Code of Maine Rules › 02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION › 031 - BUREAU OF INSURANCE › Chapter 710 - STANDARDS FOR DETERMINING HAZARDOUS FINANCIAL CONDITIONS FOR INSURANCE COMPANIES › Section 031-710-4 - Factors to Assess Financial Condition

Current through 2024-29, July 17, 2024
The Superintendent may consider the following in determining
				  whether the continued transaction of insurance business by any insurance
				  carrier in this state is currently or prospectively hazardous to policyholders,
				  holders of certificates of insurance, claimants, creditors, or the general
				  public:
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 carrier may have made
				insufficient provision, according to presently accepted actuarial standards of
				practice, for the anticipated cash flows required by the contractual
				obligations and related expenses of the carrier, when considered in light of
				the assets held by the carrier with respect to its 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
				the carrier's policies and contracts;
D. The risk that assuming reinsurer(s) may be
				unable to fulfill contractual obligations, or that the carrier's reinsurance
				program may provide inadequate security after taking into account cash flow,
				the classes of business written, and the financial condition of the assuming
				reinsurer(s);
E. The carrier's
				operating loss in the last twelve-month period or any shorter intervening
				period, relative to the carrier's surplus in excess of minimum requirements,
				giving appropriate consideration to the carrier's net capital gains or losses,
				change in non-admitted assets, cash dividends paid to shareholders, and other
				relevant factors;
Drafting Note
: The NAIC model hazardous
				  condition regulation, at Subsections
				  3(E) and
				  3(F), specifically
				  identifies operating losses exceeding 50% of the carrier's remaining surplus
				  cushion (excess over minimum required surplus), or exceeding 20% of the
				  carrier's remaining surplus cushion after excluding net capital gains, as
				  indicators of hazardous financial condition. These benchmarks are significant
				  considerations in the Superintendent's review of a carrier's financial
				  condition, but are not codified in Subsection E because the purpose of Section
				  4 is to provide a qualitative list of
				  factors for the Superintendent to consider, recognizing that there is no
				  quantitative test that can mechanically determine whether a carrier is or is
				  not in hazardous condition.
F. Whether any affiliate, subsidiary,
				reinsurer, or obligor is insolvent, threatened with insolvency, or delinquent
				in payment of its monetary or other obligations;
G. Contingent liabilities, pledges, or
				guaranties which either individually or collectively obligate the carrier to
				the extent that the solvency of the carrier may be affected;
H. Whether any controlling person of the
				carrier is delinquent in the payment or transmission of net premiums to the
				carrier;
I. The age and
				collectability of receivables;
J.
				Whether the management, board of directors, or any other person who directly or
				indirectly controls the operation of the carrier, fails to possess and
				demonstrate the experience, fitness and business repute necessary to serve the
				carrier in such position;
K.
				Whether the carrier has failed to submit required financial filings, including
				holding company filings, has furnished false or misleading information in
				required attested financial filings, or failed to provide information
				sufficient for an adequate understanding of the carrier's material risks,
				including the enterprise risk to the carrier posed by its affiliates or
				insurance holding company system;
L. Whether the carrier has released false or
				misleading financial statements 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 carrier;
M. Whether the management of the carrier has
				failed to respond to regulatory inquiries regarding the condition of the
				carrier or has furnished false and misleading information in response to such
				an inquiry;
N. Whether the
				carrier's historical growth has strained its financial and/or administrative
				capacity to meet its obligations in a timely manner;
O. Whether the carrier's projected or actual
				cash flow will adversely impact the carrier's need for liquidity;
P. Whether management has established
				reserves that do not comply with minimum standards established by state
				insurance laws and other applicable actuarial or financial standards;
Q. Whether management persistently engages in
				material under-reserving that results in adverse development;
R. Whether transactions involving affiliates,
				subsidiaries, or controlling persons fail to provide sufficient value,
				liquidity, or diversity to assure the carrier's ability to meet its outstanding
				obligations as they mature; or
S.
				Such other conditions or circumstances which have resulted or will likely
				result in a material adverse financial impact upon the carrier's financial
				condition or its ability to provide adequate service to its
				policyholders.