Bill Summary – FastDemocracy

Stricken language would be deleted from and underlined language would be added to present law.
                                          Act 1018 of the Regular Session
 State of Arkansas                   As Engrossed:       S4/21/21
 93rd General Assembly                        A Bill
 Regular Session, 2021                                                             SENATE BILL 203
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 By: Senator Rapert
 By: Representative Lowery
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                                   For An Act To Be Entitled
                AN ACT TO ESTABLISH THE ARKANSAS INSURANCE BUSINESS
                TRANSFER ACT; AND FOR OTHER PURPOSES.
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                                               Subtitle
                         TO ESTABLISH THE ARKANSAS INSURANCE
                         BUSINESS TRANSFER ACT.
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 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
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        SECTION 1.        Arkansas Code Title 23, Chapter 69, is amended to add an
 additional subchapter to read as follows:
               Subchapter 5  Arkansas Insurance Business Transfer Act
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        23-69-501.        Title.
        This subchapter shall be known and may be cited as the "Arkansas
 Insurance Business Transfer Act".
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        23-69-502.        Legislative findings  Purpose.
        (a)    The General Assembly finds that:
                (1)      There is not a basis or procedure for the transfer and
 novation of insurance policies from a transferring insurer to an assuming
 insurer by way of an insurance business transfer without the affirmative
 consent of policyholders or reinsureds; and
                (2)      There is a need to provide a basis and procedures for the
 transfer and novation of insurance policies from a transferring insurer to an
 assuming insurer by way of an insurance business transfer without the
     *ANS080*                                                                    04-21-2021 14:13:43 ANS080
     As Engrossed:       S4/21/21                                                    SB203
 affirmative consent of policyholders or reinsureds if the transfer and
 novation is conducted by a court order.
      (b)(1)     The purpose of this subchapter is to establish the requirements
 for notice and disclosure and standards and procedures for the approval of a
 transfer and novation by the Insurance Commissioner and the Pulaski County
 Circuit Court under an insurance business transfer plan.
               (2)    However, it is not the purpose of this subchapter to limit
 or restrict other means of effecting a transfer or novation.
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      23-69-503.        Definitions.
      As used in this subchapter:
               (1)    "Affiliate" means an affiliate as that term is defined in 
 23-63-503;
               (2)    "Applicant" means a transferring insurer or reinsurer that
 submits an application under  23-69-506;
               (3)(A)     "Assuming insurer" means an insurer domiciled in this
 state that assumes or seeks to assume policies from a transferring insurer
 under this subchapter.
                        (B)   "Assuming insurer" may include a company established
 under  23-63-1601 et seq.;
               (4)    "Implementation order" means an order issued by the Pulaski
 County Circuit Court under  23-69-509;
               (5)    "Independent expert" means an impartial person who:
                        (A)   Does not have a financial interest in either the
 transferring insurer or the assuming insurer;
                        (B)   Has not been employed by or acted as an officer,
 director, consultant, or other independent contractor for either the
 transferring insurer or the assuming insurer within the past twelve (12)
 months;
                        (C)   Has not been appointed by the Insurance Commissioner
 to assist in any capacity in any proceeding;
                        (D)   Has not received any compensation in connection with
 an insurance business transfer under this subchapter other than a fee based
 on a fixed or hourly basis that is not contingent on the approval or
 consummation of the insurance business transfer; and
                        (E)   Has proof of insurance coverage that is satisfactory
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     As Engrossed:    S4/21/21                                                    SB203
 to the commissioner;
            (6)(A)     "Insurance business transfer" means a transfer of
 insurance obligations or risks, or both, of existing or in-force contracts of
 insurance or reinsurance from a transferring insurer to an assuming insurer.
                     (B)   Once approved, the insurance business transfer shall
 effect a transfer and novation of the transferred contracts of insurance or
 reinsurance with the result that the assuming insurer becomes directly liable
 to the policyholders of the transferring insurer and the transferring
 insurer's insurance obligations or risks, or both, under the contracts, are
 extinguished;
            (7)    "Insurance business transfer plan" means the plan submitted
 to the State Insurance Department to accomplish the transfer and novation
 under an insurance business transfer, including any associated transfer of
 assets and rights from or on behalf of the transferring insurer to the
 assuming insurer;
            (8)    "Insurer" means an insurance or surety company, including a
 reinsurance company, and includes a corporation, company, partnership,
 association, society, order, individual, or aggregation of individuals
 engaging in, proposing to engage in, or attempting to engage in any kind of
 insurance or surety business, including the exchanging of reciprocal or
 inter-insurance contracts between individuals, partnerships, and
 corporations;
            (9)    "Policy" means a policy, contract or certificate of
 insurance, or a contract of reinsurance under which the insurer agrees to
 assume an obligation or risk, or both, of the policyholder or to make
 payments on behalf of, or to, the policyholder or its beneficiaries, and
 includes property, casualty, life, health, and any other line of insurance
 the commissioner finds is suitable for an insurance business transfer;
            (10)     "Policyholder" means an insured or a reinsured under a
 policy that is part of a subject business;
            (11)     "Subject business" means the policy or policies that are
 the subject of the insurance business transfer plan;
            (12)     "Transfer and novation" means the transfer of insurance
 obligations or risks, or both, of existing or in-force policies from a
 transferring insurer to an assuming insurer, and is intended to effect a
 novation of the transferred policies with the result that:
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     As Engrossed:     S4/21/21                                                  SB203
                     (A)   The assuming insurer becomes directly liable to the
 policyholders of the transferring insurer on the transferred policies; and
                     (B)   The transferring insurer's insurance obligations or
 risks, or both, under the transferred policies are extinguished; and
            (13)     "Transferring insurer" means an insurer or reinsurer that
 transfers and novates or seeks to transfer and novate obligations or risks,
 or both, under one (1) or more policies to an assuming insurer under an
 insurance business transfer plan.
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      23-69-504.     Venue.
      (a)   All court proceedings brought under this subchapter shall be filed
 in the Pulaski County Circuit Court.
      (b)   The court may issue any order, process, or judgment that is
 necessary or appropriate to carry out this subchapter.
      (c)   This subchapter does not preclude the court from, on its own
 motion, taking any action or making any determination necessary or
 appropriate to enforce or implement court orders or rules or to prevent an
 abuse of power.
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      23-69-505.     Notice required.
      (a)   Except as otherwise ordered by the Pulaski County Circuit Court or
 the Insurance Commissioner, if notice is required to be given by the
 applicant under this subchapter, the applicant, within fifteen (15) days of
 the event triggering the requirement, shall cause transmittal of the notice:
            (1)     By first class mail, postage prepaid, to the chief insurance
 regulator in each jurisdiction in which the applicant holds or has ever held
 a certificate of authority, and in which policies that are part of the
 subject business were issued or where policyholders currently reside;
            (2)     By certified first class mail, postage prepaid, to the
 National Conference of Insurance Guaranty Funds, the National Organization of
 Life and Health Insurance Guaranty Associations, and all state insurance
 guaranty associations for the states in which the applicant holds or has ever
 held a certificate of authority, and in which policies that are part of the
 subject business were issued or where policyholders currently reside;
            (3)     To reinsurers of the applicant under the notice requirements
 of the reinsurance agreements applicable to the policies that are part of the
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     As Engrossed:    S4/21/21                                                  SB203
 subject business, or if an agreement does not require notice, by an
 internationally recognized delivery service;
            (4)(A)     By United States mail, first class postage prepaid, to
 all policyholders holding policies that are part of the subject business, at
 their last known address as indicated by the records of the applicant or to
 the address to which premium notices or other policy documents are sent.
                     (B)   A notice of transfer shall be sent to the transferring
 insurer's agents or brokers of record on the subject business; and
            (5)    By publication in a newspaper of general circulation in the
 state in which the applicant has its principal place of business and in such
 other publications that the commissioner requires.
      (b)   If notice is given under subsection (a) of this section, an order
 under this subchapter shall be conclusive with respect to all intended
 recipients of the notice, whether or not they receive actual notice.
      (c)   If the commissioner has been named receiver of the applicant, the
 commissioner shall provide the required notice under this subchapter.
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      23-69-506.     Application  Insurance business transfer plan.
      (a)   An applicant shall file an insurance business transfer plan with
 the Insurance Commissioner for his or her review and approval.
      (b)   The insurance business transfer plan shall contain the following
 information or an explanation as to why the information is not included:
            (1)    The name, address, and telephone number of the transferring
 insurer and the assuming insurer and their respective direct and indirect
 controlling persons, if any;
            (2)    A summary of the insurance business transfer plan;
            (3)    The identification and description of the subject business;
            (4)    The most recent audited financial statements and annual and
 quarterly reports of the transferring insurer and assuming insurer filed with
 their domiciliary regulator;
            (5)    The most recent actuarial report and opinion that quantifies
 the liabilities associated with the subject business;
            (6)    The pro forma financial statements showing the projected
 balance sheet, results of operations, and cash flows of the assuming insurer
 for the three (3) years following the proposed transfer and novation;
            (7)    Officers' certificates of the transferring insurer and the
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     As Engrossed:     S4/21/21                                                   SB203
 assuming insurer attesting that each has obtained all required internal
 approvals and authorizations regarding the insurance business transfer plan
 and completed all necessary and appropriate actions as required;
             (8)    A proposal for implementation and administration of the
 insurance business transfer plan, including the form of notice to be provided
 under the insurance business transfer plan to any policyholder whose policy
 is part of the subject business;
             (9)    A full description of how the notice described in
 subdivision (b)(8) of this section shall be provided;
             (10)    A description of all reinsurance arrangements that would
 pass to the assuming insurer under the insurance business transfer plan;
             (11)    A description of any guarantees or additional reinsurance
 that will cover the subject business following the transfer and novation;
             (12)    A statement describing the assuming insurer's proposed
 investment policies and any contemplated third party claims management and
 administration arrangements;
             (13)    Evidence of approval or nonobjection of the transfer from
 the chief insurance regulator of the state of the transferring insurer's
 domicile;
             (14)(A)       An opinion report from an independent expert, selected
 by the commissioner from a list of at least two (2) nominees submitted
 jointly by the transferring insurer and the assuming insurer, to assist the
 commissioner and the Pulaski County Circuit Court in the review of the
 proposed transaction.
                     (B)    If the commissioner, in his or her sole discretion,
 rejects the nominees described in subdivision (b)(14)(A) of this section, the
 commissioner may appoint an independent expert; and
             (15)    Any other information the commissioner deems necessary.
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      23-69-507.     Opinion report  Review requirements.
      (a)    The opinion report required under  23-69-506(b)(14) shall provide
 the following:
             (1)    A statement of the independent expert's professional
 qualifications, including a description of the experience that qualifies him
 or her as an expert suitable for the engagement;
             (2)    A statement indicating whether or not the independent expert
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     As Engrossed:    S4/21/21                                                  SB203
 has, or has had, direct or indirect interest in the transferring insurer or
 the assuming insurer or any affiliate of the transferring insurer or assuming
 insurer;
            (3)    A statement as to the scope of the opinion report;
            (4)    A summary of the terms of the insurance business transfer
 plan to the extent relevant to the opinion report;
            (5)    Documents, reports, and other material information the
 independent expert has considered in preparing the opinion report and if any
 information requested has not been provided;
            (6)    A statement indicating the extent to which the independent
 expert has relied on the information and judgment of others;
            (7)    The identities of the individuals on whom the independent
 expert has relied and a statement as to why, in the opinion of the
 independent expert, such reliance is reasonable;
            (8)    A statement of the independent expert's opinion of the
 likely effects of the insurance business transfer plan on policyholders and
 claimants, distinguishing between the following:
                    (A)   Transferring policyholders and claimants;
                    (B)   Policyholders and claimants of the transferring
 insurer whose policies will not be transferred; and
                    (C)   Policyholders and claimants of the assuming insurer;
            (9)    For each opinion that the independent expert expresses in
 the opinion report, a statement of the facts and circumstances supporting the
 opinion; and
            (10)    A statement as to whether the security position of
 policyholders that are affected by the insurance business transfer are
 adversely materially affected by the insurance business transfer.
      (b)   The independent expert shall include in an opinion report:
            (1)    An analysis of the transferring insurer's actuarial review
 of reserves for the subject business to determine the reserve adequacy;
            (2)    An analysis of the financial condition of the transferring
 insurer and the assuming insurer and the effect the insurance business
 transfer will have on the financial condition of each insurer;
            (3)    A review of the plans or proposals the assuming insurer has
 with respect to the administration of the policies subject to the proposed
 insurance business transfer;
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     As Engrossed:       S4/21/21                                                  SB203
               (4)    An analysis of whether the proposed insurance business
 transfer will have an adverse material impact on the policyholders and
 claimants of the transferring insurer and the assuming insurer;
               (5)    An analy