Or. Admin. R. 410-141-5320 - CCO HOLDING COMPANY REGULATION: Transactions Within Holding Company

Current through Register Vol. 60, No. 12, December 1, 2021

(1) A transaction within a CCO holding company system to which a CCO subject to registration is a party is subject to the following standards:
(a) The terms must be fair and reasonable.
(b) Charges or fees for services performed must be reasonable.
(c) Expenses incurred and payment received must be allocated to the CCO in conformity with customary insurance accounting practices that are consistently applied.
(d) The books, accounts and records of each party to the transaction must be maintained so as to disclose clearly and accurately the nature and details of the transaction, including accounting information that is necessary to support the reasonableness of the charges or fees to the respective parties.
(e) The combined capital and surplus of the CCO following any transaction with an affiliate or any shareholder dividend must be reasonable in relation to the CCO's outstanding liabilities and adequate to the CCO's financial needs.
(2) The Authority may prescribe from time to time required provisions that must be included in agreements with affiliates for cost-sharing services and management.
(3) A CCO and any person in the CCO's CCO holding company system may enter into a transaction described in subsection (4), including an amendment to or modification of an affiliate agreement that is subject to standards set forth in this section, only if:
(a) The CCO has notified the Authority of the CCO's intention to enter into the transaction in writing and not later than the 30th day before the transaction, or within a shorter period the Authority allows; and
(b) The Authority does not disapprove the transaction within the period.
(4) Subsection (3) applies to the following transactions:
(a) Sales, purchases, exchanges, loans or extensions of credit, guarantees or investments, if the transactions equal or exceed the lesser of three percent of the CCO's allowed assets or 25 percent of the CCO's combined capital and surplus, each as of the 31st day of December immediately preceding.
(b) Loans or extensions of credit to any person that is not an affiliate, if the CCO makes the loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in any affiliate of the CCO that is making the loans or extending the credit. This subparagraph applies to transactions that equal or exceed the lesser of three percent of the CCO's allowed assets or 25 percent of the CCO's combined capital and surplus, each as of the 31st day of December immediately preceding.
(c) Reinsurance agreements or modifications to reinsurance agreements, reinsurance pooling agreements and agreements in which the reinsurance premium or a change in the CCO's liabilities, the projected reinsurance premium or a projected change in the CCO's liabilities in any of the next three years equals or exceeds five percent of the CCO's combined capital and surplus, as of the 31st day of December immediately preceding, including agreements that may require as consideration the transfer of assets from a CCO to a nonaffiliate if an agreement or understanding exists between the CCO and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the CCO.
(d) All management agreements, service contracts, tax allocation agreements, guarantees and all cost-sharing arrangements.
(e) A guarantee that a CCO makes if the guarantee is not quantifiable as to amount. If the guarantee is quantifiable as to amount, the CCO is not required to notify the Authority under this section unless the guarantee exceeds the lesser of one-half of one percent of the CCO's admitted assets or 10 percent of surplus with respect to Members as of the 31st day of December immediately preceding.
(f) Direct or indirect acquisitions or investments in a person that controls the CCO or in an affiliate of the CCO, the amount of which, together with the CCO's existing acquisitions or investments in the person or affiliate, exceeds two and one-half percent of the CCO's surplus to Members.
(g) Any other material transactions specified by the Authority from time to time as transactions that may adversely affect the interests of the CCO's Members.
(5) A notice for a transaction under subsection (3) that is an amendment to or modification of an affiliate agreement that was previously filed must include a statement of reasons for the change and an estimate of the financial impact the change would have on the CCO.
(6) A CCO shall notify the Authority informally within 30 days after a previously filed agreement has terminated, and the Authority, after receiving the notice, shall determine the type of filing the CCO must submit, if any.
(7) A CCO may not enter into one or more transactions during any 12-month period that are part of a plan or series of like transactions with persons that are within the CCO holding company system if the purpose of the separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise.
(8) In reviewing a transaction in accordance with subsection (3) of this section, the Authority shall consider whether the transaction complies with the standards set forth in subsection (1) of this section and whether the transaction may adversely affect the interests of Members.
(9) A CCO shall notify the Authority not later than the 30th day after any investment the CCO makes in any one corporation or other legal entity if the total investment the CCO holding company system makes in the corporation or other legal entity exceeds 10 percent of the corporation's voting securities or other equivalent ownership interests.
(10) This section does not authorize or permit any transaction that, in the case of a CCO that is not a member of the same CCO holding company system, would be otherwise contrary to law.
(11) A CCO required to give notice of a proposed transaction pursuant to subsection (3) shall furnish the required information on Form D. Form D is set forth on the website of the Authority at https://www.oregon.gov/oha/HSD/OHP/Pages/CCO-Contract-Forms.aspx.

Notes

Or. Admin. R. 410-141-5320
DMAP 60-2019, adopt filed 12/18/2019, effective 1/1/2020

Statutory/Other Authority: ORS 413.042, 414.615, 414.625, 414.635 & 414.651

Statutes/Other Implemented: ORS 414.610 - 414.685

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