Arkansas Administrative Code › Agency 054 - Arkansas Insurance Department › Rule 054.00.13-002 - Amended Rule 53 - To Define 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 is adopted and promulgated by the Arkansas Insurance
			 Commissioner pursuant to Ark. code Ann. §§
								23-61-108,
			 23-68-101,
et seq.,
and
			 25-15-101,
etseg.
Section
		  2. Purpose and Scope
The purpose of this rule is to set forth the standards which the
			 commissioner may use for identifying insurers found to be in such condition as
			 to render the continuance of their business hazardous to their policyholders,
			 creditors or the general public.
This rule 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 be interpreted to supersede any laws or parts of laws of this
			 state.
This Rule shall be applicable to all insurers, companies and
			 other entities subject to the provisions of Ark. Code Ann. §§
								23-68-101,
et seq.
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 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, actuarial opinions, actuarial reports or actuarial
		  summaries;
B. The National
		  Association of Insurance Commissioners Insurance Regulatory Information System
		  and its other financial analysis solvency tools and reports;
C. For insurers not subject to standard NAIC
		  reporting requirements, 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;
D. For insurers not
		  subject to standard NAIC reporting requirements, 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;
E. 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;
F. 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;
G. 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;
H. 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;
I. 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;
J.
		  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;
K. Whether any "controlling person" of an
		  insurer is delinquent in the transmitting to, or payment of, net premiums to
		  the insurer;
L. The age and
		  collectability of receivables;
M.
		  Whether the management of an 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;
N. 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:
O. Whether the insurer has failed to meet
		  financial and holding company filing requirements in the absence of a reason
		  satisfactory to the commissioner:
P. 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;
Q. 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;
R. Whether the insurer has experienced or
		  will experience in the foreseeable future cash flow or liquidity
		  problems;
S. Whether management has
		  established reserves that do not comply with minimum standards established by
		  state insurance laws, rules, statutory accounting standards, sound actuarial
		  principles and standards of practice;
T. Whether management persistently engages in
		  material under reserving that results in adverse development;
U. 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;
V. Any other finding
		  determined by the commissioner to be hazardous to the insurer's policyholders,
		  creditors or general public.