California Code of Regulations
Title 10 - Investment
Chapter 5 - Insurance Commissioner
Subchapter 3 - Insurers
Article 23 - Hazardous Financial Conditions; Corrective Actions
Section 2598.3 - Adjustments; Corrective Actions

Universal Citation: 10 CA Code of Regs 2598.3

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) For the purposes of making a determination of an insurer's financial condition under these regulations, the commissioner may:

(1) Disregard any credit or amount receivable resulting from transactions with a reinsurer that is insolvent, impaired or otherwise subject to a delinquency proceeding;

(2) Make appropriate adjustments including disallowance to asset values attributable to investments in or transactions with parents, subsidiaries or affiliates consistent with the NAIC Accounting Practices And Procedures Manual, state laws and regulations;

(3) Refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor;

(4) Increase the insurer's liability in an amount equal to any contingent liability, pledge, or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next twelve-month period.

(b) If the commissioner makes an initial determination that the continued operation of the insurer licensed to transact business in this state may be hazardous to its policyholders, creditors or the general public, then the commissioner will meet with the insurer to discuss implementation of one or more of the following:

(1) Reduce the total amount of present and potential liability for policy benefits by reinsurance;

(2) Reduce, suspend or limit the volume of business being accepted or renewed;

(3) Reduce general insurance and commission expenses by specified methods;

(4) Increase the insurer's capital and surplus;

(5) Suspend or limit the declaration and payment of dividend by the insurer to its stockholders or to its policyholders;

(6) File reports with the commissioner concerning the market value of the insurer's assets;

(7) Unless otherwise restricted by the Insurance Code, limit or withdraw from certain investments or discontinue certain investment practices to the extent the commissioner deems necessary;

(8) Document the adequacy of premium rates in relation to the risks insured;

(9) File, in addition to regular annual statements, interim financial reports on the form adopted by the National Association of Insurance Commissioners.

(10) Correct corporate governance practice deficiencies, and adopt and utilize governance practices that will correct, eliminate, or remedy the condition(s) that led to the commissioner's initial determination that continuance of the insurer's operations may be hazardous to its policyholders, creditors or the general public.

(11) Provide a business plan to the commissioner in order to continue to transact business in the state.

(12) Adjust rates for any non-life insurance product written by the insurer that the commissioner considers necessary to improve the financial condition of the insurer.

(c) The meeting(s) under subsection (b) shall be held pursuant to Section 12919 of the Insurance Code unless the insurer requests a public hearing pursuant to Section 1065.1 of the Insurance Code. Unless mutually agreed otherwise between the commissioner and the insurer, the meeting shall occur not less than ten (10) days nor more than thirty (30) days after the insurer's request. The meeting shall be either in the commissioner's Sacramento, Oakland, or Los Angeles office or in some other place convenient to the parties designated by the commissioner. The commissioner shall hold all meetings under this subsection privately, unless the insurer requests otherwise, in which case the meeting shall be public.

1. New section filed 11-26-2013; operative 1-1-2014 pursuant to Government Code section 11343.4(a) (Register 2013, No. 48).
2. New subsections (b)-(c) and amendment of NOTE filed 12-24-2013; operative 1-1-2014 pursuant to Government Code section 11343.4(b)(3) (Register 2013, No. 52).
3. Change without regulatory effect amending subsection (c) filed 8-27-2020 pursuant to section 100, title 1, California Code of Regulations (Register 2020, No. 35).

Note: Authority cited: Sections 720, 700(c), 700.01, 700.02, 700.025, 700.03, 700.04, 700.05, 717, 730, 731, 732, 733, 734, 735.5, 736, 736.5, 737, 738, 739.3, 739.4, 739.5, 739.6, 739.8, 900.2, 900.8, 903, 922, 922.2, 923, 923.5, 934, 1065.1, 1065.2, 1065.3, 1077.7, 1215, 1215.1, 1215.2, 1215.3, 1215.4, 1215.5, 1215.6, 1215.7, 1215.8, 1215.11, 1370.2, 1372, 4011, 4012, 4080, 10489.15, 10489.2, 10489.3, 10489.4, 10489.5, 10489.6, 10489.7, 10489.8, 10489.9, 10489.93, 10489.94, 12107, 12114(b), 12124, 12125, 12381, 12388, 12640.04, 12640.05, 12640.16, 12919; 12921.5, 12924 and 12926, Insurance Code. Reference: Sections 700(c), 923.5, 923.6(f)(1), 925.3, 735.5, 739.8, 933, 934, 706.5, 931, 933, 934 and 12920, Insurance Code.

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