Code of Vermont Rules › Agency 21 - DEPARTMENT OF FINANCIAL REGULATION › Sub-Agency 020 - INSURANCE DIVISION › Chapter 031 - DEFINING STANDARDS AND COMMISSIONER'S AUTHORITY FOR COMPANIES DEEMED TO BE IN HAZARDOUS FINANCIAL CONDITION › Section 21 020 031 - DEFINING STANDARDS AND COMMISSIONER'S AUTHORITY FOR COMPANIES DEEMED TO BE IN HAZARDOUS FINANCIAL CONDITION

Current through June,
				2024
Section 1 Authority
This regulation is promulgated pursuant to the authority
				  granted by
				  8 VSA §
											15 and Chapters 101, 123, 125, 139, 141, 142,
				  145 and 151
Section 2
				Purpose
The purpose of this regulation is to set forth the standards
				  which the Commissioner may use for identifying, and the powers and authority of
				  the Commissioner with respect to, insurers or other risk bearing entities found
				  to be 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.
This regulation shall not be interpreted to limit the powers
				  granted to the Commissioner by any laws or parts of laws of this state, nor
				  shall this regulation be interpreted to supersede 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
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. 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. Whether 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 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;
G. Whether the insurer's operating loss in
				the last 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 50% of the insurer's remaining
				surplus as regards policyholders that is in excess of the minimum
				required;
H. Whether the insurer's
				operating loss in the last 12-month period or any shorter period of time,
				excluding net capital gains, is greater than 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 including, but not limited to, 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;
J. Contingent liabilities,
				pledges or guarantees 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 such insurer;
L. Whether the age and collectability of
				receivables involve a total amount which the Commissioner determines adversely
				affects the solvency of the insurer;
M. 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;
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 including, but not limited to, whether the insurer has
				failed to meet financial and holding company filing requirements in the absence
				of a reason satisfactory to the Commissioner;
O. 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;
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 company has experienced or
				will experience in the foreseeable future cash flow and/or liquidity problems
				including, but not limited to, 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 or whether management persistently engages in material
				under reserving that results in adverse development;
R. Any other finding determined by the
				Commissioner to be hazardous to the insurer's policyholders, creditors or
				general public.