RULE 054.00.91-005 - Rule and Regulation 15: Insurance Holding Company Systems with Reporting Forms and Instructions

RULE 054.00.91-005. Rule and Regulation 15: Insurance Holding Company Systems with Reporting Forms and Instructions

SECTION 1. AUTHORITY.

This Rule and Regulation is promulgated pursuant to the authority-granted by Arkansas Code Annotated § 23-61-108, 23-63-518 and 25-15-201, et seq.

SECTION 2. EFFECTIVE DATE.

This Rule and Regulation shall become effective January 1, 1992.

SECTION 3. PURPOSE.

The purposes of this Rule and Regulation are: to set forth rules and procedural requirements which the Commissioner deems necessary to carry out the provisions of Ark. Code Ann. §§ 23-63-501, et seq., The Insurance Holding Company Regulatory Act, hereinafter referred to as "the Act". The information called for by this Rule and Regulation is hereby declared to be necessary and appropriate in the public interest and for the protection of the policyholders in this State.

SECTION 4. SEVERABILITY CLAUSE.

If any provision of this Rule and Regulation, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect other provisions or applications of this Rule and Regulation which can be given effect without the invalid provision or application, and to that end the provisions of this Rule and Regulation are severable.

SECTION 5. FORMS - GENERAL REQUIREMENTS.

(a) Forms A, B, C, and D are intended to be guides in the preparation of the statements required by the Act. They are not intended to be blank forms which are to be filled in. These statements filed shall contain the numbers and captions of all items, but the text of the items may be omitted provided the answers thereto are so prepared as to indicate to the reader the coverage of the items without the necessity of his referring to the text of the items or the instructions thereto. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.

(b) Two (2) complete copies of each statement including exhibits and all other papers and documents filed as a part thereof, shall be filed with the Commissioner by personal delivery or mail addressed to:

Insurance Commissioner of the State of Arkansas

400 University Tower Building

Little Rack, Arkansas 72204

Attention: Legal Division.

A copy of Form C shall be filed in each state in which an insurer is authorized to do business, if the Commissioner of that state has notified the insurer of its request in writing, in which case the insurer has twenty (20) days from receipt of the notice to file such form. At least one of the copies shall be manually signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of such power of attorney or other authority shall also be filed with the statement.

(c) Statements should be prepared on paper 8 1/2"x11" in size and preferably bound at the top or the top left-hand corner. Exhibits and financial statements, unless specifically prepared for the filing, may be submitted in their original size. All copies of any statement, financial statements, or exhibits shall be clear, easily readable and suitable for photocopying. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies. Statements shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency normally shall be converted into United States currency.

SECTION 6. FORMS - INCORPORATION BY REFERENCE, SUMMARIES AND OMISSIONS.

(a) Information required by any item of Form A, Form B or Form D may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of Form A, Farm B or Form D provided such document or paper is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the Commissioner which were filed within three (3) years need not be attached as exhibits. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that such material is to be incorporated by reference in answer to the item. Matter shall nor be incorporated by reference in any case where such incorporation would render the statement incomplete, unclear or confusing.

(b) Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to such statement, the summary or outline may incorporate by reference particular parts of any exhibit or document currently on file with the Commissioner which was filed within three (3) years and may be qualified in its entirety by such reference. In any case where two (2) or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of such documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which such documents differ from the documents a copy of which is filed.

SECTION 7. FORMS-INFORMATION UNKNOWN OR UNAVAILABLE AND EXTENSIONS OF TIME TO FURNISH.

(a) Information required need be given only insofar as it is known or reasonably available to the person filing the statement. If any required information is unknown and not reasonably available to the person filing, either because the obtaining thereof would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the person filing, the information may be omitted, subject to the following conditions:

(1) The person filing shall give such information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof; and

(2) The person filing shall include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of any affiliation with the person within whose knowledge the information rests and stating the result of a request made to such person for the information.

(b) If it is impractical to furnish any required information, document or report at the time it is required to be filed, there may be filed with the Commissioner as a separate document an application:

(1) Identifying the information, document or report in question;

(2) Stating why the filing thereof at the time required is impractical; and

(3) Requesting an extension of time for filing the information, document or report to a specified date. The request for extension shall be deemed granted unless the Commissioner within sixty (60) days after receipt thereof enters an order denying the request.

SECTION 8. FORMS - ADDITIONAL INFORMATION AND EXHIBITS.

In addition to the information expressly required to be included in Form A, Form B, Form C and Form D, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. Such exhibits shall be so marked as to indicate clearly the subject matters to which they refer. Changes to Forms A, B, C or D shall include on the top of the cover page the phrase: "Change No. (insert number) to" and shall indicate the date of the change and not the date of the original filing.

SECTION 9. DEFINITIONS.

(a) "Commissioner" means the Arkansas Insurance Commissioner.

(b) "Executive officer" means chief executive officer, chief operating officer, chief financial officer, treasurer, secretary, controller, and any other individual performing functions corresponding to those performed by the foregoing officers under whatever title.

(c) "Foreign insurer" shall include an alien insurer as defined in Ark. Code Ann. § 23-60-102(8) except where clearly noted otherwise.

(d) "Ultimate controlling person" means that person which is not controlled by any other person.

(e) Unless the context otherwise requires, other terms found in this Rule and Regulation and in Ark. Code Ann. § 23-63-503 are used as defined in the said Code Section. Other nomenclature or terminology is according to the Insurance Code, or industry usage if not defined by the Code.

SECTION 10. SUBSIDIARIES OF DOMESTIC INSURERS.

The authority to invest in subsidiaries under Ark. Code Ann. § 23-63-505 is in addition to any authority to invest in subsidiaries which may be contained in any other provision of the Insurance Code.

SECTION 11. ACQUISITION OF CONTROL - STATEMENT FILING.

A person required to file a statement pursuant to Ark. Code Ann. § 23-63-514 shall furnish the required information on Form A, hereby made a part of this Rule and Regulation.

SECTION 12. AMENDMENTS TO FORM A.

The applicant shall promptly advise the Commissioner of any changes in the information so furnished on Form A arising subsequent to the date upon which such information was furnished, but prior to the Commissioner's disposition of the application.

SECTION 13. ACQUISITION OF ARK. CODE ANN. § 23-63-506 INSURERS.

(a) If the person being acquired is deemed to be a "domestic insurer" solely because of the provisions of Ark. Code Ann. § 23-63-506, the name of the domestic insurer on the cover page should be indicated as follows:

"ABC Insurance Company, a subsidiary of XYZ Holding Company".

(b) Where a § 23-63-506 insurer is being acquired, references to "the insurer" contained in Form A shall refer to both the domestic subsidiary insurer and the person being acquired.

SECTION 14. ANNUAL REGISTRATION OF INSURERS - STATEMENT FILING.

An insurer required to file an annual registration statement pursuant to Ark. Code Ann. § 23-63-514 shall furnish the required information on Form B, hereby made a part of this Rule and Regulation.

SECTION 15. SUMMARY OF REGISTRATION - STATEMENT FILING.

An insurer required to file an annual registration statement pursuant to Ark. Code Ann. § 23-63-514 is also required to furnish information required on Form C, hereby made a part of this Rule and Regulation. An insurer shall file a copy of Farm C in each state in which the insurer is authorized to do business, if requested by the Commissioner of that state.

SECTION 16. ALTERNATIVE AND CONSOLIDATED REGISTRATIONS.

(a) Any authorized insurer may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under Ark. Code Ann. § 23-63-514. A registration statement may include information not required by the Act regarding any insurer in the insurance holding company system even if such insurer is not authorized to do business in this State. In lieu of filing a registration statement on Form B, the authorized insurer may file a copy of the registration statement or similar report which it is required to file in its State of domicile, provided:

(1) The statement or report contains substantially similar information required to be furnished on Form B; and

(2) The filing insurer is the principal insurance company in the insurance holding company system.

(b) The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer, shall set forth a brief statement of facts which will substantiate the filing insurer's claim that it, in fact, is the principal insurer in the insurance holding company 'system.

(c) With the prior approval of the Commissioner, an unauthorized insurer may follow any of the procedures which could be done by an authorized insurer under paragraph (a) above.

(d) Any insurer may take advantage of the provisions of Ark. Code Ann. § 23-63-514(f) or (g) without obtaining the prior approval of the Commissioner. The Commissioner, however, reserves the right to require individual filings if he deems such filings necessary in the interest of clarity, ease of administration or the public good.

SECTION 17. DISCLAIMERS AND TERMINATION OF REGISTRATION.

(a) A disclaimer of affiliation or a request for termination of registration claiming that a person does not, or will not upon the taking of some proposed action, control another person (hereinafter referred to as the "subject") shall contain the following information:

(1) The number of authorized, issued and outstanding voting securities of the subject;

(2) With respect to the person whose control is denied and all affiliates of such person, the number and percentage of shares of the subject's voting securities which are held of record or known to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly;

(3) All material relationships and bases for affiliation between the subject and the person whose control is denied and all affiliates of such person;

(4) A statement explaining why such person should not be considered to control the subject.

(b) A request for termination of registration shall be deemed to have been granted unless the Commissioner, within 30 days after he receives the request, notifies the registrant otherwise.

SECTION 18. TRANSACTIONS SUBJECT TO PRIOR NOTICE - NOTICE FILING.

An insurer required to give notice of a proposed transaction pursuant to Ark. Code Ann. § 23-63-515 shall furnish the required information on Form D, hereby made a part of this Rule and Regulation.

SECTION 19. EXTRAORDINARY DIVIDENDS AND OTHER DISTRIBUTIONS.

(a) Requests for approval of extraordinary dividends or any other extraordinary distribution to shareholders shall include the following:

(1) The amount of the proposed dividend;

(2) The date established for payment of the dividend;

(3) A statement as to whether the dividend is to be in cash or other property and, if in property, a description thereof, its cost, and its fair market value together with an explanation of the basis for valuation;

(4) A copy of the calculations determining that the proposed dividend is extraordinary. The work paper shall include the following information:

(i) The amounts, dates and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurers own securities) paid within the period of twelve (12) consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year.

(ii) Surplus as regards policyholders (total capital and surplus) as of the 31st day of December next preceding;

(iii) If the insurer is a life insurer, the net gain from operations for the twelve (12) month period ending the 31st day of December next preceding;

(iv) If the insurer is not a life insurer, the net income less realized capital gains far the twelve (12) month period ending the 31st day of December next preceding and the two preceding twelve (12) month periods; and

(v) If the insurer is not a life insurer, the dividends paid to stockholders excluding distributions of the insurer's own securities in the preceding two (2) calendar years.

(5) A balance sheet and statement of income for the period intervening from the last annual statement filed with the Commissioner and the end of the month preceding the month in which the request for dividend approval is submitted; and

(6) A brief statement as to the effect of the proposed dividend upon the insurer's surplus and the reasonableness of surplus in relation to the insurer's outstanding liabilities and the adequacy of surplus relative to the insurer's financial needs.

(b) Subject to Ark. Code Ann. § 23-63-515(c), (d), (e) and (f), each registered insurer shall report to the Commissioner all dividends and other distributions to shareholders within 15 business days following the declaration thereof, including the same information required by Subsections (a)(4) (i)-(v) of this Section.

SECTION 20. ADEQUACY OF SURPLUS.

The factors set forth in Ark. Code Ann. § 23-63-515(b) are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer's surplus no single factor is necessarily controlling. The Commissioner, instead, will consider the net effect of all of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the Commissioner will consider the extent to which each of these factors varies from company to company and in determining the quality and liquidity of investments in subsidiaries, the Commissioner will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.

FORM A

FORM B

FORM C

FORM D

(8/8/1991)

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