(a) Subject to all other limitations and
requirements of
3
AAC 21.201 -
3
AAC 21.399, a property and casualty insurer or an
accident and health insurer shall maintain an amount at least equal to 100
percent of adjusted loss reserves and loss adjustment expense reserves, 100
percent of adjusted unearned premium reserves, and 100 percent of policy and
contract reserves required by AS 21.18 in
(1)
cash and cash equivalents;
(2) a
bank certificate of deposit, subject to review by the director; if the director
determines that the amount of the certificate of deposit purchased by an
insurer in any one bank is excessive based on a finding that the
diversification of the insurer's investment holdings is inadequate, the
director will require the insurer to liquidate that portion found to be
excessive;
(3) a share or savings
account of a savings and loan or building and loan association, to the extent
that the account is insured by the Federal Deposit Insurance
Corporation;
(4) a high-grade
investment or medium-grade investment that qualifies under
3
AAC 21.330 or
3
AAC 21.335;
(5) an equity interest that qualifies under
3
AAC 21.340 and that is traded on a qualified
exchange;
(6) an investment of the
type set out in
3
AAC 21.360 if the investment is rated in the highest
rating category by a nationally recognized statistical rating organization
recognized by the securities valuation office for rating foreign jurisdictions
and if any foreign currency exposure is effectively hedged through the maturity
date of the investment;
(7) a
qualifying investment of the type set out in (4), (5), or (6) of this
subsection that is acquired, held, or invested in under
3
AAC 21.375;
(8) interest and dividends receivable on a
qualifying investment of the type set out in (1) - (7) of this subsection;
or
(9) reinsurance recoverable on
paid losses.
(b) For
purposes of determining the amount of assets to be maintained under (a) of this
section,
(1) the calculation of adjusted loss
reserves and loss adjustment expense reserves, adjusted unearned premium
reserves, and policy and contract reserves required by AS 21.18 must be based
on the amounts reported as of the date of the most recently filed financial
statement under
AS
21.09.200,
AS
21.09.205, and
3
AAC 21.400;
(2) with unpaid amounts determined net of
anticipated salvage and subrogation and gross of any discount, adjusted loss
reserves and loss adjustment expense reserves must be equal to the sum of the
amounts derived by
(A) identifying each
amount reported by the insurer as losses and loss adjustment expenses unpaid
for each accident year for each individual line of business;
(B) multiplying each amount identified in (A)
of this paragraph by the discount factor that is applicable to the line of
business and accident year under
26 U.S.C.
846 (Internal Revenue Code) for the calendar
year that corresponds to the insurer's most recently filed annual financial
statement under
AS
21.09.200; and
(C) from the product of the calculation in
(B) of this paragraph, subtracting accrued retrospective premiums discounted by
an average discount factor; the average discount factor is calculated by
dividing the sum of the discounted losses and loss adjustment expenses unpaid,
as calculated in (B) of this paragraph, by the sum of the insurer's loss and
loss adjustment expense reserves determined before discounting, as identified
in (A) of this paragraph;
(3) adjusted unearned premium reserves must
be equal to the amount reported by the insurer, as of the date of the most
recently filed financial statement under
AS
21.09.200,
AS
21.09.205, and
3
AAC 21.400, as unearned premium reserves minus the
admitted asset amounts reported by the insurer as
(A) premiums and agents' balances in the
course of collection, accident and health premiums due and unpaid, and
uncollected premiums for accident and health premiums;
(B) premiums, agents' balances, and
installments booked but deferred and not yet due; and
(C) bills receivable, taken for premium;
and
(4) policy and
contract reserves required by AS 21.18 must also include the amounts required
by National Association of Insurance Commissioners accounting practices and
procedures manual for additional or contingency reserves and for reserves in
addition to loss reserves, loss adjustment expense reserves, and unearned
premium reserves.
(c) A
property and casualty insurer or accident and health insurer shall supplement
the annual financial statement required by
AS
21.09.200 with a reconciliation and summary
of the insurer's assets and reserve requirements as required in (a) and (b) of
this section. A reconciliation and summary showing that an insurer's assets as
required in (a) and (b) of this section are greater than or equal to its
undiscounted reserves referred to in (a) and (b) of this section will be
considered sufficient to satisfy this requirement. Upon prior notification, and
as the director determines necessary to confirm continued compliance with this
section, the director will require an insurer to submit a reconciliation and
summary with a quarterly statement filed under
AS
21.09.205 and
3
AAC 21.400 during the calendar year.
(d) If a property and casualty or accident
and health insurer has assets and reserves that do not comply with (a) and (b)
of this section, the insurer shall notify the director immediately of the
amount by which the reserve requirements exceed the annual admitted asset value
of the qualifying assets, explain why the deficiency exists, and, within 30
days after the date of the notice, propose a plan of action to remedy the
deficiency.
(e) If the director
determines that a property and casualty insurer or accident and health insurer
is not in compliance with (a) and (b) of this section, the director will
require the insurer to eliminate the condition causing the noncompliance within
a specified time from the date the notice of the director's requirement is
mailed or delivered to the insurer. If an insurer fails to comply with the
director's requirement, the insurer will be considered to be in hazardous
financial condition, and the director will take one or more of the actions
authorized by AS 21 as to an insurer in a hazardous financial
condition.