02-031 C.M.R. ch. 710, § 5 - Determination of Hazardous Financial Condition

A. For the purposes of making a determination of hazardous financial condition, the Superintendent may:

1 Disallow any credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired, or otherwise subject to a delinquency proceeding;

2 Adjust or disallow values of assets and investments relating to, or arising out of transactions with, entities affiliated with the carrier, consistent with the NAIC Accounting Practices and Procedures Manual and any other accounting practices lawfully permitted or prescribed by the Superintendent or by the applicable domiciliary regulator;

3 Disallow the stated value of accounts receivable if collectability of the asset is unlikely based upon aging of the account balance or financial condition of a debtor(s); or

4 In making a determination of surplus, assign a liability value when there is a substantial risk that the carrier will be required to fund within the next twelve months any liability, pledge, or guarantee contingently undertaken by the carrier.

B. In addition to other specific remedies in Title 24-A M.R.S.A., when the Superintendent determines that the continued operation of the carrier in this state is currently or prospectively hazardous to the policyholders, holders of certificates of insurance, claimants, or the general public, the Superintendent may issue an order, pursuant to 24-A M.R.S.A. §4401(1), requiring the carrier to:

1 Reduce the total amount of present and potential liability for policy obligations by reinsuring all or a portion of risks with appropriately qualified reinsurers;

2 Limit the volume of business being accepted or renewed;

3 Reduce general insurance and commission expenses through methods specified or approved by the Superintendent;

4 Increase capital and/or surplus funds;

5 Obtain prior approval of the Superintendent before payment of any dividend to be distributed or credited to the carrier's stockholders or policyholders;

6 Seek appropriate appraisals of assets specified by the Superintendent and inform the Superintendent as to the market value thereof;

7 Discontinue non-conforming or unsafe investment practices and institute divestiture procedures respecting assets which constitute ineligible or inappropriate investments;

8 Demonstrate the adequacy of premium rates in relation to risks insured;

9 File, in addition to regular annual statements, interim financial reports on the form adopted by the National Association of Insurance Commissioners or in any other format as specified by the Superintendent;

10 Correct corporate governance practice deficiencies, and adopt and follow governance practices acceptable to the Superintendent;

11 Provide and adhere to a business plan acceptable to the Superintendent; or

12 Notwithstanding any other provision of law limiting the frequency or amount of premium rate adjustments, adjust rates for any non-life insurance product to the extent that the Superintendent determines to be necessary to improve the financial condition of the carrier.

C. The Superintendent may make and serve the order without notice and before hearing, and must simultaneously serve upon the carrier and other persons involved the notice of hearing scheduling a hearing not less than ten (10) days nor more than thirty (30) days after the notice is served, unless the Superintendent and the carrier mutually agree upon a later time. The Superintendent's order and notice of hearing shall be served upon the carrier in compliance with the notice provisions of the Maine Administrative Procedure Act, Title 5, chapter 375, subchapter IV. The notice of hearing shall state the time and place of hearing, and the conduct, condition, or ground upon which the Superintendent based the order. The Superintendent shall hold all hearings under this subsection privately, unless the carrier requests a public hearing, in which case the hearing shall be public.

Notes

02-031 C.M.R. ch. 710, § 5