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2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-185 - Purpose and scope.

§ 58-10-185. Purpose and scope.
(a) The purpose of this Part is to improve the Commissioner's ability to monitor the financial condition of insurers by requiring (i) an annual audit of financial statements reporting the financial position and the results of operations of insurers by independent certified public accountants, (ii) communication of internal control related matters noted in an audit, and (iii) management's report of internal control over financial reporting.
(b) Every insurer, as defined in G.S. 58-10-190, shall be subject to this Part. Insurers having direct premiums written in this State of less than one million dollars ($1,000,000) in any calendar year and fewer than 1,000 policyholders or certificate holders of direct written policies nationwide at the end of the calendar year shall be exempt from this Part for the year, unless the Commissioner makes a specific finding that compliance is necessary for the Commissioner to carry out statutory responsibilities, except that insurers having assumed premiums pursuant to contracts of reinsurance of one million dollars ($1,000,000) or more will not be exempt.
(c) Foreign or alien insurers filing the audited financial report in another state, pursuant to that state's requirement for filing of audited financial reports, which has been found by the Commissioner to be substantially similar to the requirements in this Part, are exempt from G.S. 58-10-195 through G.S. 58-10-240 if:
(1) A copy of the audited financial report, communication of internal control related matters noted in an audit, and the accountant's letter of qualifications that are filed with the other state are filed with the Commissioner in accordance with the filing dates specified in G.S. 58-10-195, 58-10-230, and 58-10-235, respectively. Canadian insurers may submit accountants' reports as filed with the Office of the Superintendent of Financial Institutions, Canada.
(2) A copy of any notification of adverse financial condition report filed with the other state is filed with the Commissioner within the time specified in G.S. 58-10-225.
(d) Foreign or alien insurers required to file management's report of internal control over financial reporting in another state are exempt from filing the report in this State provided the other state has substantially similar reporting requirements and the report is filed with the Commissioner of the other state within the time specified.
(e) This Part shall not prohibit, preclude, or in any way limit the Commissioner from ordering, conducting, or performing examinations of insurers in accordance with G.S. 58-2-131 through G.S. 58-2-134, known as the Examination Law. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-195 - General requirements related to filing and extensions for filing of annual audited financial reports and audit committee appointment.

§ 58-10-195. General requirements related to filing and extensions for filing of annual audited financial reports and audit committee appointment.
(a) All insurers shall have an annual audit by an independent certified public accountant and shall file an audited financial report with the Commissioner on or before June 1 for the year ended December 31 immediately preceding. The Commissioner may require an insurer to file an audited financial report earlier than June 1 with 90 days' advance notice to the insurer.
(b) Extensions of the June 1 filing date may be granted by the Commissioner for 30-day periods upon a showing by the insurer and its independent certified public accountant of the reasons for requesting an extension and determination by the Commissioner of good cause for an extension. The request for extension must be received in writing not less than 10 days before the due date and in sufficient detail to permit the Commissioner to make an informed decision with respect to the requested extension.
(c) If an extension is granted in accordance with the provisions in subsection (b) of this section, a similar extension of 30 days is granted to the filing of management's report of internal control over financial reporting.
(d) Every insurer required to file an annual audited financial report pursuant to this Part shall designate a group of individuals as constituting its audit committee, as defined in G.S. 58-10-190. The audit committee of an entity that controls an insurer may be deemed to be the insurer's audit committee at the election of the controlling person. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-200 - Contents of annual audited financial report.

§ 58-10-200. Contents of annual audited financial report.
(a) The annual audited financial report shall report the financial position of the insurer as of the end of the most recent calendar year and the results of its operations, cash flows, and changes in capital and surplus for the year then ended in conformity with G.S. 58-2-165(c). The financial statements included in the audited financial report shall be prepared in a form and using language and groupings substantially the same as the relevant sections of the annual statement of the insurer filed with the Commissioner, and the financial statement shall be comparative, presenting the amounts as of December 31 of the current year and the amounts as of the immediately preceding December 31. However, in the first year in which an insurer is required to file an audited financial report, the comparative data may be omitted.
(b) The annual audited financial report shall include the following:
(1) Report of independent certified public accountant.
(2) Balance sheet reporting admitted assets, liabilities, capital, and surplus.
(3) Statement of operations.
(4) Statement of cash flows.
(5) Statement of changes in capital and surplus.
(6) Notes to financial statements, which shall be those required by the appropriate NAIC Annual Statement Instructions and the NAIC Accounting Practices and Procedures Manual. The notes shall include a reconciliation of differences, if any, between the audited statutory financial statements and the annual statement filed pursuant to G.S. 58-2-165(c) with a written description of the nature of these differences. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-205 - Designation of independent certified public accountant.

§ 58-10-205. Designation of independent certified public accountant.
(a) Each insurer required by this Part to file an annual audited financial report must, within 60 days after becoming subject to the requirement, register with the Commissioner in writing the name and address of the independent certified public accountant or accounting firm retained to conduct the annual audit. Insurers not retaining an independent certified public accountant on July 31, 2009, shall register the name and address of their retained independent certified public accountant not less than six months before the date when the first audited financial report is to be filed.
(b) The insurer shall obtain a letter from the accountant and file a copy with the Commissioner stating that the accountant is aware of the provisions of the insurance laws and the regulations of the State of North Carolina that relate to accounting and financial matters and affirming that the accountant will express his or her opinion on the financial statement in terms of its conformity to the statutory accounting practices prescribed or otherwise permitted by the Commissioner, specifying such exceptions as he or she may believe appropriate.
(c) If an accountant for the immediately preceding filed audited financial report is dismissed or resigns, the insurer shall within five business days notify the Commissioner of this event. The insurer shall also furnish the Commissioner with a separate letter within 10 business days after the notification stating whether in the 24 months preceding such event there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; which disagreements, if not resolved to the satisfaction of the former accountant, would have caused him or her to make reference to the subject matter of the disagreement in connection with his or her opinion. The disagreements required to be reported in response to this section include both those resolved to the former accountant's satisfaction and those not resolved to the former accountant's satisfaction. Disagreements contemplated by this section could include, but are not limited to, disagreements between personnel of the insurer responsible for presentation of its financial statements and personnel of the accounting firm responsible for rendering its report. The insurer shall also in writing request the former accountant to furnish a letter addressed to the insurer stating whether the accountant agrees with the statements contained in the insurer's letter and, if not, stating the reasons for which he or she does not agree; and the insurer shall furnish the responsive letter from the former accountant to the Commissioner together with its own. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-215 - Consolidated or combined audits.

§ 58-10-215. Consolidated or combined audits.
An insurer may make written application to the Commissioner for approval to file audited consolidated or combined financial statements in lieu of separate annual audited financial statements if the insurer is part of a group of insurance companies that utilizes a pooling or one hundred percent (100%) reinsurance agreement that affects the solvency of the insurer and affects the integrity of the insurer's reserves and the insurer cedes all of its direct and assumed business to the pool. In such cases, a columnar consolidating or combining worksheet that meets all of the following criteria shall be filed with the report:
(1) Amounts shown on the consolidated or combined audited financial report shall be shown on the worksheet.
(2) Amounts for each insurer subject to this section shall be stated separately.
(3) Noninsurance operations may be shown on the worksheet on a combined or individual basis.
(4) Explanations of consolidating and eliminating entries shall be included.
(5) A reconciliation shall be included of any differences between the amounts shown in the individual insurer columns of the worksheet and comparable amounts shown on the annual statements of the insurers. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-220 - Scope of audit and report of independent certified public accountant.

§ 58-10-220. Scope of audit and report of independent certified public accountant.
Financial statements furnished pursuant to G.S. 58-10-200 shall be examined by the independent certified public accountant. The audit of the insurer's financial statements shall be conducted in accordance with generally accepted auditing standards. In accordance with AU Section 319 of the Professional Standards of the AICPA, Consideration of Internal Control in a Financial Statement Audit, the independent certified public accountant should obtain an understanding of internal control sufficient to plan the audit. To the extent required by AU Section 319, for those insurers required to file a management's report of internal control over financial reporting pursuant to G.S. 58-10-255, the independent certified public accountant should consider, as that term is defined in "Statement on Auditing Standards No. 102 of the AICPA Professional Standards, Defining Professional Requirements in Statements on Auditing Standards" or its replacement, the most recently available report in planning and performing the audit of the statutory financial statements. Consideration shall be given to the procedures illustrated in the Financial Condition Examiners Handbook promulgated by the NAIC as the independent certified public accountant deems necessary. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-225 - Notification of adverse financial condition.

§ 58-10-225. Notification of adverse financial condition.
(a) The insurer required to furnish the annual audited financial report shall require the independent certified public accountant to report, in writing, within five business days to the board of directors or its audit committee any determination by the independent certified public accountant that the insurer has materially misstated its financial condition as reported to the Commissioner as of the balance sheet date currently under audit or that the insurer does not meet the minimum capital and surplus requirement of G.S. 58-7-75 as of that date. An insurer that has received a report pursuant to this subsection shall forward a copy of the report to the Commissioner within five business days after receipt of the report and shall provide the independent certified public accountant making the report with evidence of the report being furnished to the Commissioner. If the independent certified public accountant fails to receive the evidence within the required five-business-day period, the independent certified public accountant shall furnish to the Commissioner a copy of its report within the next five business days.
(b) No independent certified public accountant shall be liable in any manner to any person for any statement made in connection with subsection (a) of this section if the statement is made in good faith in compliance with that subsection.
(c) If the accountant, subsequent to the date of the audited financial report filed pursuant to this Part, becomes aware of facts that might have affected his or her report, the Commissioner notes the obligation of the accountant to take such action as prescribed in Volume 1, Section AU 561 of the Professional Standards of the AICPA. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-230 - Communication of internal control related matters noted in an audit.

§ 58-10-230. Communication of internal control related matters noted in an audit.
(a) In addition to the annual audited financial report, each insurer shall furnish the Commissioner with a written communication as to any unremediated material weaknesses in its internal control over financial reporting noted during the audit. Such communication shall be prepared by the accountant within 60 days after the filing of the annual audited financial report and shall contain a description of any unremediated material weakness, as the term "material weakness" is defined by "Statement on Auditing Standards No. 112 of the AICPA Professional Standards, Communication of Internal Control Related Matters Noted in an Audit," or its replacement, as of December 31 immediately preceding, so as to coincide with the audited financial report described in G.S. 58-10-195(a) in the insurer's internal control over financial reporting noted by the accountant during the course of their audit of the financial statements. If no unremediated material weaknesses are noted, the communication should so state.
(b) The insurer shall provide a description of remedial actions taken or proposed to correct unremediated material weaknesses, if the actions are not described in the accountant's communication. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-235 - Accountant's letter of qualifications.

§ 58-10-235. Accountant's letter of qualifications.
The accountant shall furnish the insurer, in connection with, and for inclusion in, the filing of the annual audited financial report, a letter stating all of the following:
(1) That the accountant is independent with respect to the insurer and conforms to the standards of his or her profession as contained in the Code of Professional Ethics and pronouncements of the AICPA and the Rules of Professional Conduct of the North Carolina State Board of Certified Public Accountant Examiners Board of Public Accountancy, or similar code.
(2) The background and experience in general and the experience in audits of insurers of the staff assigned to the engagement and whether each is an independent certified public accountant. Nothing within this Part shall be construed as prohibiting the accountant from utilizing such staff as he or she deems appropriate where their use is consistent with the standards prescribed by generally accepted auditing standards.
(3) That the accountant understands the annual audited financial report and his opinion thereon will be filed in compliance with this Part and that the Commissioner will be relying on this information in the monitoring and regulation of the financial position of insurers.
(4) That the accountant consents to the requirements of G.S. 58-10-240 and that the accountant consents and agrees to make available for review by the Commissioner, or the Commissioner's designee or appointed agent, the work papers, as described in G.S. 58-10-240.
(5) A representation that the accountant is properly licensed by an appropriate state licensing authority and is a member in good standing in the AICPA.
(6) A representation that the accountant is in compliance with the requirements of G.S. 58-10-210. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-240 - Definition, availability, and maintenance of independent certified public accountants' work papers.

§ 58-10-240. Definition, availability, and maintenance of independent certified public accountants' work papers.
(a) Work papers are the records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to the accountant's audit of the financial statements of an insurer. Work papers, accordingly, may include audit planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents, and schedules or commentaries prepared or obtained by the independent certified public accountant in the course of his or her audit of the financial statements of an insurer and which support the accountant's opinion.
(b) Every insurer required to file an audited financial report pursuant to this Part shall require the accountant to make available for review by the Commissioner all work papers prepared in the conduct of the accountant's audit and any communications related to the audit between the accountant and the insurer at the offices of the insurer, at the offices of the Commissioner, or at any other reasonable place designated by the Commissioner. The insurer shall require that the accountant retain the audit work papers and communications until the Commissioner has filed a report on examination covering the period of the audit but no longer than seven years after the date of the audit report.
(c) In the conduct of the periodic review by the Commissioner's examiners in subsection (b) of this section, copies of pertinent audit work papers may be made and retained by the Commissioner. Such reviews by the Commissioner's examiners shall be considered investigations, and all working papers and communications obtained during the course of such investigations shall be confidential. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-246 - Internal audit function requirements.

§ 58-10-246. Internal audit function requirements.
(a) Exemption. – An insurer is exempt from the requirements of this section if both of the following apply:
(1) The insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than five hundred million dollars ($500,000,000).
(2) If the insurer is a member of a group of insurers, the group has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than one billion dollars ($1,000,000,000).
(b) Function. – The insurer or group of insurers shall establish an internal audit function providing independent, objective, and reasonable assurance to the audit committee and insurer management regarding the insurer's governance, risk management, and internal controls. This assurance shall be provided by performing general and specific audits, reviews, and tests and by employing other techniques deemed necessary to protect assets, evaluate control effectiveness and efficiency, and evaluate compliance with policies and regulations.
(c) Independence. – In order to ensure that internal auditors remain objective, the internal audit function must be organizationally independent. For purposes of this section, "organizationally independent" means that the internal audit function (i) shall not defer ultimate judgment on audit matters to others and (ii) shall appoint an individual to head the internal audit function who will have direct and unrestricted access to the board of directors of the insurer or group of insurers. Organizational independence does not preclude dual-reporting relationships.
(d) Reporting. – The head of the internal audit function shall report to the audit committee with a frequency no less than annually on the periodic audit plan, factors that may adversely impact the internal audit function's independence or effectiveness, material findings from completed audits, and the appropriateness of corrective actions implemented by management as a result of audit findings.
(e) Additional Requirements. – If an insurer is a member of an insurance holding company system or included in a group of insurers, the insurer may satisfy the internal audit function requirements set forth in this section at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level. (2019-57, s. 2(d).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-250 - Conduct of insurer in connection with the preparation of required reports and documents.

§ 58-10-250. Conduct of insurer in connection with the preparation of required reports and documents.
(a) No director or officer of an insurer shall, directly or indirectly, do any of the following:
(1) Make or cause to be made a materially false or misleading statement to an accountant in connection with any audit, review, or communication required under this Part.
(2) Omit to state, or cause another person to omit to state, any material fact necessary in order to make statements made, in light of the circumstances under which the statements were made, not misleading to an accountant in connection with any audit, review, or communication required under this Part.
(b) No officer or director of an insurer, or any other person acting under the direction thereof, shall directly or indirectly take any action to coerce, manipulate, mislead, or fraudulently influence any accountant engaged in the performance of an audit pursuant to this Part if that person knew or should have known that the action, if successful, could result in rendering the insurer's financial statements materially misleading.
(c) For purposes of subsection (b) of this section, actions that, "if successful, could result in rendering the insurer's financial statements materially misleading" include, but are not limited to, actions taken at anytime with respect to the professional engagement period to coerce, manipulate, mislead, or fraudulently influence an accountant to do any of the following:
(1) Issue or reissue a report on an insurer's financial statements that is not warranted in the circumstances, due to material violations of statutory accounting principles prescribed by the Commissioner, generally accepted auditing standards, or other professional or regulatory standards.
(2) Not perform audit, review, or other procedures required by generally accepted auditing standards or other professional standards.
(3) Not withdraw an issued report.
(4) Not communicate matters to an insurer's audit committee. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-265 - Canadian and British companies.

§ 58-10-265. Canadian and British companies.
(a) In the case of Canadian and British insurers, the annual audited financial report shall be defined as the annual statement of total business on the form filed by such companies with their supervision authority duly audited by an independent chartered accountant.
(b) For such insurers, the letter required in G.S. 58-10-205(b) shall state that the accountant is aware of the requirements relating to the annual audited financial report filed with the Commissioner pursuant to G.S. 58-10-195 and shall affirm that the opinion expressed is in conformity with those requirements. (2009-384, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-295 - Powers of the Commissioner.

§ 58-10-295. Powers of the Commissioner.
(a) The Commissioner shall at all times retain jurisdiction over the mutual insurance holding company, its intermediate holding company subsidiaries with stock insurance company subsidiaries, and its stock insurance company subsidiaries.
(b) Following any public comment period or hearing pursuant to G.S. 58-10-285, the Commissioner by order shall approve, conditionally approve, or deny an application. The Commissioner may require, as a condition of approval of the proposed reorganization, modifications of the proposed plan of reorganization that the Commissioner finds necessary. The applicant shall accept the required modifications by filing appropriate amendments to the proposed plan of reorganization with the Commissioner within 30 days of the date of the Commissioner's order requiring the modifications. If the applicant does not accept the required modifications by failing to file the required amendments to the proposed plan of reorganization within 30 days, the proposed reorganization shall be deemed denied.
(c) An approval or conditional approval of a plan of reorganization shall expire if the reorganization is not completed within 210 days after the approval or conditional approval unless the time period is extended by the Commissioner upon a showing of good cause.
(d) The Commissioner may revoke approval or conditional approval of an applicant's plan of reorganization in the event the Commissioner finds the applicant has failed to comply with the plan of reorganization. The Commissioner may compel completion of a plan of reorganization unless the plan is abandoned in its entirety, in accordance with the applicant's provisions for governance.
(e) Upon completion of all elements of a plan of reorganization, the applicant shall provide a notice of completion to the Commissioner. (2012-161, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-300 - Special financial requirements.

§ 58-10-300. Special financial requirements.
(a) Mutual insurance holding companies and their insurance company subsidiaries and affiliates shall comply with the provisions of Article 19 of this Chapter except as expressly provided in this Part. Mutual insurance holding companies' investments in subsidiaries, including intermediate holding companies, shall not be subject to any of the restrictions on investment activities set forth in G.S. 58-19-10.
(b) When a mutual insurance holding company acquires or plans to acquire more than fifty percent (50%) of a stock insurance company, the mutual insurance holding company shall submit to the Commissioner a plan describing any membership interests of policyholders.
(c) Each mutual insurance holding company shall supply to the Commissioner, by April 1 of each year, an annual statement consisting of the following:
(1) An income statement.
(2) A balance sheet.
(3) A cash flow statement.
(4) Complete information on the status of any closed block formed as a part of a plan of reorganization.
(5) An investment plan covering all assets.
(6) A statement disclosing any intention to pledge, borrow against, alienate, hypothecate, or in any way encumber the assets of the mutual insurance holding company.
(d) At least fifty percent (50%) of the net worth of the mutual insurance holding company, based upon generally accepted accounting practices, shall be invested in insurance company subsidiaries. The Commissioner may waive the fifty percent (50%) limitation upon a showing of good cause.
(e) No policyholder who is a member of a mutual insurance holding company shall receive on account of such membership interest any payment of a policy credit, dividend, or other distribution unless the payment has been approved by the Commissioner. The Commissioner, if satisfied the proposed payment is fair and equitable to policyholders who are members, may approve the proposed payment and may require as a condition of the approval modification of the proposed payment that the Commissioner finds necessary for the protection of the policyholders.
(f) Mutual insurance holding companies shall comply with Part 3 of this Article and shall be considered a domestic insurer for the purposes of compliance with Part 3 of this Article. (2012-161, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-305 - Reorganization of domestic mutual insurer with mutual insurance holding company.

§ 58-10-305. Reorganization of domestic mutual insurer with mutual insurance holding company.
A domestic mutual insurance company may apply to reorganize by merging its policyholders' membership interests into a mutual insurance holding company by filing with the Commissioner a joint application with the mutual insurance holding company complying with the provisions of G.S. 58-10-285. (2012-161, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-310 - Mergers of mutual insurance holding companies.

§ 58-10-310. Mergers of mutual insurance holding companies.
A mutual insurance holding company may apply to merge with another mutual insurance holding company by filing with the Commissioner a plan of merger and complying with the provisions of Article 19 of this Chapter. (2012-161, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-320 - Regulation of holding company system.

§ 58-10-320. Regulation of holding company system.
(a) All material transactions, as that term is defined under Part 3 of this Article, between or among subsidiaries and affiliates of the mutual insurance holding company, must, after review and exercise of director duties by the directors of the mutual insurance holding company, be approved by a majority of the directors of the mutual insurance holding company as being fair and reasonable.
(b) If the Commissioner determines that activities within a mutual insurance holding company system have violated provisions of the General Statutes of North Carolina or the North Carolina Administrative Code or acted to circumvent requirements or prohibitions contained in the General Statutes or Administrative Code, the Commissioner may prohibit or order rescission of any transaction relating to those activities. (2012-161, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-325 - Reporting of stock ownership and transactions.

§ 58-10-325. Reporting of stock ownership and transactions.
(a) Any director or officer of a mutual insurance holding company, its subsidiary, or affiliate, who acquires directly or indirectly the beneficial ownership of any security issued by any intermediate holding company or any insurance company subsidiary of an intermediate holding company or mutual insurance holding company shall, within 15 days following the transaction, file with the Commissioner a statement of the transaction on the form prescribed by the Commissioner.
(b) A mutual insurance holding company, and its subsidiaries and affiliates, shall file with the Commissioner, within 15 days of receipt, copies of Form 3, Form 4, and Schedule 13D, or any equivalent filings, such filings made under the federal Securities Exchange Act of 1934, as amended. (2012-161, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-335 - Purpose.

§ 58-10-335. Purpose.
(a) This Part shall be known and may be cited as the "North Carolina Captive Insurance Act."
(b) The purpose of this Part is to establish the procedures for the organization and regulation of the operations of captive insurance companies transacting insurance business within this State and thereby promote the general welfare of the people of this State. (2013-116, s. 1.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-347 - Provisional approval for a license.

§ 58-10-347. Provisional approval for a license.
(a) At the Commissioner's discretion, provisional approval for a license may be granted to an applicant business entity for a period not to exceed 90 days.
(b) An applicant business entity may petition the Commissioner to extend the provisional time provided the petition is received in writing not less than 10 days before expiration of the provisional time and provides sufficient detail to permit the Commissioner to make an informed decision.
(c) Extensions may be granted by the Commissioner for 30-day periods upon a showing by the applicant business entity of the reasons for requesting an extension and a determination by the Commissioner of good cause for the extension.
(d) As a condition precedent to provisionally approving a license under this section, the applicant business entity shall have filed an application required by this Part and the Commissioner shall have made a preliminary finding that the expertise, experience, and character of the person or persons who will control and manage the applicant business entity are acceptable.
(e) The Commissioner may limit the authority of any provisional licensee in any way deemed necessary.
(f) The Commissioner may rescind the provisional approval at any time if the Commissioner determines that the interests of insureds or the public are at risk.
(g) If the applicant business entity fails to complete the license application process, the provisional approval shall terminate automatically. (2016-78, s. 4.1(c).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-350 - Commissioner use of consultants and other professionals.

§ 58-10-350. Commissioner use of consultants and other professionals.
The Commissioner may contract with consultants and other professionals to expedite and complete the application process, audits, and other regulatory activities required pursuant to this Part. Such contracts for financial, legal, audits, and other services shall not be subject to any of the following:
(1) G.S. 114-2.3.
(2) G.S. 147-17.
(3) Articles 3, 3C, and 8 of Chapter 143 of the General Statutes, together with rules and procedures adopted under those Articles concerning procurement, contracting, and contract review. (2013-116, s. 1; 2016-78, s. 4.1(d).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-355 - Organizational audit.

§ 58-10-355. Organizational audit.
In addition to the processing of the application, an organizational audit may be performed before an applicant business entity is licensed. Such investigation or audit shall consist of a general review of the applicant business entity's corporate records, including charters, bylaws, and minute books; verification of capital and surplus; verification of principal place of business; determination of assets and liabilities; and a review of such other factors as the Commissioner deems necessary. (2013-116, s. 1; 2015-99, s. 1; 2016-78, s. 4.1(e); 2018-120, s. 5.1(b).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-360 - Designation of captive manager.

§ 58-10-360. Designation of captive manager.
Before licensing, the applicant business entity shall report in writing to the Commissioner the name and address of the captive manager designated to manage the captive insurance company. The Commissioner shall approve the captive manager and may require the submission of additional information regarding the proposed captive manager in a form and manner as the Commissioner may designate. All licensed captive insurance companies shall, at all times, be managed by a captive manager approved by the Commissioner. (2013-116, s. 1; 2014-65, s. 3; 2015-99, s. 1; 2022-7, s. 6.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-365 - Names of companies.

§ 58-10-365. Names of companies.
No applicant business entity or captive insurance company shall adopt a name that is the same, deceptively similar, or likely to be confused with or mistaken for any other existing business name registered in this State nor any name likely to mislead the public. Any name adopted by an applicant business entity or a captive insurance company shall comply with the requirements of State law. (2013-116, s. 1; 2014-65, s. 4.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-370 - Capital and surplus requirements.

§ 58-10-370. Capital and surplus requirements.
(a) No applicant business entity shall be issued a license unless it possesses and maintains unimpaired paid-in capital and surplus of:
(1) In the case of a pure captive insurance company, not less than two hundred fifty thousand dollars ($250,000) or such other amount determined by the Commissioner.
(2) In the case of an association captive insurance company, not less than five hundred thousand dollars ($500,000).
(3) In the case of an industrial insured captive insurance company, not less than five hundred thousand dollars ($500,000).
(4) In the case of a risk retention group, not less than one million dollars ($1,000,000).
(5) In the case of a protected cell captive insurance company, not less than two hundred fifty thousand dollars ($250,000) or such other amount determined by the Commissioner.
(6) In the case of a special purpose captive insurance company, not less than two hundred fifty thousand dollars ($250,000) or such other amount determined by the Commissioner.
(b) The Commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business to be transacted.
(c) Capital and surplus required by subsections (a) and (b) of this section shall be in the form of cash, securities approved by the Commissioner, a clean irrevocable letter of credit issued by a bank approved by the Commissioner, or other form approved by the Commissioner. (2013-116, s. 1; 2014-65, s. 5; 2015-99, s. 1; 2016-78, s. 4.1(f).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-375 - Dividends and distributions.

§ 58-10-375. Dividends and distributions.
No captive insurance company shall pay a dividend or other distribution from capital or surplus without the prior approval of the Commissioner. Approval of an ongoing plan for the payment of dividends or other distributions shall be conditioned upon the retention, at the time of each payment, of capital or surplus in excess of amounts specified by or determined in accordance with formulas approved by the Commissioner. A captive insurance company may otherwise make such distributions as are in conformity with its purposes and approved by the Commissioner. G.S. 58-10-345(f) shall apply to all information filed pursuant to this section. (2013-116, s. 1; 2022-7, s. 1(a).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-385 - Governing board members, officers, and employees.

§ 58-10-385. Governing board members, officers, and employees.
(a) Every captive insurance company shall report to the Commissioner within 30 days after any change in its executive officers or governing board members, including in its report a biographical affidavit for each new executive officer or governing board member. The change shall be deemed approved unless it is disapproved within 30 days from the completion of the Commissioner's review of the biographical affidavit.
(b) No governing board member, officer, or employee of a captive insurance company shall, except on behalf of the captive insurance company, accept or be the beneficiary of, any fee, brokerage, gift, or other compensation because of any investment, loan, deposit, purchase, sale, payment, or exchange made by or for the captive insurance company unless otherwise approved in advance by the Commissioner, but such person may receive reasonable compensation for necessary services rendered to the captive insurance company in his or her usual private, professional, or business capacity.
(c) Any profit or gain received by or on behalf of any person in violation of this section shall inure to and be recoverable by the captive insurance company. (2013-116, s. 1; 2015-99, s. 1; 2018-120, s. 5.1(c); 2022-7, s. 4(d).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-390 - Conflict of interest.

§ 58-10-390. Conflict of interest.
(a) Each captive insurance company licensed in this State is required to adopt a conflict of interest statement for officers, governing board members, and key employees. Such statement shall disclose that the individual has no outside commitments, personal or otherwise, that would divert him or her from his or her duty to further the interests of the captive insurance company he or she represents, but this shall not preclude such person from being a governing board member or officer in more than one insurance company.
(b) Each officer, governing board member, and key employee shall file such disclosure with the governing board of the captive insurance company annually. (2013-116, s. 1; 2015-99, s. 1; 2016-78, s. 4.1(h); 2022-7, s. 4(e).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-395 - Plan of operation change.

§ 58-10-395. Plan of operation change.
(a) Any material change in a captive insurance company's plan of operation that was filed with the Commissioner at the time of initial application and any subsequent amendment of the plan requires prior approval from the Commissioner.
(b) Any change in any other information filed with the application must be filed with the Commissioner within 60 days but does not require prior approval.
(c) G.S. 58-10-345(f) shall apply to all information filed pursuant to this section. (2013-116, s. 1; 2014-65, s. 6; 2016-78, s. 4.1(i); 2022-7, s. 1(b).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-400 - Insurance manager and intermediaries.

§ 58-10-400. Insurance manager and intermediaries.
No person shall act in or from this State as a managing general agent, producer, or reinsurance intermediary for captive insurance company business without the authorization of the Commissioner. (2013-116, s. 1; 2014-65, s. 7; 2016-78, s. 4.1(j).)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-425 - Deposit requirement.

§ 58-10-425. Deposit requirement.
(a) The Commissioner may require a captive insurance company to maintain a deposit with the Commissioner in a form and amount as the Commissioner may specify.
(b) A captive insurance company may receive interest or dividends from deposits held by the Commissioner or exchange the deposits for others of equal value with the approval of the Commissioner.
(c) If a captive insurance company discontinues business, the Commissioner shall return deposits held by the Commissioner only after being satisfied that all obligations of the captive insurance company have been discharged. (2013-116, s. 1; 2014-65, s. 11.)
2023 North Carolina General Statutes › Chapter 58 - Insurance › Article 10 - Miscellaneous Insurer Financial Provisions. › § 58-10-430 - Audits and Financial Analysis.

§ 58-10-430. Audits and Financial Analysis.
(a) Whenever the Commissioner determines it to be prudent, the Commissioner shall audit a captive insurance company's affairs to ascertain its financial condition, its ability to fulfill its obligations, and whether it has complied with this Part. The expenses and charges of the audit shall be paid by the captive insurance company.
(a1) Whenever the Commissioner determines it to be prudent, the Commissioner shall conduct a financial analysis of information submitted to or obtained by the Commissioner pursuant to this Part. Except as otherwise provided in this Part, the captive insurance company is not required to pay the expense and charges of the financial analysis.
(b) G.S. 58-2-160 shall apply to audits and financial analyses conducted under this section.
(c) All audit reports, preliminary audit reports or results, working papers, recorded information, documents, and copies thereof produced by, obtained by, or disclosed to the Commissioner or any other person in the course of an audit or financial analysis made under this section are confidential, are not subject to subpoena, and may not be made public by the Commissioner or an employee or agent of the Commissioner. Nothing in this subsection shall prevent the Commissioner from using such information in furtherance of the Commissioner's regulatory authority under this Chapter. The Commissioner shall have the discretion to grant access to such information to public officials having jurisdiction over the regulation of insurance in any other state or country or to law enforcement officers of this State or any other state or agency of the federal government at any time only if the officials receiving the information agree in writing to maintain the confidentiality of the information in a manner consistent with this subsection.
(d) Risk retention groups are not subject to this section and shall instead be audited in accordance with the Examination Law, G.S. 58-2-131 through G.S. 58-2-134. (2013-116, s. 1; 2014-65, s. 12; 2015-99, s. 1; 2016-78, s. 4.1(n); 2022-7, s. 3.)