(1) The following standards, either singly or
a combination of two or more, may be considered by the superintendent to
determine whether the continued operation of any insurer might be deemed to be
hazardous to their policyholders, creditors, or the general public. The
superintendent may consider:
(a) Adverse
findings reported in financial condition or market conduct examination reports,
statutory audit reports, and actuarial opinions, reports or
summaries;
(b) The "National
Association of Insurance Commissioners (NAIC)
Insurance
Regulatory Information System" and its other financial analysis
solvency tools and reports;
(c) Whether the insurer has made adequate
provision, according to presently accepted actuarial standards of practice, for
the anticipated cash flows required by the contracted obligations and related
expenses of the insurer, when considered in light of the assets held by the
insurer with respect to such reserves and related actuarial items including,
but not limited to, the investment earnings on such assets, and the
considerations anticipated to be received and retained under such policies and
contracts;
(d) The ability of an
assuming reinsurer to perform and whether the insurer's reinsurance program
provides sufficient protection for the insurer's remaining surplus after taking
into account the insurer's cash flow and the classes of business written as
well as the financial condition of the assuming reinsurer;
(e) As reported in the most recent quarterly
or annual statutory financial statement filing, the insurer's net loss or
negative net income in the last twelve month period or any shorter period of
time, including but not limited to net unrealized capital gains or losses,
change in non-admitted assets, and the payment of cash dividends
to shareholders which are greater than fifty per cent of such insurer's
remaining capital and surplus as regards policyholders in excess of the minimum
amount required and/or;
(f) As
reported in the most recent quarterly or annual statutory financial statement
filing, the insurer's net decrease in capital and policyholders surplus, in the
last twelve month period or any shorter period of time, is greater than fifty
per cent of such insurer's remaining capital and policyholders surplus in
excess of the minimum required;
(g)
As reported in the most recent quarterly or annual statutory financial
statement filing, whether the insurer's net loss or negative net income in the
last twelve month period or any shorter period of time, excluding net realized
capital gains and losses, is greater than twenty per cent of the insurer's
remaining surplus as regards policyholders in excess of the minimum
required;
(h) Whether a reinsurer,
obligor, or any entity within the insurer's insurance holding company system is
insolvent, threatened with insolvency, or delinquent in payment of its monetary
or other obligation and which in the opinion of the superintendent may affect
the solvency of the insurer;
(i)
Contingent liabilities, pledges or guarantees which either individually or
collectively involve a total amount which in the opinion of the superintendent
may affect the solvency of the insurer;
(j) Whether any person, exercising control of
an insurer as defined in division (C) of section
3905.61 of the Revised Code is
delinquent in the transmitting to, or payment of, net premiums to such
insurer;
(k) The age and
collectability of receivables;
(l) Whether the management of an insurer,
including officers, directors, or any other person who directly or indirectly
controls the operation of such insurer, fails to possess and demonstrate the
competence, fitness and reputation deemed necessary to serve the insurer in
such position;
(m) Whether
management of an insurer has failed to respond to inquiries relative to the
condition of the insurer or has furnished false and misleading information
concerning an inquiry;
(n) Whether
the insurer has failed to meet financial and holding company filing
requirements in the absence of a reason satisfactory to the
superintendent;
(o) Whether
management of an insurer has filed any false or misleading sworn financial
statement, or has released false or misleading financial statements to lending
institutions or to the general public, or has made a false or misleading entry,
or has omitted an entry of material amount in the books of the
insurer;
(p) Whether the insurer
has grown so rapidly and to such an extent that it lacks adequate financial and
administrative capacity to meet its obligations in a timely manner;
(q) Whether the insurer has experienced or
will experience in the foreseeable future cash flow and/or liquidity
problems;
(r) Whether an insurer
has failed to comply with paragraph (J) of rule
3901-1-50
of the Administrative Code;
(s)
Whether the insurer meets measures of capital adequacy adopted by statute or
rule;
(t) Whether management has
established reserves that do not comply with state insurance laws, regulations,
statutory accounting standards, sound actuarial principles, and standards of
practice;
(u) Whether management
engages in reporting inadequate reserve levels that result in material adverse
development;
(v) Whether a material
change during the year to the insurer's financial condition, including, but not
limited to, changes in assets, liabilities, surplus, premium growth, mix of
business, reinsurance, or operating performance that may adversely impact the
result of the next year-end risk based capital calculation to a level that
would require regulatory action;
(w) Whether transactions among affiliates,
subsidiaries, or controlling persons for which the insurer receives assets or
capital gains, or both, do not provide sufficient value, liquidity or diversity
to assure the insurer's ability to meet its outstanding obligations as they
mature;
(x) Any other finding
determined by the superintendent to be hazardous to the insurer's
policyholders, creditors, or general public.
(2) For the purposes of making a
determination of an insurer's financial condition under this rule the
superintendent may:
(a) Disregard any credit
or amount receivable resulting from transactions with a reinsurer which is
insolvent, impaired or otherwise subject to a delinquency proceeding;
(b) 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;
(c) 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;
(d) Refuse to recognize the
stated value of assets pledged or in any way hypothecated to secure a liability
to the extent that they are in excess of the specific recorded liability of the
insurer;
(e) 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.
