Current through March 14, 2024
No insurer shall be or become an eligible surplus lines insurer
unless authorized by the commissioner in accordance with the following
conditions:
(a) For each line of
insurance it proposes to write as an eligible surplus lines insurer, the
insurer shall:
(1) be currently licensed in
the state of its domicile if chartered, incorporated, organized or constituted
within the United States; or
(2) be
currently licensed in its United States domiciliary jurisdiction if, as an
alien insurer, it does business through a United States branch; or
(3) be currently licensed in its domiciliary
jurisdiction outside the United States if an alien insurer; or
(4) be chartered by, incorporated, organized
or constituted within or under the laws of this state if applying to be
designated as a domestic surplus lines insurer; and
(5) show that it writes the lines of business
that it proposes to write in this state in sufficient volume as to demonstrate
an expertness in insuring such product lines.
(b) Each insurer shall have capital and
surplus to policyholders of at least fifteen million dollars, provided those
insurers presently on the list of eligible surplus lines insurers that do not
meet this requirement shall have until December 31, 1997 to meet this
requirement if such insurers have capital and surplus to policyholders of at
least ten million dollars by December 31, 1995 and capital and surplus to
policyholders of at least twelve million dollars by December 31,1996.
(c) A determination of financial condition
will be made regarding those insurers that apply. In making this determination
there shall be deducted from unassigned funds any nonqualifying assets or
understatement in reserves or special deposits not held on account for all
policyholders. The difference between market value and amortized value of
investments in bonds may be taken into consideration and also the ratio of
earned premiums to surplus as regards policyholders when that ratio exceeds
3:1, as well as any other ratios that are generally acceptable among regulators
and the insurance industry.
(d) The
commissioner, upon assessment of the rate of growth of the insurer, its
business persistency, supporting surplus resources, business acquisition costs,
claims experience and investment policies shall make a determination concerning
the adequacy of equity resources as related to the insurer's business
expansion. Such determination together with a review of the insurer's plan of
operations, both nationally and for this state, will be used to evaluate the
insurer's potential to perform on policy obligations contracted within this
state and its expertness in the business of insurance. The condition or methods
of operation of the insurer shall not be such as would render its operation
hazardous to the public or its policyholders in this state.
(e) In order to be declared an eligible
surplus lines insurer or a domestic surplus lines insurer, an insurance company
shall file an application on the form prescribed by the commissioner and do the
following:
(1) If an alien insurer, give the
name and address of its United States manager or representative.
(2) File a certificate of compliance from the
public official having supervision of insurance in the company's domiciliary
jurisdiction showing that it is authorized to transact the kind or kinds of
insurance proposed to be transacted in this state.
(3) File a legible copy of the corporate
charter or articles of incorporation with all amendments thereto certified by
the public officer with whom the originals are on file in its domiciliary
jurisdiction.
(4) File a copy of
the bylaws, as amended, certified to by the company's secretary or other
officer having custody thereof.
(5)
File evidence of all deposits in the United States.
(6) File a certified copy of the deed of
trust filed with the jurisdiction of entry to the United States, if a branch of
an alien insurer.
(7) File a
statement of trusteed surplus in the United States, if an alien
insurer.
(8) File a certified copy
of a report of examination conducted by the company's domiciliary jurisdiction
with an "as of date" no more than two years preceding its application, or such
other evidence of verification of financial security as is acceptable to both
its domiciliary jurisdiction and to the commissioner.
(9) File annual statements for the two years
preceding the current year for the type(s) of insurance proposed to be
transacted in this state. They shall be in such form and with such detail as is
prescribed by the commissioner.
(10) File a copy of any agreements by which
the right to conduct or influence any of the affairs of the company is
transferred to others, also any employment or deferred compensation agreements
in which any officer, director or shareholder who controls five percent or more
of the outstanding shares of the company directly or indirectly
participates.
(11) File audit
reports for the two complete fiscal years immediately preceding the date of
application certified by the company's outside public accounting firm (if the
applicant has appointed independent outside accountants). If not contained in
the report, a reconciliation, prepared by the independent accountant, shall be
furnished which details adjustments from original basis of presentation to
statutory form. Include any comments or management letters prepared by the
outside accountant, as well as recommendations relative to adequacy of internal
controls or a signed statement by the independent accountant that no
recommendations have been rendered to management.
In the case of an insurance exchange created under the laws of
any state and where the exchange requires its syndicates to file audited
financial statements on an annual basis, the exchange shall provide the
commissioner with a certification from the insurance department of its state of
domicile that such statements have been filed by each syndicate and are
available for the commissioner's inspection upon request. The certification
shall include a schedule of capital and surplus for each syndicate so
filing.
(12) File a
detailed narrative of the company's plan of operations for this state and
nationally.
(13) File a statement
of ownership of the applicant. Include all shareholders of record who control
five percent or more of the outstanding shares of the applicant directly or
indirectly.
(14) File biographical
data respecting all directors and the following officers of the applicant: The
president, vice president, secretary, treasurer, chief actuary, general
counsel, comptroller and any person, however described, who enjoys, in fact,
the executive authority of any such officers, including a statement that no
officer, director or five percent shareholder has been convicted of a felony;
or if such persons have been so convicted, a description of the nature of the
crime and the address of the court and docket number of the case when judgment
was entered.
(15) File copies of
all annual, quarterly or other reports, and proxy statements made by the
applicant and its parent to stockholders and policyholders during the preceding
twelve month period.
(16) File any
prospectus of the company or its parent within the preceding three
years.
(17) File a copy of the most
recent Form 10-K, if the applicant or any of its affiliates are regulated by
the Securities and Exchange Commission.
(18) File a copy of the holding company
registration statement, and any amendments thereto, as filed with the insurance
supervisory official in the jurisdiction where the company is registered for
the current year.
(19) If a license
has been refused or approval as an eligible surplus lines insurer has been
refused or withdrawn by any jurisdiction, furnish an explanation and a copy of
any refusal or withdrawal. Also include any disciplinary action by any
jurisdiction in the most recent two year period.
(20) If applying for the authority to conduct
business as a domestic surplus lines insurer, file a resolution adopted by the
board of directors to be designated as a domestic surplus lines
insurer.
(f) If an alien
insurer as defined in section 38a-740-1(b) of the Regulations of Connecticut
State Agencies, or group of insurers located outside the United States, such
insurer or insurers shall establish and maintain a United States trust fund in
the following amounts:
(1) In the case of a
Lloyd's plan or other similar group of insurers, which consists of
unincorporated individual insurers, or a combination of both unincorporated and
incorporated insurers, such trust shall be in the amount of one hundred million
dollars which shall be held jointly for the benefit of any United States
surplus lines policyholder of any member of the group.
The incorporated members of the group shall not be engaged in
any other business other than underwriting as a member of the group and shall
be subject to the same level of solvency regulation and control by the group's
domiciliary regulator as are the unincorporated members.
(2) In the case of a group of incorporated
insurers under common administration, which has continuously transacted an
insurance business outside the United States for at least three years
immediately prior to the effective date of this section, and which submits to
this state's authority to examine its books and records and agrees to bear the
expense of the examination:
(A) The group
shall maintain an aggregate policyholders' surplus of ten billion dollars;
and
(B) The group shall maintain in
trust a surplus in the amount of one hundred million dollars which shall be
available for the benefit of United States surplus lines policyholders of any
member of the group; and
(C) Each
insurer which is a member of the group shall individually maintain capital and
surplus of not less than twenty-five million dollars per company.
(3) In the case of all other alien
insurers, such insurer shall establish and maintain in the United States a
trust fund for the benefit of the United States surplus lines policyholders of
such insurer, in the minimum amount of five million four hundred thousand
dollars, except that those insurers on the list of eligible surplus lines
insurers on the effective date of this section that do not meet this
requirement shall have until December 31, 1996 to meet this requirement if such
insurers have a United States trust fund in the minimum amount of two million
five hundred thousand dollars as of the effective date of this section and a
United States trust fund in the minimum amount of three million five hundred
thousand dollars as of December 31, 1995.
(4) The trust funds required by this
subsection shall be maintained in an irrevocable trust account in the United
States in a qualified financial institution and shall consist of cash,
securities, letters of credit or investments of substantially the same
character and quality as those which are eligible investments for the capital
and statutory reserves of admitted insurers to write like kinds of insurance in
this state and, in addition, shall substantially satisfy the requirements of
the Standard Form Trust Agreement required for listing with the NAIC
International Insurers Department.
(5) Insurers in compliance with subdivisions
(1) or (2) of this subsection shall not be subject to subsection (b) of this
section.
(6) In the case of an
insurance exchange created by the laws of a state other than this state:
(A) The syndicates of the exchange shall
maintain under terms acceptable to the commissioner capital and surplus, or its
equivalent under the laws of its domiciliary jurisdiction, of not less than
seventy-five million dollars in the aggregate; and
(B) The exchange shall maintain under terms
acceptable to the commissioner not less than fifty percent of the policyholder
surplus of each syndicate in a custodial account accessible to the exchange or
its domiciliary commissioner in the event of insolvency or impairment of the
individual syndicate; and
(C) In
addition, each individual syndicate to be eligible to accept surplus lines
insurance placements from this state shall meet either of the following
requirements:
(i) For insurance exchanges
which maintain funds in an amount of not less than fifteen million dollars for
the protection of all exchange policyholders, the syndicate shall maintain
under terms acceptable to the commissioner minimum capital and surplus, or its
equivalent under the laws of the domiciliary jurisdiction, of not less than
five million dollars; or
(ii) For
insurance exchanges which do not maintain funds in an amount of not less than
fifteen million dollars for the protection of all exchange policyholders, the
syndicate shall maintain under terms acceptable to the commissioner minimum
capital and surplus, or its equivalent under the laws of its domiciliary
jurisdiction, of not less than the minimum capital and surplus requirements
under the laws of its domiciliary jurisdiction or fifteen million dollars,
whichever is greater.
(g) The insurer must be of good reputation as
to the providing of service to its policyholders and the payment of losses and
claims. The insurer shall designate in writing to the commissioner the name of
the proper individual in its employ who is directly and actively in charge of
and responsible for handling any and all insurance claims and to whom all
correspondence regarding such claims may be directed. Any personnel changes
affecting such previously designated individual shall be reported to the
insurance department and indicate the present designated individual responsible
for and in charge of handling of such insurance claims.
(h) No insurer shall be an eligible surplus
lines insurer the management of which is found by the commissioner to be
incompetent or untrustworthy, or lacking in insurance company managerial
experience as to make the proposed operation hazardous to the insurance-buying
public; or which the commissioner has good reason to believe is affiliated with
any person or persons whose business operations are or have been detrimental to
policyholders, stockholders, investors, creditors or to the public.
(i) No insurer shall be declared an eligible
surplus lines insurer unless it has first appointed in writing the commissioner
and the commissioner's successors in office to be its attorney in this State,
upon whom all lawful process, in any action or proceeding against it, may be
served with the same effect as if the company was a domestic corporation. Such
power of attorney shall be of the same legal force and validity as if served on
the company, and that the authority shall continue in force so long as any
certificate of membership, policy or liability remains outstanding against the
company in this State. A certificate of such appointment, certified and
authenticated, shall be filed in the office of the commissioner and copies
certified by the commissioner shall be sufficient evidence of such appointment.
Service upon such attorney shall be sufficient service upon the
principal.
(j) No insurer shall be
declared an eligible surplus lines insurer that is owned or financially
controlled by another state or territory of the United States or an alien
nation or any state or province thereof
(k) In addition to all of the other
requirements of this subsection, an alien insurer shall be listed by the
National Association of Insurance Commissioners International Insurers
Department. The commissioner may waive the requirements of this subsection upon
an affirmative finding of acceptability by the commissioner if the commissioner
is satisfied that the placement of insurance with the insurer is necessary and
will not be detrimental to the public and the policyholder. In determining
whether business may be placed with the insurer, the commissioner may consider
such factors as:
(i) The interests of the
public and policyholders;
(ii) The
length of time the insurer has been authorized in its domiciliary jurisdiction
and elsewhere;
(iii) Unavailability
of particular coverages from authorized insurers or unauthorized insurers
meeting the requirements of this subsection;
(iv) The size of the company as measured by
its assets, capital and surplus, reserves, premium writings, insurance in force
or other appropriate criteria;
(v)
The kinds of business the company writes, its net exposure and the extent to
which the company's business is diversified among several lines of insurance
and geographic locations; and
(vi)
The past and projected trend in the size of the company's capital and surplus
considering such factors as premium growth, operating history, loss and expense
ratios, or other appropriate criteria.
(l) An unauthorized insurer shall provide to
the commissioner a copy of its current annual statement certified by the
insurer and an actuarial opinion as to the adequacy of, and methodology used to
determine, the insurer's loss reserves. The statement shall be provided at the
same time it is provided to the insurer's domicile, but in no event more than
eight months after the close of the period reported upon, and shall be
certified as a true and correct copy by an accounting or auditing firm licensed
in the jurisdiction of the insurer's domicile and certified by a senior officer
of the nonadmitted insurer as a true and correct copy of the statement filed
with the regulatory authority in the domicile of the nonadmitted insurer. In
the case of an insurance exchange qualifying under subdivision (6) of
subsection (f) of this section, the statement may be an aggregate combined
statement of all underwriting syndicates operating during the period
reported.