(v) Within ninety days after its financial statements are due to be filed with the group's domiciliary regulator, make available to the director an annual certification of each underwriter member's solvency by the member's domiciliary regulator and financial statements of each underwriter member of the group prepared by its independent public accountant.

G. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the director as a reinsurer in this state and that secures its obligations in accordance with the requirements of this subsection, and all of the following apply:

1. To be eligible for certification, the assuming insurer shall meet the following requirements:

(a) The assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the director pursuant to paragraph 3 of this subsection.

(b) The assuming insurer must maintain minimum capital and surplus, or its equivalent, in an amount to be determined by the director pursuant to rule.

(c) The assuming insurer must maintain financial strength ratings from two or more rating agencies deemed acceptable by the director pursuant to rule.

(d) The assuming insurer must agree to submit to the jurisdiction of this state, must appoint the director as its agent for service of process in this state and must agree to provide security for one hundred percent of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment.

(e) The assuming insurer must agree to meet applicable information filing requirements as determined by the director, both with respect to an initial application for certification and on an ongoing basis.

(f) The assuming insurer must satisfy any other requirements for certification deemed relevant by the director.

2. An association that includes incorporated and individual unincorporated underwriters may be a certified reinsurer.  To be eligible for certification, in addition to satisfying the requirements prescribed in paragraph 1 of this subsection:

(a) The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents, net of 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 director to provide adequate protection.

(b) The incorporated members of the association may 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 are the unincorporated members.

(c) Within ninety days after its financial statements are due to be filed with the association's domiciliary regulator, the association shall provide to the director an annual certification by the association's domiciliary regulator of the solvency of each underwriter member or, if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association.

3. The director shall create and publish a list of qualified jurisdictions under which an assuming insurer that is licensed and domiciled in a qualified jurisdiction is eligible to be considered for certification by the director as a certified reinsurer, and all of the following apply:

(a) To determine whether the domiciliary jurisdiction of a non-United States assuming insurer is eligible to be recognized as a qualified jurisdiction, the director 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, the benefits and the extent of reciprocal recognition afforded by the non-United States jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction must agree to share information and cooperate with the director with respect to all certified reinsurers domiciled within that jurisdiction.  A jurisdiction may not be recognized as a qualified jurisdiction if the director has determined that the jurisdiction does not adequately and promptly enforce final United States judgments and arbitration awards. The director may consider additional factors.

(b) A list of qualified jurisdictions shall be published through the national association of insurance commissioners committee process.  The director shall consider this list in determining qualified jurisdictions.  If the director approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the director shall provide thoroughly documented justification in accordance with criteria to be developed under rule.

(c) United States jurisdictions that meet the requirement for accreditation under the national association of insurance commissioners financial standards and accreditation program shall be recognized as qualified jurisdictions.

(d) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, the director may suspend the reinsurer's certification indefinitely, in lieu of revocation.

4. The director shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the director pursuant to rule. The director shall publish a list of all certified reinsurers and their ratings.

5. A certified reinsurer shall secure obligations assumed from United States ceding insurers under this subsection at a level that is consistent with its rating, as specified in rules adopted by the director, and all of the following apply:

(a) For a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form that is acceptable to the director and that is consistent with section 20-3603, or in a multibeneficiary trust in accordance with subsection F of this section, except as otherwise provided in this subsection.

(b) If a certified reinsurer maintains a trust to fully secure its obligations subject to subsection F of this section and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, 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 allowed by this subsection or comparable laws of other United States jurisdictions and for its obligations subject to subsection F of this section.  It shall be a condition to the grant of certification under this subsection that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the insurance commissioner with principal regulatory oversight of each such trust account, to fund, on termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account.

(c) The minimum trusteed surplus requirements provided in subsection F 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 this subsection, except that such a trust shall maintain a minimum trusteed surplus of $10,000,000.

(d) With respect to obligations incurred by a certified reinsurer under this subsection, if the security is insufficient, the director shall reduce the allowable credit by an amount proportionate to the deficiency, and may impose further reductions in allowable credit on finding that there is a material risk that the certified reinsurer's obligations will not be paid in full when due.

(e) A certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure one hundred percent of its obligations.  If the director continues to assign a higher rating as allowed by other provisions of this section, this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended.  For the purposes of this subdivision, "terminated" refers to revocation, suspension, voluntary surrender and inactive status.

6. If an applicant for certification has been certified as a reinsurer in a national association of insurance commissioners accredited jurisdiction, the director may defer to that jurisdiction's certification and to the rating assigned by that jurisdiction, and the assuming insurer shall be considered to be a certified reinsurer in this state.

7. To continue to qualify for a reduction in security for its in-force business, a certified reinsurer that ceases to assume new business in this state may request to maintain its certification in inactive status.  An inactive certified reinsurer shall continue to comply with all applicable requirements of this subsection, and the director shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.

H. Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the following conditions:

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

(a) A non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and the European Union, that is a member state of the European Union.

(b) A United States jurisdiction that meets the requirements for accreditation under the national association of insurance commissioners financial standards and accreditation program.

(c) A qualified jurisdiction, as determined by the director pursuant to subsection G, paragraph 3 of this section that is not otherwise described in subdivision (a) or (b) of this paragraph and that meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the director in rule.

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

3. The assuming insurer must have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, that is prescribed in rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.

4. The assuming insurer must agree and provide adequate assurance to the director, in a form specified by the director pursuant to rule, as follows:

(a) The assuming insurer must provide a prompt written notice and explanation to the director if it falls below the minimum requirements prescribed in paragraph 2 or 3 of this subsection or if any regulatory action is taken against it for serious noncompliance with applicable law.

(b) The assuming insurer must consent in writing to the jurisdiction of the courts of this state and to the appointment of the director as agent for service of process. The director may require that consent for service of process be provided to the director and included in each reinsurance agreement. This subdivision does not limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws.

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

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

(e) The assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement that involves this state's ceding insurers, and agree to notify the ceding insurer and the director and to provide security in an amount equal to one hundred percent of the assuming insurer's liabilities to the ceding insurer, should the assuming insurer enter into such a solvent scheme of arrangement. The security shall be in a form that is consistent with the requirements prescribed in subsection G of this section and section 20-3603 and as specified by the director in rule.

5. If requested by the director, the assuming insurer or its legal successor must provide on behalf of itself and any legal predecessors certain documentation to the director as specified by the director in rule.

6. The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria prescribed in rule.

7. The assuming insurer's supervisory authority must confirm to the director on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements prescribed in paragraphs 2 and 3 of this subsection.

8. The assuming insurer may provide the director with additional information on a voluntary basis.

I. The director:

1. Shall timely create and publish a list of reciprocal jurisdictions that includes any reciprocal jurisdiction prescribed in subsection H, paragraph 1, subdivisions (a) and (b) of this section and shall consider including any other reciprocal jurisdiction included on the national association of insurance commissioners list of reciprocal jurisdictions published through the national association of insurance commissioners committee process. The director may approve a jurisdiction that does not appear on the national association of insurance commissioners list of reciprocal jurisdictions in accordance with criteria to be developed under rules issued by the director.

2. May remove a jurisdiction from the list of reciprocal jurisdictions on a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process prescribed in rules issued by the director, except that the director shall not remove from the list a reciprocal jurisdiction prescribed in subsection H, paragraph 1, subdivisions (a) and (b) of this section.  On removal of a reciprocal jurisdiction from the list, credit for reinsurance ceded to an assuming insurer that has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed by law.

3. Shall timely create and publish a list of assuming insurers that have satisfied the conditions prescribed in this section and to which cessions shall be granted credit in accordance with this section. The director may add an assuming insurer to the list if a national association of insurance commissioners accredited jurisdiction has added the assuming insurer to a list of such assuming insurers or if, on initial eligibility, the assuming insurer submits the information to the director as required under subsection H, paragraph 4 of this section and complies with any additional requirements that the director may impose by rule, except to the extent that they conflict with an applicable covered agreement.

4. May revoke or suspend the eligibility of an assuming insurer for recognition under this subsection in accordance with procedures prescribed in rule, if the director determines that the assuming insurer no longer meets one or more of the requirements under this section. While the assuming insurer's eligibility is suspended, a reinsurance agreement issued, amended or renewed after the effective date of the suspension does not qualify for credit except to the extent that the assuming insurer's obligations under the contract are secured in accordance with section 20-3603. If the assuming insurer's eligibility is revoked, credit for reinsurance may not be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into before the date of revocation, except to the extent that the assuming insurer's obligations under the contract are secured in a form acceptable to the director and are consistent with the parameters prescribed in section 20-3603.

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

K. Subsection H of this section does not:

1. Limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this article or another applicable law or rule.

2. Authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as allowed by the terms of the agreement.

3. Limit or in any way alter the capacity of parties to any reinsurance agreement to renegotiate the agreement.

L. Credit may be taken under subsection H of this section only for reinsurance agreements entered into, amended or renewed on or after September 29, 2021, and only with respect to losses incurred and reserves reported on or after the later of the date on which the assuming insurer has met all eligibility requirements pursuant to subsection H of this section and the effective date of the new reinsurance agreement, amendment or renewal. This subsection does not alter or impair a ceding insurer's right to take credit for reinsurance, to the extent that credit is not available under this section, as long as the reinsurance qualifies for credit under any other applicable provision of this article.

M. Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subsection C, D, E, F, G or H of this section, but only as to the insurance of risks located in jurisdictions where the reinsurance is required by applicable law or regulation of that jurisdiction.

N. If the assuming insurer is not licensed, accredited or certified to transact insurance or reinsurance in this state, the credit allowed by subsections E and F of this section may not be allowed unless the assuming insurer agrees in the reinsurance agreements:

1. That if the assuming insurer fails to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, will submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give the court jurisdiction and will abide by the final decision of the court or of any appellate court in the event of an appeal.  This subsection 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.

2. To designate the director or a designated attorney as its true and lawful attorney on whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding insurer.

O. If the assuming insurer does not meet the requirements prescribed in subsection C, D, E or H of this section, the credit allowed by subsection F or G of this section may 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 that is less than the amount required by subsection F, paragraph 5 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 insurance commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the insurance commissioner 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 insurance commissioner 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 insurance commissioner with regulatory oversight determines that the assets of the trust fund or any part of the assets are not necessary to satisfy the claims of the United States ceding insurers of the grantor of the trust, the assets or part of the assets shall be returned by the insurance commissioner with regulatory oversight to the trustee for distribution in accordance with the trust agreement.

4. The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this subsection.

P. If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the director may suspend or revoke the reinsurer's accreditation or certification, and the following apply:

1. The director must give the reinsurer notice and an opportunity for a hearing. The suspension or revocation may not take effect until after the director's order on the hearing, unless either:

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

(b) The director'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 subsection G, paragraph 6 of this section.

(c) The director finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the director's action.

2. While a reinsurer's accreditation or certification is suspended, a reinsurance contract issued or renewed after the effective date of the suspension does not qualify for credit except to the extent that the reinsurer's obligations under the contract are secured in accordance with section 20-3603. If a reinsurer's accreditation or certification is revoked, a credit for reinsurance may not be granted after the effective date of the revocation except to the extent that the reinsurer's obligations under the contract are secured in accordance with subsection G, paragraph 5 of this section or section 20-3603.

Q. A ceding insurer shall take steps to:

1. Manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the director within thirty days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceed fifty percent of the domestic ceding insurer's last reported surplus to policyholders, or after it is determined that reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, are likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

2. A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the director within thirty days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than twenty percent 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.  The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

R. For the purposes of this section, "covered agreement" means an agreement that is entered into pursuant to the Dodd-Frank Wall Street reform and consumer protection act (31 United States Code sections 313 and 314), that is currently in effect or in a period of provisional application and that addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance.
A.R.S. § 20-1406.01 — Arizona Code / Title 20 / Chapter 6 / Article 5 / Section 1406.01
20-1406.01 Prohibiting denial of chiropractic contract benefits; direct reimbursement
Status: in_force

20-1406.01. Prohibiting denial of chiropractic contract benefits; direct reimbursement

If a group disability insurance contract or blanket disability insurance contract provides for or offers reimbursement for any service which is within the lawful scope of the practice of a chiropractor holding a certificate or license issued by the state in which the services are rendered, a subscriber covered under such contract may select either a physician or chiropractor to provide the examination, care or treatment for which the subscriber is eligible and which falls within the scope of practice of the chiropractor or physician. Reimbursement for the cost of the service may be made directly to the person licensed or certified pursuant to title 32, chapter 8 or 13 or to the subscriber if the cost of the service has not been reimbursed to another provider or health care institution.
A.R.S. § 20-159 — Arizona Code / Title 20 / Chapter 1 / Article 2 / Section 159
20-159 Insurance examiners' revolving fund; definition
Status: in_force

20-159. Insurance examiners' revolving fund; definition

A. The director may establish a separate fund designated as the insurance examiners' revolving fund.

B. The fund shall be used for the examination expenses authorized by section 20-156 and to compensate independent contractor examiners as authorized by section 20-148. Independent contractor examiners may be reimbursed or compensated for:

1. Actual travel expenses in amounts customary for such expenses and approved by the director.

2. A reasonable living expense allowance at a rate customary for such expenses and approved by the director.

3. Per diem compensation at a rate customary for such compensation as approved by the director.

C. All persons receiving any reimbursement or compensation from the insurance examiners' revolving fund shall submit to the director for approval a detailed account of all expenses and compensation necessarily incurred on account of an examination. Persons shall not receive or accept any additional emolument on account of an examination. Any reimbursement or compensation made by the fund and approved by the director shall be charged to the person being examined by the director and all receipts shall be credited to the fund.

D. The fund is a special state fund pursuant to section 35-142, subsection A, paragraph 8. Monies in the insurance examiners' revolving fund shall not revert to the general fund.

E. Each authorized insurer shall deposit at a time determined by the director the sum of one hundred dollars with the director to be credited to the insurance examiners' revolving fund. Such deposit not to exceed one hundred dollars shall be returned only if such insurer ceases to transact insurance business in this state.

F. For purposes of this section, "insurer" includes health care services organizations, prepaid dental plan organizations, hospital service corporations, medical service corporations, dental service corporations and hospital, medical, dental and optometric service corporations incorporated in this state.
A.R.S. § 20-1582 — Arizona Code / Title 20 / Chapter 6 / Article 9 / Section 1582
20-1582 Title insurance agents; replies to inquiries by director
Status: in_force

20-1582. Title insurance agents; replies to inquiries by director

Every title insurance agent shall promptly reply, in writing, with a copy thereof to each title insurer for which the agent is acting, to any inquiry of the director relative to the business of title insurance, and failure to reply shall be a ground for revocation of the agent's license. A copy of any inquiry sent by the director to any agent relative to the agent's conduct of the business of title insurance shall also be sent by the director to each title insurer for which the agent is acting.
A.R.S. § 20-1243.01 — Arizona Code / Title 20 / Chapter 6 / Article 1.3 / Section 1243.01
20-1243.01 Scope and limitation of article
Status: in_force

20-1243.01. Scope and limitation of article

A. This article applies to any sale or recommendation of an annuity.

B. This article does not:

1. Affect in any manner any provision of title 44, chapters 12 and 13.

2. Create or imply a private cause of action for a violation of this article or subject a producer to civil liability under the best interest standard of care prescribed in section 20-1243.03 or under standards that govern the conduct of a fiduciary or fiduciary relationship.
A.R.S. § 20-646 — Arizona Code / Title 20 / Chapter 3 / Article 4 / Section 646
20-646 Cooperation with Arizona property and casualty insurance guaranty fund and life and disability insurance guaranty fund
Status: in_force

20-646. Cooperation with Arizona property and casualty insurance guaranty fund and life and disability insurance guaranty fund

The provisions of this article shall be construed to permit the orderly and effective payment of claims by the Arizona property and casualty insurance guaranty fund established pursuant to article 6 of this chapter and the life and disability insurance guaranty fund established pursuant to article 7 of this chapter.
A.R.S. § 20-1558 — Arizona Code / Title 20 / Chapter 6 / Article 8.1 / Section 1558
20-1558 Miscellaneous reserves
Status: in_force

20-1558. Miscellaneous reserves

A. If the laws of any other jurisdiction in which a mortgage guaranty insurance company, subject to the requirement of this article is also licensed to transact mortgage guaranty insurance, require a larger unearned premium reserve or contingency reserve in the aggregate than that set forth in this article, the establishment of such larger unearned premium reserve or contingency reserve in the aggregate shall be deemed to be in compliance with this article.

B. Unearned premium reserves and contingency reserves shall be computed and maintained on risks insured after the effective date of this article as required by sections 20-1554 and 20-1556. Unearned premium reserves and contingency reserves on risks insured before the effective date of this article may be computed and maintained as required previously.
A.R.S. § 20-285 — Arizona Code / Title 20 / Chapter 2 / Article 3 / Section 285
20-285 Application for license
Status: in_force

20-285. Application for license

A. A person who applies for a resident insurance producer license shall apply to the director on a form prescribed by the director and shall declare under penalty of denial, suspension or revocation of the license that the statements made in the application are true, correct and complete to the best of the knowledge and belief of the applicant or the applicant's duly authorized representative. The applicant shall provide information concerning the applicant's identity, personal history, business record and experience in insurance and any other pertinent fact the director requires.

B. Before the director approves the application of the individual, the director shall find that the individual:

1. Is at least eighteen years of age.

2. Has not committed any act that is a ground for denial, suspension or revocation prescribed in section 20-295.

3. Has paid the fees prescribed in section 20-167.

4. Has successfully passed the examinations for the lines of authority for which the individual has applied.

C. Before the director approves the application of a business entity, the director shall find that the business entity:

1. Has paid the fees prescribed in section 20-167.

2. Will be acting within the scope of its partnership agreement, articles of incorporation or other chartering documents when the business entity transacts business under the license.

3. Has designated an individually licensed insurance producer who is responsible for the business entity's compliance with the insurance laws of this state.

D. The application of a business entity shall also include the names of all members, officers and directors of the business entity.  For any individual who is identified pursuant to this subsection and pursuant to subsection C, paragraph 3 of this section, the director may require the applicant to provide the information required for a license as an individual.

E. Before the director grants a license, the director may require the applicant to:

1. Provide any document that is reasonably necessary to verify the information that is contained in an application and other information including prior criminal records.

2. Submit a full set of fingerprints to the department. The department of insurance and financial institutions shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation.

F. A nonresident person who is licensed as an insurance producer in another state, who becomes a resident of this state and who continues to act as an insurance producer shall apply to become a resident licensee pursuant to this section within ninety days.
A.R.S. § 20-1097.01 — Arizona Code / Title 20 / Chapter 4 / Article 13 / Section 1097.01
20-1097.01 Exceptions
Status: in_force

20-1097.01. Exceptions

This article does not apply to:

1. Any lawyer referral services authorized by the state bar of Arizona.

2. Retainer contracts made by attorneys-at-law with individual or group clients with fees based on estimates of the nature and the amount of the legal services to be provided.

3. The furnishing of legal assistance by employee organizations to their members in matters relating to employment or occupations.

4. The furnishing of legal assistance to members or dependents of churches, cooperatives, educational institutions, credit unions, labor unions or other organizations of employees in which the organization contracts directly with a lawyer or a law firm for the provision of legal services.
A.R.S. § 20-1552 — Arizona Code / Title 20 / Chapter 6 / Article 8.1 / Section 1552
20-1552 Compensating balances prohibited
Status: in_force

20-1552. Compensating balances prohibited

A. Except for commercial checking accounts and normal deposits in support of an active bank line of credit, a mortgage guaranty insurance company, its holding company or any affiliate of either such companies shall not maintain funds on deposit with the lender for which the mortgage guaranty insurance company has insured loans.

B. Any deposit account bearing interest at rates less than what is currently being paid other depositors on similar deposits or any deposit in excess of amounts insured by an agency of the federal government shall be presumed to be an account in violation of this section. A mortgage guaranty insurance company shall not use compensating balances, special deposit accounts or engage in any practice which unduly delays its receipt of monies due or which involves the use of its financial resources for the benefit of any owner, mortgagee of the real property or any interest in such property or any person who is acting as agent, representative, attorney or employee of such owner, purchaser or mortgagee as a means of circumventing any part of this section.
A.R.S. § 20-240 — Arizona Code / Title 20 / Chapter 2 / Article 1 / Section 240
20-240 Electronic posting of policies; definitions
Status: in_force

20-240. Electronic posting of policies; definitions

A. Notwithstanding section 20-239, an insurer may post property and casualty insurance policies and endorsements that are subject to article 4.1 of this chapter pursuant to section 20-382 on the insurer's website instead of sending the policies and endorsements to the insured, if all of the following conditions are satisfied:

1. The policies and endorsements posted by the insurer on its website do not contain personal information or privileged information.

2. The insurer makes accessible each policy and endorsement:

(a) On the insurer's website while each policy and endorsement remains in use.

(b) For a period of five years after the insurer discontinues the policy or endorsement.

3. The insurer posts its policies and endorsements on the insurer's website in a manner that enables the insured to print and save a copy of the policy and endorsements using programs and applications that are widely available on the internet and free of charge to use.

4. The insurer agrees to respond to requests from the insured in a timely manner and to provide notice in the manner that the insurer customarily communicates with an insured:

(a) At the time of issuance of the initial policy forms and any renewal forms of a method by which the insured may obtain, on request and without charge, a paper or electronic copy of the insured's policy or endorsement.

(b) Of any changes to the forms or endorsements, and of the insured's right to obtain, on request and without charge, a paper or electronic copy of the forms and endorsements.

(c) Of the insurer's specific website address and instructions on how to access the referenced policy and endorsement forms on the insurer's website.

5. On each declarations page delivered to an insured, the insurer clearly identifies the exact policy and endorsement forms purchased by the insured.

B. For the purposes of this section, "personal information" and "privileged information" have the same meanings prescribed in section 20-2102.
A.R.S. § 20-3201 — Arizona Code / Title 20 / Chapter 22 / Article 1 / Section 3201
20-3201 Definitions
Status: in_force

20-3201. Definitions

In this chapter, unless the context otherwise requires:

1. "Advertising" means any written, electronic or printed communication or any communication by means of recorded telephone messages or transmitted by radio, television, the internet or similar communications media, including film strips, motion pictures and videos, that is published, disseminated, circulated or placed directly before an owner in this state for the purpose of creating an interest in or inducing an owner to purchase or sell, assign, devise, bequest or transfer the death benefit or ownership of a life insurance policy or an interest in a life insurance policy pursuant to a life settlement contract.

2. "Broker":

(a) Means a person who:

(i) On behalf of an owner, and for a fee, commission or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and providers.

(ii) Represents only the owner.

(iii) Owes a fiduciary duty to the owner to act according to the owner's instructions, and in the best interest of the owner, notwithstanding the manner in which the broker is compensated.

(b) Does not include an attorney, certified public accountant or financial planner who is retained in the type of practice customarily performed in that professional capacity to represent the owner and whose compensation is not paid directly or indirectly by the provider or any other person, except the owner.

3. "Business of life settlements" includes offering to enter into, soliciting, negotiating, procuring, effectuating, monitoring or tracking of life settlement contracts.

4. "Chronic illness" means an illness that causes an individual to either:

(a) Be unable to perform at least two activities of daily living.

(b) Require substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

5. "Financing entity" means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a provider, credit enhancer or any entity that has a direct ownership in a policy or certificate that is the subject of a life settlement contract and for which both of the following apply:

(a) The entity's principal activity related to the transaction is providing monies to effect the life settlement contract or the purchase of one or more policies.

(b) The entity has an agreement in writing with one or more providers to finance the acquisition of life settlement contracts.

6. "Financing transaction" means a transaction in which a licensed provider obtains financing from a financing entity, including any secured or unsecured financing, any securitization transaction or any securities offering that either is registered or exempt from registration under federal and state securities law.

7. "Insured" means the person who is covered under the policy being considered for sale in a life settlement contract.

8. "Life expectancy" means the arithmetic mean of the number of months the insured under the life insurance policy to be settled can be expected to live considering medical records and appropriate experiential data.

9. "Life insurance producer" means any person who is licensed to transact life insurance business in this state pursuant to chapter 2, article 3 of this title.

10. "Life settlement contract":

(a) Means a written agreement between a provider and an owner that establishes the terms under which compensation or anything of value will be paid, which compensation or thing of value is less than the expected death benefit of the insurance policy or certificate, in return for the owner's assignment, transfer, sale, devise or bequest of the death benefit or any portion of an insurance policy or certificate of insurance for compensation if the minimum value for a life settlement contract is greater than a cash surrender value or accelerated death benefit available at the time of an application for a life settlement contract.

(b) Includes the transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns the policy if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more life insurance contracts that are owned by a person residing in this state.

(c) Includes a premium finance loan made for a policy on or before the date of issuance of the policy if one or more of the following conditions apply:

(i) The loan proceeds are not used solely to pay premiums for the policy and any costs or expenses incurred by the lender or the borrower in connection with the financing.

(ii) The owner receives on the date of the premium finance loan a guarantee of the future life settlement value of the policy.

(iii) The owner agrees on the date of the premium finance loan to sell the policy or any portion of the policy's death benefit on any date following the issuance of the policy, not including an agreement to sell the policy in the event of a default, if the default is not pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this chapter.

(d) Does not include any of the following:

(i) A policy loan by a life insurance company pursuant to the terms of the life insurance policy or accelerated death provisions contained in the life insurance policy, whether issued with the original policy or as a rider.

(ii) A premium finance loan or any loan made by a bank or other licensed financial institution if the default on the loan or the transfer of the policy in connection with the default is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this chapter.

(iii) A collateral assignment of a life insurance policy by an owner.

(iv) A loan made by a lender if the loan is not described in subdivision (c) of this paragraph and is not otherwise within the definition of life settlement contract.

(v) An agreement where all of the parties are either closely related to the insured by blood or law or have a lawful substantial economic interest in the continued life, health and bodily safety of the person insured or in trusts established primarily for the benefit of those parties.

(vi) Any designation, consent or agreement by an insured who is an employee of an employer in connection with the purchase by the employer or by a trust established by the employer of life insurance on the life of the employee.

(vii) A bona fide business succession planning arrangement between one or more shareholders in a corporation or between a corporation and one or more of its shareholders or one or more trusts established by its shareholders, between one or more partners in a partnership or between a partnership and one or more of its partners or one or more trusts established by its partners or between one or more members in a limited liability company or between a limited liability company and one or more of its members or one or more trusts established by its members.

(viii) An agreement entered into by a service recipient, or a trust established by the service recipient, and a service provider, or a trust established by the service provider, who performs significant services for the service recipient's trade or business.

(ix) Any other contract, transaction or arrangement that the director determines is not of the type intended to be regulated by this chapter.

11. "Owner":

(a) Means the owner of a policy, with or without a chronic illness or a terminal illness or condition, who enters or seeks to enter into a life settlement contract.

(b) Is not limited to an owner of a policy that insures the life of an individual with a chronic illness or a terminal illness or condition except where specifically addressed.

(c) Does not include any of the following:

(i) Any provider or other licensee under this chapter.

(ii) A qualified institutional buyer as defined in rule 144A of the federal securities act of 1933, as amended.

(iii) A financing entity.

(iv) A special purpose entity.

(v) A related provider trust.

12. "Person" means an individual or business entity.

13. "Policy" means an individual or group policy, group certificate, contract or arrangement of life insurance owned by a resident of this state regardless of whether delivered or issued for delivery in this state.

14. "Premium finance loan" means a loan that is made primarily for the purpose of making premium payments on a life insurance policy and that is secured by an interest in the life insurance policy.

15. "Provider":

(a) Means a person, other than an owner, who enters into or effectuates a life settlement contract with an owner.

(b) Does not include any of the following:

(i) Any bank, savings bank, savings and loan association or credit union.

(ii) A licensed lending institution or creditor or secured party pursuant to a premium finance loan agreement that takes an assignment of a life insurance policy or certificate issued pursuant to a group life insurance policy as collateral for a loan.

(iii) The insurer of a life insurance policy or rider to the extent of providing accelerated death benefits or riders or cash surrender value.

(iv) A purchaser.

(v) Any authorized or eligible insurer that provides stop loss coverage to a provider, purchaser, financing entity, special purpose entity or related provider trust.

(vi) A financing entity.

(vii) A related provider trust.

(viii) A broker.

(ix) An accredited investor or qualified institutional buyer, as defined in regulation D, rule 501 or rule 144A of the federal securities act of 1933, as amended, who purchases a life settlement policy from a provider.

16. "Purchaser" means a person who pays compensation or anything of value as consideration for a beneficial interest in a trust that is vested with, or for the assignment, transfer or sale of, an ownership or other interest in a life insurance policy or a certificate issued pursuant to a group life insurance policy that has been the subject of a life settlement contract.

17. "Related provider trust" means a titling trust or other trust that is established by a licensed provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction and that has a written agreement with the licensed provider under which the licensed provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files relating to life settlement transactions available to the department as if those records and files were maintained directly by the licensed provider.

18. "Settled" means a life insurance policy or certificate that has been acquired by a provider pursuant to a life settlement contract.

19. "Special purpose entity" means a corporation, partnership, trust, limited liability company or other legal entity whose securities pay a fixed rate of return commensurate with established asset-backed capital markets or that has been formed solely to provide either directly or indirectly access to institutional capital markets:

(a) For a financing entity or provider.

(b) In connection with a transaction in which the securities in the special purpose entity are acquired by the owner or by a qualified institutional buyer as defined in rule 144 of the federal securities act of 1933, as amended.

20. "Stranger originated life insurance" means an intentional  practice or plan as prescribed in section 20-443.02.

21. "Terminally ill" means having an illness or sickness that can reasonably be expected to result in death in twenty-four months or less.
A.R.S. § 20-1564 — Arizona Code / Title 20 / Chapter 6 / Article 9 / Section 1564
20-1564 Investments
Status: reserved

20-1564. Investments

A. A domestic title insurer shall invest and maintain invested funds to the amount of minimum paid-in capital required under this title only in cash and the securities described in subsection B, paragraph 1 of this section and sections 20-537, 20-538 and 20-551.

B. A domestic title insurer may invest its capital, surplus and accumulations in excess of the amount of minimum paid-in capital required under this title in the investments made eligible for funds of domestic insurers by sections 20-537 through 20-541, sections 20-543 through 20-548 and sections 20-551, 20-554 and 20-555 and in addition in the following investments:

1. Real estate loans.  Ground rents and bonds, notes or other evidences of indebtedness, secured by first mortgages or trust deeds on unencumbered and improved real property located in any state, district or territory of the United States, and in investments in the equity of the seller under contracts covering the entire balance due on bona fide sales of the real property, provided, however, that a loan guaranteed or insured in full by the administrator of veterans' affairs pursuant to the federal servicemen's readjustment act of 1944, as amended, may be subject to a prior encumbrance. Real property shall not be considered to be encumbered within the meaning of this subsection by reason of the existence of instruments reserving mineral, oil, water or timber rights, rights-of-way, sewer rights, rights in walls or driveways, by reason of liens inferior to the lien securing the loan of the insurer, or liens for taxes or assessments not yet delinquent, or by reason of building restrictions or other restrictive covenants or by reason of any lease under which rents or profits are reserved to the owner, if, in any event, the security for the loan is a first lien on the real property, and if there is no condition or right of re-entry or forfeiture under which the lien can be cut off, subordinated or otherwise disturbed.  Real property shall be deemed to be improved if such real property is a lot or portion of a subdivision or development that has been improved by off-site improvements for the general benefit of all or a portion of the subdivision or development.  No mortgage or trust deed, loan or investment in a seller's equity under a contract made or acquired by the insurer on any one property shall at the date of investment exceed seventy-five per cent of the value of the real property securing the loan, or subject to the contract, provided, however, that the limitation in respect to value shall not apply to a loan which is:

(a) Insured by, or for which a commitment to insure has been made by, the federal housing administrator or commissioner pursuant to the federal national housing act, as amended;

(b) Guaranteed by the administrator of veterans' affairs pursuant to the federal servicemen's readjustment act of 1944, as amended, except that if only a portion of a loan is so guaranteed, the limitation shall apply to the portion that is not guaranteed;

(c) Insured by the administrator of veterans' affairs pursuant to the federal servicemen's readjustment act of 1944, as amended.

2. Federal housing administrators debentures.  Debentures issued by the federal housing administrator or commissioner in settlement of claims pursuant to the federal national housing act, as amended.

3. National mortgage association securities.  Securities of national mortgage associations or similar national mortgage credit institutions organized under the federal national housing act, as amended.

4. Federal land bank and related securities.  Bonds, debentures and other obligations of federal land banks or federal intermediate credit banks issued pursuant to the federal farm loan act, as amended, or of banks for cooperatives issued pursuant to the farm credit act of 1933, as amended.

5. Loans on leaseholds.  Loans on leasehold estates on improved, unencumbered real estate located in any state, district or territory of the United States, provided that no loan shall exceed seventy-five per cent of the value of the leasehold at the date of investment, and provided further that every loan shall provide for amortization by repayments 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-five years.

6. Federal savings and loan insurance corporation obligations.  Bonds, notes or obligations issued, assumed or guaranteed by the federal savings and loan insurance corporation, under the federal national housing act, as amended.

7. Federal home loan bank obligations.  Bonds, notes or obligations issued, assumed or guaranteed by the federal home loan bank, or issued, assumed or guaranteed by the federal home loan bank board under the federal home loan bank act, as amended.

C. Section 20-536, subsections B and C do not apply to domestic title insurers.

D. Any title insurer that is organized under the laws of this state may purchase, receive, hold and convey real estate or an interest in real estate:

1. Required for its convenient accommodation in the transaction of its business with reasonable regard to future needs.

2. Acquired in connection with a claim under a policy of title insurance.

3. Acquired in satisfaction or on account of loans, mortgages, liens, judgments or decrees, previously owing to it in the course of its business.

4. Acquired in part payment of the consideration of the sale of real property owned by it if the transaction shall result in a net reduction in the company's investment in real estate.

5. Reasonably necessary for the purpose of maintaining or enhancing the sale value of real property previously acquired or held by it under paragraph 1, 2, 3 or 4 of this subsection.

E. A title insurer shall not continue to hold any real estate acquired by it under paragraph 2, 3 or 4 of subsection D for more than five years from the date of acquisition, unless it shall obtain the written approval of the director to hold the real estate for a longer period of time.

F. A title insurer may invest in a title insurance plant, and that plant shall be considered an asset at the actual cost of the plant.  The aggregate admitted value of the investment shall not exceed the amount allowed pursuant to the accounting practices and procedures manual adopted by the national association of insurance commissioners.  In determining the admitted value of a title insurance plant, no value shall be attributed to furniture and fixtures, and the real estate in which the title plant is housed shall be carried as real estate.  The value of title abstracts, title briefs, copies of conveyances or other documents, indices and other records comprising the title insurance plant shall be determined by considering the expenses incurred in obtaining them.  Once the title insurance plant is operational its value may be increased only by the acquisition of another title insurance plant by purchase, consolidation or merger.  In no event shall the value of the title insurance plant be increased by additions made as part of the normal course of abstracting and insuring titles to real estate.  Subject to the limitations prescribed in this subsection, a title insurer may enter into agreements with one or more other title insurers authorized to do business in this state, or with one or more title insurance agents, to participate in the ownership, management and control of a title insurance plant to service the needs of all parties, or in lieu of that common ownership the parties may invest in the stock of a corporation owning and operating a title plant for the same purposes.  Subject to the limitations with respect to value set forth in this subsection, any joint investment in existence on the effective date of this section may be continued indefinitely.

G. Funds equal to the unearned premium reserve of a title insurer may be held in cash or invested, but the funds shall be invested only in those classes of investments authorized by sections 20-537 through 20-541, sections 20-543, 20-544 and 20-545 and subsection B, paragraphs 4, 6 and 7 of this section, except that not more than one-fourth of the reserve may be invested in preferred or guaranteed stocks or shares.

H. Nothing in this section applies to any investments made by a title insurer when acting as a trustee.