Ohio Administrative Code › Title 3901 - Department of Insurance › Chapter 3901-3 - Acquisitions and Mergers; Insurance Holding Company Systems › Section 3901-3-04 - Hazardous financial condition standards

Current through all regulations passed and filed through July 1, 2024
(A) Purpose
The purpose of this rule is to facilitate the department of
				insurance's surveillance of the financial condition of insurers by setting out
				standards which the superintendent may use for identifying insurers whose
				condition is such 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 superintendent by any laws of this
				state.
(B) Authority
This rule is 
									promulgated pursuant to the authority vested in
				the superintendent under sections
				3901.041,
				3903.09 and
				3903.71 of the Revised
				Code.
(C) Standards
(1) The following standards, either singly or
			 a combination of two or more, may be considered by the superintendent to
			 determine whether the continued operation of any insurer might be deemed to be
			 hazardous to their policyholders, creditors, or the general public. The
			 superintendent may consider:
(a) Adverse
			 findings reported in financial condition or market conduct examination reports,
			 statutory audit reports, and actuarial opinions, reports or
			 summaries;
(b) The "National
			 Association of Insurance Commissioners (NAIC)
			 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 contracted 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) As reported in the most recent quarterly
			 or annual statutory financial statement filing, the insurer's net loss or
			 negative net income in the last twelve month period or any shorter period of
			 time, including but not limited to net unrealized capital gains or losses,
			 change in non-admitted assets, and the payment of cash dividends
			 to shareholders which are greater than fifty per cent of such insurer's
			 remaining capital and surplus as regards policyholders in excess of the minimum
			 amount required and/or;
(f) As
			 reported in the most recent quarterly or annual statutory financial statement
			 filing, the insurer's net decrease in capital and policyholders surplus, in the
			 last twelve month period or any shorter period of time, is greater than fifty
			 per cent of such insurer's remaining capital and policyholders surplus in
			 excess of the minimum required;
(g)
			 As reported in the most recent quarterly or annual statutory financial
			 statement filing, whether the insurer's net loss or negative net income in the
			 last twelve month period or any shorter period of time, excluding net realized
			 capital gains and losses, is greater than twenty per cent of the insurer's
			 remaining surplus as regards policyholders in excess of the minimum
			 required;
(h) 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 obligation and which in the opinion of the superintendent may affect
			 the solvency of the insurer;
(i)
			 Contingent liabilities, pledges or guarantees which either individually or
			 collectively involve a total amount which in the opinion of the superintendent
			 may affect the solvency of the insurer;
(j) Whether any person, exercising control of
			 an insurer as defined in division (C) of section
			 3905.61 of the Revised Code is
			 delinquent in the transmitting to, or payment of, net premiums to such
			 insurer;
(k) The age and
			 
										collectability of receivables;
(l) 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;
(m) 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;
(n) Whether
			 the insurer has failed to meet financial and holding company filing
			 requirements in the absence of a reason satisfactory to the
			 superintendent;
(o) Whether
			 management of an insurer has filed any false or misleading sworn financial
			 statement, or 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
			 insurer;
(p) 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;
(q) Whether the insurer has experienced or
			 will experience in the foreseeable future cash flow and/or liquidity
			 problems;
(r) Whether an insurer
			 has failed to comply with paragraph (J) of rule
			 3901-1-50
			 of the Administrative Code;
(s)
			 Whether the insurer meets measures of capital adequacy adopted by statute or
			 rule;
(t) Whether management has
			 established reserves that do not comply with state insurance laws, regulations,
			 statutory accounting standards, sound actuarial principles, and standards of
			 practice;
(u) Whether management
			 engages in reporting inadequate reserve levels that result in material adverse
			 development;
(v) Whether a material
			 change during the year to the insurer's financial condition, including, but not
			 limited to, changes in assets, liabilities, surplus, premium growth, mix of
			 business, reinsurance, or operating performance that may adversely impact the
			 result of the next year-end risk based capital calculation to a level that
			 would require regulatory action;
(w) 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;
(x) Any other finding
			 determined by the superintendent to be hazardous to the insurer's
			 policyholders, creditors, or general public.