ENTITLED An Act to revise certain provisions regarding insurance holding companies.

Be it enacted by the Legislature of the State of South Dakota:

Section 1. That   58-5A-1 be AMENDED:

58-5A-1. Terms used in this chapter mean:

(1) "Affiliate of, or a person affiliated with, a specific person," any person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified;

(2) "Control," including "controlling," "controlled by," and "under common control with," the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is solely the result of an official position with, or a corporate office held by, the person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, ten percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by   58-5A-29 that control does not exist in fact;

(3) "Enterprise risk," any activity, circumstance, event, or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including anything that may cause the insurer's risk-based capital to fall into company action level or may cause the insurer to be in hazardous financial condition pursuant to chapter 58-4;

(4) "Group-wide supervisor," the regulatory official authorized to engage in conducting and coordinating group-wide supervision activities who is determined or acknowledged by the director under the provisions of    58-5A-80.1 to 58-5A-80.8, inclusive, to have sufficient significant contacts with the internationally active insurance group;

(5) "Insurance group," for the purposes of conducting an ORSA, those insurers and affiliates included within an insurance holding company system;

(6) "Insurance holding company system," any two or more affiliated persons, one or more of which is an insurer;

(7) "Insurer," a company qualified and licensed by the director of the Division of Insurance to transact the business of insurance in this state. For ORSA purposes, the term, insurer, does not include agencies, authorities or instrumentalities of the United States, its possessions or territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;

(8) "Internationally active insurance group," an insurance holding company system that includes an insurer registered under chapter 58-5A and that:

(a) Writes premiums in at least three countries;

(b) Writes at least ten percent of its total gross premium outside the United States; and

(c) Based on a three-year rolling average, has total assets in the insurance holding company system of at least fifty billion dollars or the total gross written premiums of the insurance holding company system are at least ten billion dollars;

(9) "NAIC," the National Association of Insurance Commissioners;

(10) "NAIC liquidity stress test framework," the NAIC publication that includes a history of the NAIC's development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, the liquidity stress test instructions, and reporting templates for a specific data year as approved by the NAIC and adopted by the director pursuant to rules promulgated under chapter 1-26;

(11) "ORSA guidance manual," the version of the NAIC own risk and solvency assessment guidance manual as adopted by the director for use in South Dakota by administrative rule;

(12) "ORSA summary report," a confidential high-level summary of an insurer or insurance group's ORSA;

(13) "Own risk and solvency assessment" or "ORSA," a confidential internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer or insurance group's current business plan and the sufficiency of capital resources to support those risks;

(14) "Security holder" of a specified person is one who owns any security of the person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing;

(15) "Scope criteria," the designated exposure bases along with minimum magnitudes thereof for the specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC liquidity stress test framework for that data year as detailed in the NAIC liquidity stress test framework;

(16) "Subsidiary of a specified person," any affiliate controlled by a person directly, or indirectly, through one or more intermediaries;

(17) "Voting security," any security convertible into or evidencing a right to acquire a voting security.

Section 2. That   58-5A-23 be AMENDED:

58-5A-23. No information need be disclosed on the registration statement filed pursuant to the provisions of   58-5A-20 if the information is not material for the purposes of this chapter. Unless the director by rule or order provides otherwise, sales, purchases, exchanges, loans, or extensions of credit, or investments, involving one percent or less of an insurer's admitted assets as of December thirty‑first immediately preceding are not material for purposes of this section. The definition of materiality provided in this section does not apply for purposes of the group capital calculation or the liquidity stress test framework.

Section 3. That   58-5A-41 be AMENDED:

58-5A-41. Documents, materials, or other information including filings in the possession or control of the Division of Insurance that are obtained by or disclosed to the director or any other person in the course of an examination or investigation made pursuant to this chapter and all information reported pursuant to this chapter are recognized as being proprietary and to contain trade secrets, and are confidential by law and privileged, are not subject to open records, freedom of information, sunshine, or other related laws, are not subject to subpoena, and are not subject to discovery or admissible in evidence in any private civil action. However, the director is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the director's official duties. The director may not otherwise make the documents, materials, or other information public without the prior written consent of the insurer to which it pertains unless the director, after giving the insurer and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interest of policyholders, shareholders, or the public will be served by the publication thereof, in which event the director may publish all or any part.

For purposes of the information reported and provided to the director pursuant to section 7 of this Act, the director shall maintain the confidentiality of the group capital calculation and group capital ratio produced within the calculation and any group capital information received from an insurance holding company supervised by the Federal Reserve Board or any U.S. group-wide supervisor.

For purposes of the information reported and provided to the director pursuant to section 10 of this Act, the director shall maintain the confidentiality of the liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company supervised by the Federal Reserve Board and non-U.S. group-wide supervisors.

Section 4. That   58-5A-41.2 be AMENDED:

58-5A-41.2. To assist in the performance of the duties assigned to the director pursuant to the provisions of this chapter:

(1) The director may, upon request, share documents, materials, or other information, including the confidential and privileged documents, materials, or information, including proprietary materials, trade secrets, documents, and materials disclosed pursuant to this chapter with a state, federal, and international regulatory agency, the NAIC, any third-party consultant designated by the director, and a state, federal, and international law enforcement authority, including a member of any supervisory college described in    58-5A-78 to 58-5A-80, inclusive, if the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information, and verifies in writing the legal authority to maintain confidentiality;

(2) Notwithstanding the provisions of subdivision (1), the director may only share information reported pursuant to   58-5A-29.1, with a director of a state that has laws substantially similar to the provisions of   58-5A-41, and who agrees in writing not to disclose such information; and

(3) The director may receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, including proprietary materials and trade secret information from the NAIC and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.

The sharing of information by the director pursuant to this chapter is not a delegation of regulatory authority or rule-making authority, and the director is solely responsible for the administration, execution, and enforcement of the provisions of this chapter.

Section 5. That   58-5A-41.3 be AMENDED:

58-5A-41.3. The director must enter into written agreements with the NAIC and any third-party consultant designated by the director governing the sharing and use of information provided pursuant to this chapter that:

(1) Specify procedures and protocols regardin