Alabama Administrative Code › Title 482 - ALABAMA DEPARTMENT OF INSURANCE › Chapter 482-1-101 - STANDARDS FOR DETERMINING HAZARDOUS FINANCIAL CONDITION › Section 482-1-101-.03 - Standards

Current through Register Vol. 42, No. 9, June 28, 2024
The following standards, either singly or a combination of two
				or more, may be considered by the Commissioner to determine whether the
				continued operation of any insurer transacting an insurance business in this
				state might be deemed to be hazardous to its policyholders, creditors or the
				general public. The Commissioner may consider:
(a) Adverse findings reported in financial
			 condition and market conduct examination reports, audit reports, and actuarial
			 opinions, reports or summaries.
(b)
			 The National Association of Insurance Commissioners Insurance Regulatory
			 Information System and its other financial analysis solvency tools and
			 reports.
(c) Whether the insurer
			 has made adequate provision, according to presently accepted actuarial
			 standards of practice, for the anticipated cash flows required by the
			 contractural obligations and related expenses of the insurer, when considered
			 in light of the assets held by the insurer with respect to such reserves and
			 related actuarial items including, but not limited to, the investment earnings
			 on such assets, and the considerations anticipated to be received and retained
			 under such policies and contracts.
(d) The ability of an assuming reinsurer to
			 perform and whether the insurer's reinsurance program provides sufficient
			 protection for the insurer's remaining surplus after taking into account the
			 insurer's cash flow and the classes of business written as well as the
			 financial condition of the assuming reinsurer.
(e) Whether the insurer's operating loss in
			 the last twelve month period or any shorter period of time, including but not
			 limited to net capital gain or loss, change in non-admitted assets, and cash
			 dividends paid to shareholders, is greater than 50% of such insurer's remaining
			 surplus as regards policyholders in excess of the minimum required.
(f) Whether the insurer's operating loss in
			 the last twelve-month period or any shorter period of time, excluding net
			 capital gains, is greater than twenty percent (20%) of the insurer's remaining
			 surplus as regards policyholders in excess of the minimum required.
(g) Whether a reinsurer, obligor or any
			 entity within the insurer's insurance holding company system, is insolvent,
			 threatened with insolvency, or delinquent in payment of its monetary or other
			 obligations, and which in the opinion of the Commissioner may affect the
			 solvency of the insurer.
(h)
			 Contingent liabilities, pledges or guaranties which either individually or
			 collectively involve a total amount which in the opinion of the Commissioner
			 may affect the solvency of the insurer.
(i) Whether any "controlling person" of an
			 insurer is delinquent in the transmitting to, or payment of, net premiums to
			 such insurer.
(j) The age and
			 collectability of receivables.
(k)
			 Whether the management of an insurer, including officers, directors, or any
			 other person who directly or indirectly controls the operation of such insurer,
			 fails to possess and demonstrate the competence, fitness and reputation deemed
			 necessary to serve the insurer in such position.
(l) Whether management of an insurer has
			 failed to respond to inquiries relative to the condition of the insurer or has
			 furnished false and misleading information concerning an inquiry.
(m) Whether the insurer has failed to meet
			 financial and holding company filing requirements in the absence of a reason
			 satisfactory to the Commissioner.
(n) Whether management of an insurer either
			 has filed any false or misleading sworn financial statement, or has released
			 false or misleading financial statement to lending institutions or to the
			 general public, or has made a false or misleading entry, or has omitted an
			 entry of material amount in the books of the insurer.
(o) Whether the insurer has grown so rapidly
			 and to such an extent that it lacks adequate financial and administrative
			 capacity to meet its obligations in a timely manner.
(p) Whether the insurer has experienced or
			 will experience in the foreseeable future cash flow and/or liquidity
			 problems.
(q) Whether management
			 has established reserves that do not comply with minimum standards established
			 by state insurance laws, regulations, statutory accounting standards, sound
			 actuarial principles and standards of practice.
(r) Whether management persistently engages
			 in material under reserving that results in adverse development.
(s) Whether transactions among affiliates,
			 subsidiaries or controlling persons for which the insurer receives assets or
			 capital gains, or both, do not provide sufficient value, liquidity or diversity
			 to assure the insurer's ability to meet its outstanding obligations as they
			 mature.
(t) Any other finding
			 determined by the Commissioner to be hazardous to the insurer's policyholders,
			 creditors or general public.
Author:
Commissioner of Insurance
Statutory Authority:
Code of Ala.
				  1975
, §
										27-2-17,
				  27-2-33,
				  27-3-21,
				  27-21A-17,
				  27-32-1, et seq.