Arkansas Administrative Code › Agency 054 - Arkansas Insurance Department › Rule 054.00.91-003 - Rule and Regulation 53: Definition of Standards and Commissioner's Authority for Companies Deemed to be in Hazardous Financial Condition

Current through Register Vol. 49, No. 6, June, 2024
SECTION 1.
		  AUTHORITY
This Rule and Regulation is adopted and promulgated by the
			 Insurance Commissioner for the State of Arkansas ("Commissioner") pursuant to
			 Arkansas Code Annotated §§
								23-61-103,
			 23-61-108,
			 23-63-205,
			 23-63-213,
			 23-68-105,
			 23-68-106,
			 23-68-107,
			 23-68-108,
			 23-69-138,
			 23-71-103,
			 23-72-103,
			 23-73-104,
			 23-74-705,
			 23-75-102,
			 23-76-103
			 and
			 25-15-201, et
			 seq.
SECTION 2. PURPOSE
The purpose of this Rule and Regulation is to set forth the
			 standards which the Commissioner may use for identifying insurers found to he
			 in such condition as to render the continuance of their business hazardous to
			 the public or to holders of their policies or certificates of insurance.
For purposes of this Rule and Regulation "insurer" means an
			 authorized insurer as defined in Arkansas Code Annotated §
								23-60-102(11).
This Rule and Regulation shall not be interpreted to limit the
			 powers granted the Commissioner by any laws or parts of laws of this state, nor
			 shall this Rule and Regulation be interpreted to supercede any laws or parts of
			 laws of this state.
SECTION
		  3. STANDARDS
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 the policyholders, creditors or the general
			 public. The Commissioner may consider:
1. Adverse findings reported in financial
		  condition and market conduct examination reports;
2. The National Association of Insurance
		  Commissioners Insurance Regulatory Information System and its related
		  reports;
3. The ratios of
		  commission expense, general insurance expense, policy benefits and reserve
		  increases as to annual premium and net investment income which could lead to an
		  impairment of capital and surplus;
4. The insurer's asset portfolio, when viewed
		  in light of current economic conditions, is not of sufficient value, liquidity,
		  or diversity to assure the company's ability to meet its outstanding
		  obligations as they mature;
5. The
		  ability of an assuming reinsurer to perform, and whether the insurer's
		  reinsurance program provides sufficient protection for the company'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;
6. The insurer's
		  operating loss in the last twelve (12) 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
		  fifty percent (50.?) of such insurer's remaining surplus as regards
		  policyholders in excess of the minimum required;
7. Whether any affiliate, subsidiary or
		  reinsurer is insolvent, threatened with insolvency, or delinquent in payment of
		  its monetary or other obligation;
8. 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;
9. Whether any
		  "controlling person" of an insurer is delinquent in the transmitting to, or
		  payment of, net premiums to such insurer;
10. The age and collectibility of
		  receivables;
11. 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;
12. 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;
13. 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;
14. 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;
15. Whether the company has experienced or
		  will experience in the foreseeable future cash flow and/or liquidity
		  problems.