Tenn. Comp. R. & Regs. 0780-01-81-.09 - CERTIFICATE OF AUTHORITY

(1) A person shall apply to be a third party administrator upon an application to be specified by the Commissioner and shall receive a certificate of authority or license from the Commissioner, prior to performing any function of a third party administrator in this state. It shall be unlawful for any person to operate in this state as a third party administrator without a certificate of authority or license.

(2) The application shall include or be accompanied by the following information and documents:

(a) All basic organizational documents of the applicant, including any articles of incorporation, articles of association, partnership agreement, trade name certificate, pool agreement, shareholder agreement and other applicable documents and all amendments to such documents;

(b) The bylaws, rules, regulations or similar documents regulating the internal affairs of the applicant;

(c) NAIC Biographical Affidavit for individuals who are responsible for the conduct of affairs of the applicant including: all members of the board of directors, board of trustees, executive committee or other governing board or committee; the principal officers in the case of a corporation or the partners or members in the case of a partnership, association or limited liability company; any shareholders or member holding directly or indirectly ten percent (10%) or more of the voting stock, voting securities or voting interest of the applicant; and any other person who exercises control or influence over the affairs of the applicant;

(d) Audited annual financial statements for the past year that are no more than six (6) months older than the date of application that prove that the applicant has a positive net worth. In lieu of audited financial statements, an applicant may submit financial statements or reports that are attested to by a company officer in a form approved by the commissioner. If attested, the attestation must refer to the financial statement by date and bear original signatures and notarized seal. The financial statements may be prepared on a GAAP basis but the commissioner reserves the ability to only consider assets that would be admitted by the NAIC's Accounting Practices and Procedures Manual. The financial statement must be in the name of the applicant or prepared on a consolidated basis that includes a columnar consolidating or combining worksheet that is filed with the report and includes the following:

1. Amounts shown on the consolidated audited or attested financial report shall be shown on the worksheet;

2. Amounts for each entity shall be stated separately;

3. Explanations of consolidation and eliminating entries; and

4. Other information as the commissioner may require in determining the current financial condition of the applicant.

(e) A statement describing the business plan including information on staffing levels and activities proposed in this state and nationwide. The plan shall provide details setting forth the applicant's capability for providing a sufficient number of experienced and qualified personnel in the areas of claims adjustment, claims processing, record keeping and underwriting recommendations; and

(f) Such other pertinent information as may be required by the Commissioner.

(3) Proof of a fidelity bond, fidelity insurance coverage and/or crime insurance coverage in the amount of Two Hundred Fifty Thousand Dollars ($250,000) issued in the name of the applicant. The deductible on the bond or insurance policy may not exceed ten percent (10%) of the third party administrator's or applicant's net worth as determined by the commissioner.

(a) Bonds and insurance must be written by an insurance company licensed to do business in Tennessee.

(b) Bonds and insurance policies must specify the beginning and end date. The notation "until cancelled" is not acceptable for purposes of this subparagraph.

(c) The Department of Commerce and Insurance shall be listed as the certificate holder on the bond or insurance policy so as to be notified in the event of the bond or policy's cancellation.

(4) A third party administrator licensed or applying for licensure under this Chapter shall make available for inspection by the Commissioner its accounts, records, and files for examination, and make its officers available to give information with respect to its affairs, as often as reasonably required by the Commissioner.

(5) The Commissioner may refuse to issue a certificate of authority or license if the Commissioner determines that the third party administrator, or any individual responsible for the conduct of affairs of the third party administrator is not competent, trustworthy, financially responsible or of good personal and business reputation, or has had an insurance or a third party administrator certificate of authority or license denied or revoked for cause by any jurisdiction, or if the Commissioner determines that any of the grounds set forth in Rule 0780-01-81-.10 exists with respect to the third party administrator.

(6) A certificate of authority or license issued under this Chapter shall remain valid, unless surrendered, suspended or revoked by the Commissioner, for a period of one (1) year.

(7) A third party administrator licensed or applying for licensure under this Chapter shall immediately notify the Commissioner of any material change in its ownership, control, or any other fact or circumstance affecting its qualification for a certificate of authority or license in this State.

(8) All third party administrators shall annually on or before the anniversary date of the granting of its certificate of authority renew its certificate of authority.

(9) A third party administrator that holds a license as a service company at the time of the effective date of this Chapter has until January 1, 2006, to obtain a certificate of authority under this Chapter.

Notes

Tenn. Comp. R. & Regs. 0780-01-81-.09

Original rule filed September 12, 2005; effective November 26, 2005. Amendments filed October 13, 2008; effective December 27, 2008.

Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c), 50-6-405(h), 56-1-409 and 4-5-320.