A. Transactions within an insurance holding company system to which an insurer subject to registration is a party are subject to the following standards:
1. The terms are fair and reasonable.
2. Agreements for cost sharing or management services and management must include provisions that are required by rule.
3. Charges or fees for services performed are reasonable.
4. Expenses incurred and payment received are allocated to the insurer in conformity with customary insurance accounting practices consistently applied.
5. The books, accounts and records of each party to all transactions clearly and accurately disclose the nature and details of the transactions including any accounting information that is necessary to support the reasonableness of the charges or fees to the respective parties.
6. The insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.
7. If the director deems that an insurer subject to this article is in a hazardous financial condition pursuant to section 20-220.01 or that a condition exists that constitutes grounds for supervision, conservation or a delinquency proceeding, the director may require the insurer to submit a deposit, held by the director, or a bond to protect the insurer for the duration of any outstanding contract or agreement. In determining whether to require a deposit or bond, the director shall consider whether an affiliated person would be able to fulfill the contract or agreement if the insurer were to be placed into liquidation. The director may determine the amount of the deposit or bond, not to exceed the value of the contract or agreement in any one year, and whether the deposit or bond should be required for a single contract, multiple contracts or a contract with a specific person.
8. All records and data of the insurer that are held by an affiliate are the property of the insurer and are subject to the insurer's control. The records and data must be maintained in an identifiable manner and must be segregated or readily capable of being segregated at no additional cost to the insurer. At the request of the insurer, the affiliate shall allow the receiver to obtain a complete set of all records of any type that pertain to the insurer's business, obtain access to the operating systems on which the data is maintained, obtain the software that runs those systems and restrict the use of the data by the affiliate if it is not operating the insurer's business. Notwithstanding any other law, the affiliate shall provide a waiver of any landlord lien or other encumbrance to give the insurer access to all records and data in the event of the affiliate's default under a lease or other agreement. For the purposes of this paragraph, "all records and data" includes claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records or similar records within the possession, custody or control of the affiliate.
9. Premiums or other funds that belong to the insurer and that are collected by or held by an affiliate are the exclusive property of the insurer and are subject to the control of the insurer. If an insurer is placed into receivership, any right of offset is subject to chapter 3, article 4 of this title.
B. The following transactions involving a domestic insurer and any person in its insurance holding company system, including amendments and modifications of affiliate agreements previously filed pursuant to this section that are subject to any materiality standards contained in paragraphs 1, 2, 3, 4 and 5 of this subsection, may not be entered into unless the insurer notifies the director in writing not less than thirty days before entering the transaction, unless the director permits a shorter notification period, of its intention to enter into the transaction and the director does not disapprove the transaction within that period:
1. Sales, purchases, exchanges, loans or extensions of credit, guarantees or investments if the transactions equal or exceed, with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders as of December 31 next preceding or, with respect to life insurers, three percent of the insurer's admitted assets as of December 31 next preceding.
2. Loans or extensions of credit to any person who is not an affiliate if the insurer makes the loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of or to make investments in any affiliate of the insurer making such loans or extensions of credit if the transactions equal or exceed, with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders as of December 31 next preceding or, with respect to life insurers, three percent of the insurer's admitted assets as of December 31 next preceding.
3. Reinsurance agreements or modifications to reinsurance agreements, including:
(a) All reinsurance pooling agreements.
(b) Agreements in which the reinsurance premium or a change in the insurer's liabilities, or the projected reinsurance premium or a change in the insurer's liabilities in any of the next three years, equals or exceeds five percent of the insurer's surplus as regards policyholders as of December 31 next preceding, including those agreements that may require as consideration the transfer of assets from an insurer to a nonaffiliate if an agreement or understanding exists between the insurer and the nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer.
4. All management agreements, service contracts, tax allocation agreements, guarantees and cost sharing arrangements.
5. Guarantees at the time executed by a domestic insurer, provided that a guarantee that is quantifiable as to amount is not subject to the notice requirements of this subsection unless the guarantee exceeds the lesser of one-half of one percent of the insurer's admitted assets or ten percent of the insurer's surplus as regards policyholders as of December 31 next preceding the execution of the guarantee. All guarantees that are not quantifiable as to amount are subject to the notice requirements of this subsection.
6. Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount that, together with its present holding in such investments, exceeds two and one-half percent of the insurer's surplus to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to section 20-481.01, or in nonsubsidiary insurance affiliates that are subject to this article, are exempt from this requirement.
7. Any material transaction that is specified by rule and that the director determines may adversely affect the interests of the insurer's policyholders.
C. The notice prescribed in subsection B of this section for amendments or modifications must include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be given within thirty days after a termination of a previously filed agreement to the director for determination of the type of filing required, if any.
D. Subsection B of this section does not authorize or allow any transactions that would be otherwise contrary to law.
E. A domestic insurer shall not enter into transactions that are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thereby avoid the review that otherwise would occur. If the director determines that separate transactions were entered into during any twelve month period for that purpose, the director may order the insurer to cease and desist under section 20-481.26.
F. In reviewing transactions pursuant to subsection B of this section, the director shall consider if the transactions comply with the standards set forth in subsection A of this section and if they adversely affect the interests of policyholders.
G. Within thirty days after an investment of a domestic insurer in any one corporation the director shall be notified of the investment if the total investment in the corporation by the insurance holding company system exceeds ten percent of the corporation's voting securities.
H. The director may adopt rules to exempt transactions involving nonmaterial amounts from the notice requirements of this section.
I. For the purposes of supervision, seizure, conservatorship or receivership proceedings:
1. An affiliate that is a party to an agreement or contract with a domestic insurer that is subject to subsection B, paragraph 4 of this section is subject to the jurisdiction of any supervision, seizure, conservatorship or receivership proceedings against the insurer and to the authority of any supervisor, conservator, rehabilitator or liquidator for the insurer that is appointed pursuant to chapter 3, article 4 of this title for the purpose of interpreting, enforcing and overseeing the affiliate's obligations under the agreement or contract to perform services for the insurer that either:
(a) Are an integral part of the insurer's operations, including management, administrative, accounting, data processing, marketing, underwriting, claims handling, investment or other similar functions.
(b) Are essential to the insurer's ability to fulfill its obligations under insurance policies.
2. The director may require that an agreement or contract pursuant to subsection B, paragraph 4 of this section for the provision of services described in paragraph 1 of this subsection specify that the affiliate consents to the jurisdiction prescribed in this subsection.