California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 23 - Hazardous Financial Conditions; Corrective Actions › Section 2598.2 - Standards

Current through Register 2024 Notice Reg. No. 28, July 12, 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 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 contractual 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 fifty percent (50%) of the
				  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 the
				  insurer is delinquent in the transmitting to, or payment of, net premiums to
				  the insurer;
(j) The age and
				  collectability of receivables;
(k)
				  Whether the management of the insurer, including officers, directors, or any
				  other person who directly or indirectly controls the operation of the insurer,
				  fails to possess and demonstrate the competence, fitness and reputation deemed
				  necessary to serve the insurer in such position;
(l) Whether management of the 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 the 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 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.
1. New
					 section filed 11-26-2013; operative 1-1-2014 pursuant to Government Code
					 section
					 11343.4(a)
					 (Register 2013, No. 48).
Note: Authority cited: Sections
						720,
						700(c),
						700.01,
						700.02,
						700.025,
						700.03,
						700.04,
						700.05,
						717,
						730,
						731,
						732,
						733,
						738,
						739.3,
						739.4,
						739.6,
						900.8,
						922.2,
						923,
						923.5,
						934,
						1011,
						1215,
						1215.1,
						1215.2,
						1215.3,
						1215.4,
						1215.5,
						1215.6,
						1215.7,
						1370.2,
						1372,
						4011,
						4012,
						4080,
						10489.15,
						10489.2,
						10489.3,
						10489.4,
						10489.5,
						10489.6,
						10489.7,
						10489.8,
						10489.9,
						10489.93,
						10489.94,
						12107,
						12114(b),
						12124,
						12125,
						12381,
						12388,
						12640.04,
						12640.05,
						12640.16
						and
						12926,
						Insurance Code. Reference: Sections
						700(c),
						700.01,
						700.02,
						700.025,
						700.03,
						700.04,
						700.05,
						717,
						923.5,
						925.3,
						1065.1,
						1065.2,
						1370.2,
						1372,
						4011,
						4012,
						4080,
						10489.15,
						10489.2,
						10489.3,
						10489.4,
						10489.5,
						10489.6,
						10489.7,
						10489.8,
						10489.9,
						10489.93,
						10489.94,
						12107,
						12114(b),
						12124,
						12125,
						12381,
						12388,
						12640.04,
						12640.05
						and
						12920,
						Insurance Code.