§ 3 — Administrative supervision by commissioner

Section 3. (A) An insurer may be subject to administrative supervision by the commissioner, without a prior hearing, if upon examination or at any other time the commissioner determines that:(1) the insurer's condition renders the continuance of its business hazardous as defined in subsection (C) to its policyholders or the general public;(2) the insurer gives its consent; or(3) the business of the insurer is being conducted fraudulently.(B) An insurer may be subject to administrative supervision by the commissioner if upon examination or at any other time the commissioner determines, after notice and hearing, that:(1) the insurer has exceeded its powers, as defined in section one; or(2) the insurer has engaged in a deliberate pattern or practice constituting a failure to comply with the applicable provisions of chapter one hundred and fifty-two, one hundred and seventy-five, one hundred and seventy-six, one hundred and seventy-six A, one hundred and seventy-six B, one hundred and seventy-six C, one hundred and seventy-six D, one hundred and seventy-six E, one hundred and seventy-six F, one hundred and seventy-six G, one hundred and seventy-six H, one hundred and seventy-six I, or one hundred and seventy-eight A.(C) Any one or more of the following standards may be considered by the commissioner to determine whether the condition of any insurer renders the continuance of its business hazardous to its policyholders or the general public:(1) material adverse findings concerning the insurer's financial condition defined in subsection (D) reported in financial condition and market conduct examination reports;(2) the National Association of Insurance Commissioners Insurance Regulatory Information System and its related reports;(3) the ratios of commission expense, general insurance expense, policy benefits and reserve increases to annual premium and net investment income which could lead to an impairment of capital and surplus;(4) the insurer's asset portfolio when viewed in light of current economic conditions is not of sufficient value, liquidity, or diversity to assure the company's ability to meet its outstanding obligations as they mature;(5) the recoverability of ceded reinsurance for which credit has been taken in the annual statement and whether the insurer's reinsurance program provides sufficient protection for the company's remaining surplus after taking into account the insurer's cash flow and the classes of business written;(6) the insurer's operating loss in the last twelve month period or any shorter period of time, including but not limited to net capital gain or loss, change in non-admitted assets, and cash dividends paid to shareholders, is greater than fifty percent of such insurer's remaining surplus as regards policyholders in excess of the minimum required;(7) whether the insolvency, threatened insolvency or delinquency in payment of a monetary or other obligation of a parent, affiliate, subsidiary or reinsurer may materially adversely affect the solvency of the insurer;(8) contingent liabilities, pledges or guaranties which either individually or collectively involve a total amount which the commissioner determines may materially adversely affect the solvency of the insurer;(9) whether any controlling person of any insurer is delinquent in the transmitting, or payment of, net premiums to such insurer;(10) the age and collectibility of receivables involve a total amount which the commissioner determines adversely affects the solvency of the insurer;(11) 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;(12) whether management of an insurer has failed to respond to inquires relative to the condition of the insurer or has knowingly furnished false and misleading information concerning an inquiry;(13) whether management of an insurer either knowingly has filed any false or misleading sworn financial statement, or knowingly has released false or misleading financial statements to lending institutions or to the general public, or knowingly has made a false or misleading entry, or knowingly has omitted an entry of material amount in the books of the insurer;(14) 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; or(15) whether the company has experienced or will experience in the foreseeable future cash flow or liquidity problems.(D) For the purpose of making a determination of an insurer's financial condition in clause (1) of subsection (C), the commissioner may:(1) disregard any credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired or otherwise subject to a delinquency proceeding;(2) make appropriate adjustments to asset values attributable to investments in or transactions with parents, subsidiaries, or affiliates;(3) 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; or(4) 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.(E) If the commissioner determines that any of the conditions set forth in subsection (A) or (B) exist, the commissioner may issue an order which shall provide:(1) notice to the insurer of this determination, and the grounds for this determination;(2) a written list to the insurer of the requirements to abate this determination within the time period established pursuant to section five; and(3) notice to the insurer that it is under the supervision of the commissioner and that the commissioner is applying and effectuating the provisions of this chapter.(F) The commissioner may employ staff personnel and outside counsel and other consultants as may be necessary for the proper conduct of the administrative supervision. All reasonable costs of such outside counsel and other consultants, including the costs attributable to the use of staff personnel, shall be borne by the insurer under administrative supervision.