Bill Summary – FastDemocracy

Stricken language would be deleted from and underlined language would be added to present law.
                                           Act 469 of the Regular Session
 State of Arkansas
 94th General Assembly                        A Bill
 Regular Session, 2023                                                             SENATE BILL 357
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 By: Senator Dees
 By: Representative Maddox
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                                   For An Act To Be Entitled
                AN ACT TO ENACT THE STATE INSURANCE DEPARTMENT'S
                GENERAL OMNIBUS BILL; TO AMEND THE LAW CONCERNING
                EXAMINATIONS BY THE INSURANCE COMMISSIONER; TO
                CLARIFY REQUIREMENTS FOR A MARKET CONDUCT ANNUAL
                STATEMENT; TO MODIFY THE VALUATION OF ASSETS OF A
                REPORTING ENTITY BY THE INSURANCE COMMISSIONER; TO
                AMEND THE LAW CONCERNING CAPTIVE INSURERS; TO MODIFY
                THE EXAMINATION REQUIREMENTS OF CAPTIVE INSURERS; TO
                REGULATE THE MAINTENANCE OF AN INSURER'S HOME OFFICE
                AND RECORDS; TO AMEND THE LAW CONCERNING THE
                FORMATION OF RECIPROCAL INSURERS; TO MODIFY THE LAW
                CONCERNING THE LICENSURE OF HEALTH MAINTENANCE
                ORGANIZATIONS; TO CHANGE THE DUE DATE OF ANNUAL
                REPORTS OF AUTOMOBILE CLUBS OR ASSOCIATIONS THAT ARE
                REQUIRED BY THE INSURANCE COMMISSIONER; TO MODIFY THE
                STANDARD VALUATION LAW FOR LIFE INSURANCE AND
                ANNUITIES; TO REPEAL THE SMALL COMPANY EXEMPTION FROM
                THE STANDARD VALUATION LAW FOR LIFE INSURANCE AND
                ANNUITIES; AND FOR OTHER PURPOSES.
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                                               Subtitle
                         TO ENACT THE STATE INSURANCE DEPARTMENT'S
                         GENERAL OMNIBUS BILL.
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 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
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      SECTION 1.        Arkansas Code § 23-61-205(a)(2), concerning the verified
 reports of an examination by the Insurance Commissioner, is amended to read
 as follows:
               (2)(A)     No later than sixty (60) days following completion of the
 examination, the examiner in charge shall file with the State Insurance
 Department a verified written report of the examination under oath.
                        (B)   Upon receipt of the verified report, the department
 shall transmit the report to the company examined, together with a notice
 which shall afford the company examined a reasonable opportunity of not more
 than thirty (30) twenty (20) days to make a written submission or rebuttal
 with respect to any matters contained in the examination report.
                        (C)   For good cause shown, the commissioner may grant an
 extension of time to the company to review the verified report.
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      SECTION 2.        Arkansas Code § 23-61-206(b)(3), concerning payment of
 examination expenses, is amended to read as follows:
               (3)(A)     Per diem charges of examiners and others assisting in the
 examination shall be computed beginning at the time of reporting for duty at
 the office of the company to be examined and terminating upon completion of
 the examination or the examiner's active participation therein and to include
 actual days for travel as certified by the Insurance Commissioner.
                        (B)   If air travel is used, only one (1) day's travel time
 will be authorized.
                        (C)   If an automobile is used, travel time allowed shall be
 computed at the rate of not less than four hundred (400) miles per day as
 determined by the Rand McNally Road Atlas, with the actual mileage traveled
 compensated at the most current rate per mile approved for state employees
 according to the examination guidance section in the most current edition of
 the Financial Condition Examiner's Handbook published by the National
 Association of Insurance Commissioners.
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      SECTION 3.        Arkansas Code § 23-63-216(b), concerning market conduct
 annual statements, is amended to add an additional subdivision to read as
 follows:
               (4)(A)     If the commissioner determines that an authorized insurer
 has violated subdivisions (b)(1)(A) or (b)(1)(B) of this section, then the
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 commissioner may order payment of a monetary penalty of one thousand dollars
 ($1,000) for failure to timely file the market conduct annual statement.
                     (B)   The monetary penalty described in subdivision
 (b)(4)(A) shall not exceed twelve thousand dollars ($12,000) for each
 authorized insurer in any twelve-month period.
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      SECTION 4.      Arkansas Code § 23-63-611(3), concerning asset valuation of
 other assets of a reporting entity by the Insurance Commissioner, is amended
 to read as follows:
               (3)   Other assets shall be valued as specified by the Insurance
 Commissioner in a rule, in accordance with the provisions of according to §
 23-63-601(2), which method of valuation is not inconsistent with the National
 Association of Insurance Commissioners' publication as it existed on January
 1, 2001 January 1, 2023, entitled the “Valuation of Securities Manual”,
 prepared by the Securities Valuation Office Capital Markets and Investment
 Analysis Office.
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      SECTION 5.      Arkansas Code § 23-63-1608(a), concerning examinations of
 captive insurers, is amended to read as follows:
      (a)(1)     At least one (1) time every three (3) five (5) years, or
 whenever the Insurance Commissioner determines it to be prudent, the
 commissioner or a person appointed by the commissioner shall visit each
 captive insurance company and thoroughly inspect and examine its affairs to
 ascertain its financial condition, its ability to fulfill its obligations,
 and whether or not it has complied with this subchapter.
               (2)   Upon application, the commissioner may enlarge the three-
 year period to a five-year period, if a captive insurance company is subject
 during that period to a comprehensive annual audit by independent auditors
 approved by the commissioner of a scope satisfactory to the commissioner.
               (3)   The expenses and charges of the examination must shall be
 paid to the state by the company or companies examined, in accordance with
 according to the Arkansas Insurance Code.
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      SECTION 6.      Arkansas Code § 23-63-1620(g)(3), concerning the
 requirements of sponsored captive insurers, is amended to read as follows:
               (3)   An incorporated protected cell shall have its own distinct
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 name or designation, which shall include the words “Incorporated Cell” or the
 acronym "IC".
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      SECTION 7.     Arkansas Code § 23-69-134(d)(3), concerning the maintenance
 of a home office and records of an insurer, is amended to read as follows:
            (3)     Maintaining its home office, records, and assets in another
 state, provided if:
                    (A)   The insurer shall keep keeps in its home office
 complete records of its assets, transactions, and affairs in accordance with
 such according to the methods and systems as are customary or suitable as to
 the kinds of insurance transacted;
                    (B)   The insurer was maintaining its home office in another
 state upon January 1, 1960;
                    (C)   All records and assets of the insurer are made readily
 available at the home office for examination by the commissioner at his or
 her request; and
                    (D)(C)   The insurer shall maintain a principal maintains a
 place of business in this state where service of process may be made as
 provided in under §§ 23-79-204 and 23-79-205.
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      SECTION 8.     Arkansas Code § 23-70-106(a), concerning the formation of
 reciprocal insurers, is amended to read as follows:
      (a)   Twenty-five (25) or more persons domiciled in this state may
 organize a domestic reciprocal insurer and make application to the Insurance
 Commissioner for a certificate of authority to transact insurance.
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      SECTION 9.     Arkansas Code § 23-76-108(b)(10), concerning the deposits
 required for licensure of health maintenance organizations, is repealed.
            (10)    Any deposit of cash or securities, in an amount determined
 to be appropriate by the commissioner pursuant to § 23-76-118 [repealed], is
 sufficient to guarantee that the obligations to provide the promised benefits
 will be performed; and
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      SECTION 10.     Arkansas Code § 23-76-122(a) and (b), concerning the
 examination of a health maintenance organization by the Insurance
 Commissioner, is amended to read as follows:
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          (a)   The Insurance Commissioner may make an examination of the affairs
 of any health maintenance organization as often as he or she deems it
 necessary for the protection of the interests of the people of this state but
 not less frequently than one (1) time every three (3) five (5) years.
          (b)   The commissioner may make an examination concerning the quality of
 healthcare services of any health maintenance organization as often as he or
 she deems it necessary for the protection of the interests of the people of
 this state but not less frequently than one (1) time every three (3) five (5)
 years.
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          SECTION 11.      Arkansas Code § 23-76-122(f)(2), concerning a waiver of an
 examination of a health maintenance organization by the Insurance
 Commissioner, is amended to read as follows:
                   (2)   The commissioner shall consider the following in determining
 whether a full or partial waiver may be granted:
                         (A)   Claims payment history;
                         (B)   Consumer complaint history; and
                         (C)   Financial condition; and
                         (D)   Compliance with § 23-76-118 [repealed].
                   (3)   Any health maintenance organization requesting a waiver of
 an examination shall continue to comply with § 23-76-118 [repealed] until
 such time as it is no longer providing healthcare services in this state.
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          SECTION 12.      Arkansas Code § 23-77-109(a), concerning the due date of
 annual reports of automobile clubs or associations, is amended to read as
 follows:
          (a)(1)     Each licensed automobile club or association shall annually on
 or before April 1 June 1, or within any extension of time therefor which the
 Insurance Commissioner for good cause may have granted, file with the
 commissioner a full and true statement of its financial condition,
 transactions, and affairs as of the December 31 preceding.
                   (2)   The statement required in subdivision (a)(1) of this section
 shall be in a general form and context as required or not disapproved by the
 commissioner.
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          SECTION 13.      Arkansas Code § 23-84-119 is amended to read as follows:
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      23-84-119.        Single-state and small company exemptions exemption.
      (a)(1)      The Insurance Commissioner may exempt specific product forms or
 product lines of a domestic company that is licensed and doing business only
 in this state from the requirements of §§ 23-84-115 — 23-84-117 if:
               (A)(1)     The commissioner has issued a written exemption to the
 company and has not subsequently revoked the exemption in writing; and
               (B)(2)     The company computes reserves using assumptions and
 methods used before the operative date of the valuation manual in addition to
 any requirements established by the commissioner.
      (2)(b)      If a company is granted an exemption under subdivision (a)(1)
 subsection (a) of this section:
               (A)(1)     Sections 23-84-103 — 23-84-114 apply to the company; and
               (B)(2)     Any reference to § 23-84-115 found in §§ 23-84-103 — 23-
 84-112 and 23-84-114 do not apply to the company.
      (b)(1)      A company that has less than three hundred million dollars
 ($300,000,000) of ordinary life premiums, that is licensed and doing business
 in this state, and that is subject to the requirements of §§ 23-84-115 — 23-
 84-118 may hold reserves based on the mortality tables and interest rates
 defined by the valuation manual for net premium reserves using the
 methodology defined in §§ 23-84-106 and 23-84-108 — 23-84-111 as applicable
 to ordinary life insurance in lieu of the reserves required by §§ 23-84-115 —
 23-84-118, if:
                        (A)   In the event the company is a member of a group of
 life insurers, the group has combined ordinary life premiums of less than six
 hundred million dollars ($600,000,000);
                        (B)(i)     The company reported total adjusted capital of at
 least four hundred fifty percent (450%) of authorized control level risk-
 based capital in the most recent risk-based capital report.
                                 (ii)   Upon written request from a company that does
 not satisfy subdivision (b)(1)(B)(i) of this section, the commissioner may
 exempt the company from subdivision (b)(1)(B)(i) of this section;
                        (C)   The appointed actuary has provided an unqualified
 opinion on the reserves in accordance with § 23-84-112; and
                        (D)   The company has provided a certification by a
 qualified actuary that any universal life policy with a secondary guarantee
 issued or assumed by the company after the operative date of the valuation
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 manual meets the definition of a nonmaterial secondary guarantee universal
 life product as defined in the valuation manual.
              (2)   For purposes of subdivision (b)(1) of this section, ordinary
 life premiums are measured as direct premium plus reinsurance assumed from an
 unaffiliated company, as reported in the prior calendar year annual
 statement.
              (3)(A)     On or before July 1 each year, a domestic company that
 meets all of the conditions required by this subsection may file a statement
 with the commissioner certifying that the conditions are met for the current
 calendar year based on premiums and other values from the financial
 statements of the prior calendar year.
                       (B)   The commissioner may reject the statement on or before
 September 1 of the same calendar year and require the domestic company to
 comply with the valuation manual requirements for life insurance reserves.
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                                    APPROVED: 4/4/23
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Statutes affected: 
SB 357: 23-61-205(a), 23-61-206(b), 23-63-216(b), 23-63-611(3), 23-63-1608(a), 23-63-1620(g), 23-69-134(d), 23-70-106(a), 23-76-108(b), 23-76-122(a), 23-76-122(f), 23-77-109(a)
Act 469: 23-61-205(a), 23-61-206(b), 23-63-216(b), 23-63-611(3), 23-63-1608(a), 23-63-1620(g), 23-69-134(d), 23-70-106(a), 23-76-108(b), 23-76-122(a), 23-76-122(f), 23-77-109(a)