CHAPTER 698
INSURERS

PART I
IN GENERAL. COSTS

      Sec. 38a-41. (Formerly Sec. 38-20). Authority to do business. Licensure. Revocation or refusal to renew license. Fines. Company owned by a state or foreign nation or company controlled by insureds not to be licensed. Appeals. Plan of operations. Type of business to be conducted. (a) No insurance company or health care center shall do any insurance business or health care center business within this state until and except while it is permitted to do so under the terms of a license issued by the commissioner. Any such company desiring to obtain such a license shall make application to the commissioner, setting forth the line or lines of business which it is seeking authorization to write. It shall file with the commissioner a certified copy of its charter or articles of association and evidence satisfactory to the commissioner that it has complied with the laws of the jurisdiction under which it is organized, a statement of its financial condition in such form as is required by the commissioner, together with such evidence of its correctness as the commissioner requires and evidence of good management in such form as is required by the commissioner. Applicant companies licensed in and operated from administrative offices in one state but domiciled in another state, as permitted by the applicable state law, shall provide justification of such arrangement, satisfactory to the commissioner, which shall demonstrate that regulatory influence of the domiciliary supervisory official has not been diminished as a result of such arrangement. An applicant shall demonstrate an orderly pattern of growth in its marketing territories in the geographic region, with the exception of a newly formed health care center, and an expertise in marketing and servicing the lines of insurance or the health care center business it desires to write. It shall submit evidence of its ability to provide continuant and timely claims settlement. If the information furnished is satisfactory to the commissioner and if all other requirements of law have been complied with, he may issue to such company a license permitting it to do business in this state. Each such license shall expire on the first day of May succeeding the date of its issuance, but may be renewed without any formalities except as required by the commissioner. Failure of a licensed company to exercise its authority to write a particular line or lines of business in this state for two consecutive calendar years may constitute sufficient cause for revocation of the company's authority to write those lines of business.

      (b) The commissioner shall adopt regulations in accordance with the provisions of chapter 54 specifying the information and evidence that an insurance company or health care center desiring to obtain or renew a license to do an insurance business or health care center business shall submit and the requirements with which it shall comply.

      (c) The commissioner may, at any time, for cause, suspend, revoke or refuse to renew any such license or in lieu of or in addition to suspension or revocation of such license the commissioner, after reasonable notice to and hearing of any holder of such license, may impose a fine not to exceed ten thousand dollars. Such hearings may be held by the commissioner or any person designated by the commissioner. Whenever a person other than the commissioner acts as the hearing officer, the person shall submit to the commissioner a memorandum of the person's findings and recommendations upon which the commissioner may base a decision. The commissioner may, if the commissioner deems it in the interest of the public, publish in one or more newspapers of the state a statement that, under the provisions of this section, the commissioner has suspended or revoked the license of any insurance company or health care center to do business in this state.

      (d) No license to do an insurance business within this state shall be issued to a foreign insurance company owned or financially controlled by another state of the United States or to an alien insurance company owned or financially controlled by a foreign nation or any state or province thereof.

      (e) No license to do an insurance business within this state shall be issued to any company which insures or plans to insure the separate risks of the employees of an employer that directly or indirectly controls the insurer by stock ownership or otherwise or exercises control of the operations of the insurer where the premiums written annually by the insurer on the separate risks of such employees exceed or will exceed ten per cent of the total premiums which the insurer writes or will write annually or where the commissions payable, if any, on premiums covering the risks of such employees written by the insurer annually exceed or will exceed ten per cent of the total commissions to agents which are or will be paid annually by the insurer.

      (f) Any company aggrieved by the action of the commissioner in revoking, suspending or refusing to renew a license or in imposing a fine may appeal therefrom, in accordance with the provisions of section 4-183, except venue for such appeal shall be in the judicial district of New Britain. Appeals under this section shall be privileged in respect to the order of trial assignment.

      (g) Except as provided in section 38a-92l an insurer shall be required to be licensed to transact financial guaranty insurance in this state, as defined in subdivision (1) of section 38a-92a. Prior to the issuance of a license to transact financial guaranty insurance business, an insurer shall submit for the approval of the commissioner a plan of operation detailing the types and projected diversification of guaranties that will be issued, the underwriting procedures that will be followed, managerial oversight methods, investment policies and other matters as may be prescribed by the commissioner. An insurer licensed to transact the business of financial guaranty insurance may also be licensed to transact the business of surety, credit and residual value insurance, but may not be licensed to transact any other lines of insurance in this state.

      (1949 Rev., S. 6045, 6175; 1955, S. 2786d; 1967, P.A. 159; 1969, P.A. 480, S. 1; 1971, P.A. 870, S. 95; P.A. 76-436, S. 628, 681; P.A. 77-603, S. 25, 125; P.A. 78-280, S. 5, 6, 127; P.A. 81-101, S. 7; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; 90-243, S. 6; P.A. 93-136, S. 16; 93-142, S. 4, 7, 8; P.A. 95-220, S. 4-6; P.A. 99-9, S. 2, 6; 99-215, S. 24, 29; P.A. 04-174, S. 1, 2.)

      History: 1967 act authorized imposition of fine, added hearing provisions and provisions re petitions to court; 1969 act added provision prohibiting issuance of license to company which insures or plans to insure employees of employer which directly or indirectly controls insurer by stock ownership, etc.; 1971 act replaced superior court with court of common pleas, effective September 1, 1971, except that courts with cases pending retain jurisdiction unless pending matters deemed transferable; P.A. 76-436 replaced court of common pleas with superior court, effective July 1, 1978; P.A. 77-603 replaced previous provisions re petitions to court with provision re appeals in accordance with Sec. 4-183; P.A. 78-280 substituted "judicial district of Hartford-New Britain" for "Hartford county"; P.A. 81-101 divided section into Subsecs., required that insurance companies desiring to obtain a license submit evidence of good management to the commissioner, specified requirements for applicant companies licensed in one state and domiciled in another and provided that commissioner adopt regulations concerning requirements for licensure; P.A. 88-230 replaced "judicial district of Hartford-New Britain" with "judicial district of Hartford", effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; P.A. 90-243 added a provision re revocation of an insurance company's authority and inserted references to "foreign" and "alien" insurance companies; Sec. 38-20 transferred to Sec. 38a-41 in 1991; P.A. 93-136 added new Subsec. (g) re transaction of financial guaranty insurance business; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 99-9 amended section to add references to "health care centers" and "health care center business", amended Subsec. (a) to substitute "line or lines of business which it is seeking authorization to write" for "lines of insurance which it desires to write", to add "as permitted by the applicable state law" re justification provided by applicant companies domiciled in another state, to except newly formed health care centers from required demonstration of orderly pattern of growth, and to substitute "business" for "insurance", and amended Subsec. (c) to substitute "the commissioner" for "he" and to make a technical change, effective May 12, 1999; P.A. 99-215 replaced "judicial district of Hartford" with "judicial district of New Britain" in Subsec. (f), effective June 29, 1999; P.A. 04-174 amended Subsec. (c) to substitute "refuse to renew" for "reissue" and make technical changes for the purposes of gender neutrality and amended Subsec. (f) to substitute "renew" for "reissue".

      Annotations to former section 38-20:

      Powers of the insurance commissioner are discretionary or quasi-judicial, rather than ministerial. 60 C. 448. Courts will not interfere with the exercise of the insurance commissioner's discretion. Id. Mandamus will not lie to control action of insurance commissioner under this section. Id. Cited. 122 C. 295. Cited. 188 C. 152.

      Sec. 38a-41a. Certificate authorizing formation of insurance company or health care center. Information required by commissioner. Costs. (a) A certificate authorizing the formation of a corporation to transact the business of an insurance company or a health care center shall be issued by the commissioner if the following is submitted to the commissioner by the incorporators and is deemed to be satisfactory: (1) The proposed articles of incorporation, which shall state that the corporation has, as a purpose, the doing of an insurance business or health care center business; (2) the proposed bylaws of the corporation; and (3) such information as the commissioner shall require to evaluate the objectives, management and control of the proposed corporation, pursuant to the provisions of chapter 54.

      (b) All expenses incurred by the commissioner in connection with proceedings under this section shall be paid by the person filing the application.

      (P.A. 96-106, S. 3; P.A. 99-9, S. 3, 6.)

      History: P.A. 99-9 amended Subsec. (a) to add reference to a "health care center" and "health care center business" and to substitute "commissioner" for "him" and "Insurance Commissioner", effective May 12, 1999.

      Sec. 38a-42. (Formerly Sec. 38-20b). Contracts with life, accident or health insurance producers. (a) Except as provided in subsection (b) of this section, no insurance company shall enter into any contract of remuneration with any life or accident and health insurance producer where the initial or any renewal commission is contingent upon (1) such contract being in effect more than two years, or (2) any continuing premium or other volume requirement contained in such contract.

      (b) Any insurance company may enter into a contract of remuneration of the kind prohibited in subsection (a) of this section with any such insurance producer if the company has offered to such producer a contract which contains no such contingent provisions as described in subdivisions (1) and (2) of subsection (a) of this section and which provides actuarially equivalent remuneration to the contract containing such contingent provisions.

      (1969, P.A. 263, S. 1, 2; P.A. 96-193, S. 1, 36; P.A. 04-10, S. 1.)

      History: Sec. 38-20b transferred to Sec. 38a-42 in 1991; P.A. 96-193 substituted "producer" for "agent" and "broker", effective June 3, 1996; P.A. 04-10 made technical changes.

      Sec. 38a-43. (Formerly Sec. 38-22). Foreign and alien insurance companies may be prohibited from transacting business in this state. Whenever it appears to the commissioner that permission to transact business within any state of the United States or within any foreign country has been refused to any domestic insurance company after a certificate of the solvency and good management of such company has been issued to it by the commissioner and after such company has complied with any reasonable laws of such state or foreign country requiring deposits of money or securities with the government of such state or country, the commissioner may immediately cancel the authority of each company organized under the laws of such state or foreign government and licensed to do business in this state and may refuse a certificate of authority to each such company thereafter applying for authority to do business in this state, until the commissioner's certificate has been recognized by the government of such state or country.

      (1949 Rev., S. 6053; P.A. 04-10, S. 2.)

      History: Sec. 38-22 transferred to Sec. 38a-43 in 1991; P.A. 04-10 made technical changes.

      Annotation to former section 38-22:

      Cited. 122 C. 295.

      Sec. 38a-44. (Formerly Sec. 38-64b). Notice to commissioner of intent to discontinue line of insurance. Any insurer licensed to do business in this state, or authorized to do business on a nonadmitted basis, which intends to discontinue offering or substantially reduce its writings in a line or subline of insurance in this state shall send, by registered or certified mail, or deliver to the Insurance Commissioner written notice of its intent to take such action at least sixty days before the initial notice of cancellation or nonrenewal is delivered or mailed to the insureds. This section shall not apply to life insurance policies or annuity contracts.

      (P.A. 86-98, S. 4, 6; P.A. 93-273, S. 1.)

      History: Sec. 38-64b transferred to Sec. 38a-44 in 1991; P.A. 93-273 required notification of commissioner sixty days before the initial notice of cancellation or nonrenewal is delivered or mailed to the insureds, rather than sixty days before effective date of action to discontinue offerings of insurance lines or sublines, and added provision specifically excluding life insurance policies or annuity contracts from section provisions.

      Annotation to former section 38-64b:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Sec. 38a-45. (Formerly Sec. 38-29). Limitation on title insurance and mortgage guaranty insurance. No corporation shall insure or guarantee titles to real estate situated in this state except subject to and in accordance with all laws of this state relating to insurance or insurance companies generally or relating to the powers or duties of the commissioner. No corporation doing title insurance business may do any other line of insurance business. No corporation doing mortgage guaranty insurance business may do any other line of insurance business. The commissioner may adopt regulations, in accordance with chapter 54, which set requirements concerning the amount of deposits and the establishment and maintenance of unearned premium and loss reserves and other liabilities of domestic title insurance companies and foreign mortgage guaranty insurance companies for the purpose of protecting their policyholders.

      (1949 Rev., S. 6087; February, 1965, P.A. 530; P.A. 77-23; P.A. 90-243, S. 11; P.A. 04-10, S. 3.)

      History: 1965 act added provision re commissioner's power to regulate deposit amounts, unearned premium and loss reserves, etc.; P.A. 77-23 prohibited corporations doing title insurance business or mortgage guaranty insurance business from engaging in any other business; P.A. 90-243 substituted "foreign" for "nonresident" companies; Sec. 38-29 transferred to Sec. 38a-45 in 1991; P.A. 04-10 added reference to chapter 54 re adoption of regulations.

      Sec. 38a-46. (Formerly Sec. 38-30). Writing of participating and nonparticipating insurance by domestic stock and mutual insurance companies. Any domestic insurance company, either mutual or having capital stock, empowered to write fire, marine, casualty, fidelity and surety or boiler and machinery insurance, may issue any or all of its policies with or without participation in profits, savings or unabsorbed portions of premiums, may classify policies issued on a participating or nonparticipating basis and may determine the right to participate and the extent of participation of any class or classes of policies.

      (1949 Rev., S. 6089.)

      History: Sec. 38-30 transferred to Sec. 38a-46 in 1991.

      Sec. 38a-47. (Formerly Sec. 38-53a). Payments by domestic insurance companies for expenditures of Insurance Department. All domestic insurance companies and other domestic entities subject to taxation under chapter 207 shall, in accordance with section 38a-48, annually pay to the Insurance Commissioner, for deposit in the Insurance Fund established under section 38a-52a, an amount equal to the actual expenditures made by the Insurance Department during each fiscal year, and the actual expenditures made by the Office of the Healthcare Advocate, including the cost of fringe benefits for department and office personnel as estimated by the Comptroller, plus the expenditures made on behalf of the department and the office from the Capital Equipment Purchase Fund pursuant to section 4a-9 for such year, but excluding expenditures paid for by fraternal benefit societies, foreign and alien insurance companies and other foreign and alien entities under sections 38a-49 and 38a-50. Payments shall be made by assessment of all such domestic insurance companies and other domestic entities calculated and collected in accordance with the provisions of section 38a-48. Any such domestic insurance company or other domestic entity aggrieved because of any assessment levied under this section may appeal therefrom in accordance with the provisions of section 38a-52.

      (P.A. 80-482, S. 280, 345, 348; P.A. 82-26, S. 1; 82-456, S. 1, 2; P.A. 85-185, S. 1, 3; P.A. 86-265, S. 1, 2; P.A. 87-515, S. 3, 4; P.A. 89-165, S. 1, 3; P.A. 90-148, S. 25, 34; 90-243, S. 20; June Sp. Sess. P.A. 91-14, S. 12, 30; June Sp. Sess. P.A. 01-9, S. 66, 131; P.A. 05-102, S. 3.)

      History: P.A. 82-26 provided that the comptroller rather than administrative services department estimate fringe benefit costs for insurance department personnel; P.A. 82-456 increased the percentage of expenditures of the insurance department paid by companies from seventy to one hundred and eliminated the eight per cent of taxes and charges option, replacing it with various dollar amounts per fiscal year; P.A. 85-185 provided the method of calculation of the proper amount for the fiscal year commencing July 1, 1984; P.A. 86-265 added Subsec. (b), providing for an assessment for the fiscal year ending June 30, 1987, covering the total expenditures of the department in that year, and amended Subsec. (a) to provide that the amount assessed pursuant to Subsec. (b) shall be used as the basis for the calculation of the assessments for the following years; P.A. 87-515 provided that domestic insurance companies shall be assessed for the actual expenditures made by the department during each fiscal year, and removed prior limitations on the total assessment amount; P.A. 89-165 provided that domestic insurance companies shall be assessed for the expenditures made on behalf of the department from the capital equipment purchase fund; P.A. 90-148 inserted reference to Sec. 38-53b as a technical change related to certain procedural amendments occurring in said Sec. 38-53b; P.A. 90-243 inserted references to "foreign" and "alien" insurance companies to replace references to "nonresident" and "foreign" companies; Sec. 38-53a transferred to Sec. 38a-47 in 1991; June Sp. Sess. P.A. 91-14 deleted reference to deposit general fund and substituted reference to insurance fund deposits; June Sp. Sess. P.A. 01-9 added provisions re expenditures by the Office of the Managed Care Ombudsman, effective July 1, 2001; P.A. 05-102 renamed the Office of the Managed Care Ombudsman the Office of the Healthcare Advocate.

      Sec. 38a-48. (Formerly Sec. 38-53b). Assessment of payments by domestic insurance companies. Adjustments. Penalty. Interest. Payments credited to Insurance Fund. Allocation of assessments. (a) On or before June thirtieth, annually, the Commissioner of Revenue Services shall render to the Insurance Commissioner a statement certifying the amount of taxes or charges imposed on each domestic insurance company or other domestic entity under chapter 207 on business done in this state during the preceding calendar year; the statement for local domestic insurance companies shall set forth the amount of taxes and charges before any tax credits allowed as provided in section 12-202.

      (b) On or before July thirty-first, annually, the Insurance Commissioner and the Office of the Healthcare Advocate shall render to each domestic insurance company or other domestic entity liable for payment under section 38a-47, (1) a statement which includes the amount appropriated to the Insurance Department and the Office of the Healthcare Advocate for the fiscal year beginning July first of the same year, the cost of fringe benefits for department and office personnel for such year, as estimated by the Comptroller, and the estimated expenditures on behalf of the department and the office from the Capital Equipment Purchase Fund pursuant to section 4a-9 for such year, (2) a statement of the total taxes imposed on all domestic insurance companies and domestic insurance entities under chapter 207 on business done in this state during the preceding calendar year, and (3) the proposed assessment against that company or entity, calculated in accordance with the provisions of subsection (c) of this section, provided that for the purposes of this calculation the amount appropriated to the Insurance Department and the Office of the Healthcare Advocate plus the cost of fringe benefits for department and office personnel and the estimated expenditures on behalf of the department and the office from the Capital Equipment Purchase Fund pursuant to section 4a-9 shall be deemed to be the actual expenditures of the department and the office.

      (c) (1) The proposed assessments for each domestic insurance company or other domestic entity shall be calculated by (A) allocating twenty per cent of the amount to be paid under section 38a-47 among the domestic entities organized under sections 38a-199 to 38a-209, inclusive, and 38a-214 to 38a-225, inclusive, in proportion to their respective shares of the total taxes and charges imposed under chapter 207 on such entities on business done in this state during the preceding calendar year, and (B) allocating eighty per cent of the amount to be paid under section 38a-47 among all domestic insurance companies and domestic entities other than those organized under sections 38a-199 to 38a-209, inclusive, and 38a-214 to 38a-225, inclusive, in proportion to their respective shares of the total taxes and charges imposed under chapter 207 on such domestic insurance companies and domestic entities on business done in this state during the preceding calendar year, provided if there are no domestic entities organized under sections 38a-199 to 38a-209, inclusive, and 38a-214 to 38a-225, inclusive, at the time of assessment, one hundred per cent of the amount to be paid under section 38a-47 shall be allocated among such domestic insurance companies and domestic entities.

      (2) When the amount any such company or entity is assessed pursuant to this section exceeds twenty-five per cent of the actual expenditures of the Insurance Department and the Office of the Healthcare Advocate, such excess amount shall not be paid by such company or entity but rather shall be assessed against and paid by all other such companies and entities in proportion to their respective shares of the total taxes and charges imposed under chapter 207 on business done in this state during the preceding calendar year, except that for purposes of any assessment made to fund payments to the Department of Public Health to purchase vaccines, such company or entity shall be responsible for its share of the costs, notwithstanding whether its assessment exceeds twenty-five per cent of the actual expenditures of the Insurance Department and the Office of the Healthcare Advocate. The provisions of this subdivision shall not be applicable to any corporation which has converted to a domestic mutual insurance company pursuant to section 38a-155 upon the effective date of any public act which amends said section to modify or remove any restriction on the business such a company may engage in, for purposes of any assessment due from such company on and after such effective date.

      (d) For purposes of calculating the amount of payment under section 38a-47, as well as the amount of the assessments under this section, the "total taxes imposed on all domestic insurance companies and other domestic entities under chapter 207" shall be based upon the amounts shown as payable to the state for the calendar year on the returns filed with the Commissioner of Revenue Services pursuant to chapter 207; with respect to calculating the amount of payment and assessment for local domestic insurance companies, the amount used shall be the taxes and charges imposed before any tax credits allowed as provided in section 12-202.

      (e) On or before September thirtieth, annually, for each fiscal year ending prior to July 1, 1990, the Insurance Commissioner and the Healthcare Advocate, after receiving any objections to the proposed assessments and making such adjustments as in their opinion may be indicated, shall assess each such domestic insurance company or other domestic entity an amount equal to its proposed assessment as so adjusted. Each domestic insurance company or other domestic entity shall pay to the Insurance Commissioner on or before October thirty-first an amount equal to fifty per cent of its assessment adjusted to reflect any credit or amount due from the preceding fiscal year as determined by the commissioner under subsection (g) of this section. Each domestic insurance company or other domestic entity shall pay to the Insurance Commissioner on or before the following April thirtieth, the remaining fifty per cent of its assessment.

      (f) On or before September first, annually, for each fiscal year ending after July 1, 1990, the Insurance Commissioner and the Healthcare Advocate, after receiving any objections to the proposed assessments and making such adjustments as in their opinion may be indicated, shall assess each such domestic insurance company or other domestic entity an amount equal to its proposed assessment as so adjusted. Each domestic insurance company or other domestic entity shall pay to the Insurance Commissioner (1) on or before June 30, 1990, and on or before June thirtieth annually thereafter, an estimated payment against its assessment for the following year equal to twenty-five per cent of its assessment for the fiscal year ending such June thirtieth, (2) on or before September thirtieth, annually, twenty-five per cent of its assessment adjusted to reflect any credit or amount due from the preceding fiscal year as determined by the commissioner under subsection (g) of this section, and (3) on or before the following December thirty-first and March thirty-first, annually, each domestic insurance company or other domestic entity shall pay to the Insurance Commissioner the remaining fifty per cent of its proposed assessment to the department in two equal installments.

      (g) Immediately following the close of the fiscal year, the Insurance Commissioner and the Healthcare Advocate shall recalculate the proposed assessment for each domestic insurance company or other domestic entity in accordance with subsection (c) of this section using the actual expenditures made by the Insurance Department and the Office of the Healthcare Advocate during that fiscal year and the actual expenditures made on behalf of the department and the office from the Capital Equipment Purchase Fund pursuant to section 4a-9. On or before July thirty-first, the Insurance Commissioner and the Healthcare Advocate shall render to each such domestic insurance company and other domestic entity a statement showing the difference between their respective recalculated assessments and the amount they have previously paid. On or before August thirty-first, the Insurance Commissioner and the Healthcare Advocate, after receiving any objections to such statements, shall make such adjustments which in their opinion may be indicated, and shall render an adjusted assessment, if any, to the affected companies.

      (h) If any assessment is not paid when due, a penalty of ten dollars shall be added thereto, and interest at the rate of six per cent per annum shall be paid thereafter on such assessment and penalty.

      (i) The commissioner shall deposit all payments made under this section with the State Treasurer. On and after June 6, 1991, the moneys so deposited shall be credited to the Insurance Fund established under section 38a-52a and shall be accounted for as expenses recovered from insurance companies.

      (P.A. 80-482, S. 281, 345, 348; P.A. 82-26, S. 2; P.A. 84-185, S. 1; P.A. 88-326, S. 1, 11; P.A. 89-165, S. 2, 3; P.A. 90-148, S. 26, 34; June Sp. Sess. P.A. 91-14, S. 13, 30; P.A. 92-60, S. 5; June Sp. Sess. P.A. 01-9, S. 67, 131; P.A. 05-102, S. 4; P.A. 06-113, S. 1.)

      History: P.A. 82-26 amended Subsec. (b) to provide that the comptroller rather than administrative services department estimate fringe benefit costs for insurance department personnel; P.A. 84-185 amended Subsec. (g) to provide for a ten-dollar penalty on overdue assessments and to provide the interest charges shall accrue on both the assessment and penalty; P.A. 88-326 inserted a new Subdiv. (2) in Subsec. (c) concerning assessments which exceed twenty-five per cent of the expenditures of the insurance department; P.A. 89-165 amended Subdiv. (1) of Subsec. (b) to provide that the statement rendered to each insurance company include the estimated expenditures on behalf of the department from the capital equipment purchase fund, amended Subdiv. (3) of Subsec. (b) to provide that the proposed assessment against each company be calculated to include such estimated expenditures, amended Subsec. (f) to provide that when the proposed assessment is recalculated the actual expenditures from such fund shall be used and deleted Subsec. (i); P.A. 90-148 (1) amended Subsec. (e) to make assessment procedure therein applicable to state fiscal years ending prior to July 1, 1990, and (2) inserted a new Subsec. (f), with appropriate changes in lettering for succeeding subsections, applicable to state fiscal years ending after July 1, 1990, providing for assessment procedures very similar to those in Subsec. (e) except that on June thirtieth annually, first payable June 30, 1990, each domestic company shall make an estimated payment for the following year, such payment being in addition to payments of twenty-five per cent of the company's assessment for the year in each of September, December and March following; Sec. 38-53b transferred to Sec. 38a-48 in 1991; June Sp. Sess. P.A. 91-14 amended Subsec. (i) to provide that on and after June 6, 1991, moneys deposited with treasurer shall be credited to insurance fund, rather than general fund; P.A. 92-60 amended Subsec. (c) by changing the manner of assessment for domestic entities organized under certain sections of the insurance statutes; (Revisor's note: In 1997 in Subsec. (i) the phrase "... the Insurance Fund and established under section 38a-52a ..." was changed editorially by the Revisors to "... the Insurance Fund established under section 38a-52a and ..." thereby correcting an error in the codification of June Sp. Sess. P.A. 91-14, S. 13); June Sp. Sess. P.A. 01-9 added provisions re the Office of the Managed Care Ombudsman in Subsecs. (b), (c), and (e) to (g), effective July 1, 2001; P.A. 05-102 amended Subsecs. (b), (c), (e), (f) and (g) by renaming the Office of the Managed Care Ombudsman the Office of the Healthcare Advocate and making technical and conforming changes; P.A. 06-113 amended Subsec. (c)(2) to add exception for purposes of any assessment made to fund payments to Department of Public Health to purchase vaccines, making company or entity responsible for its share of costs, notwithstanding whether its assessment exceeds twenty-five per cent of actual expenditures of Insurance Department and Office of the Healthcare Advocate, effective July 1, 2006.

      See Sec. 19a-7j re assessment of health and welfare fee on domestic insurers and health care centers doing life or health insurance business in state.

      Sec. 38a-49. (Formerly Sec. 38-51). Fraternal benefit societies and foreign or alien companies to reimburse state for costs of examination. All fraternal benefit societies and all foreign and alien insurance companies and other entities examined by the Insurance Commissioner shall annually reimburse the state for the costs of such examinations. The total cost of all examinations conducted during the fiscal year, including supervision and other overhead, shall be one hundred and thirty-five per cent of the total salaries paid to the examining personnel of the Insurance Department engaged in such examinations less any salary reimbursements. The commissioner shall apportion such total cost of examinations for the fiscal year among such insurance companies and other entities examined during such fiscal year on the basis of time involved in the several examinations and shall assess such fraternal benefit societies, foreign and alien insurance companies and other foreign and alien entities for their respective apportionments of the total cost. Such assessments shall be in addition to any taxes and fees otherwise payable to the state.

      (1953, S. 2808d; 1959, P.A. 687, S. 1; P.A. 75-290, S. 1; P.A. 77-614, S. 163, 587, 610; P.A. 78-303, S. 85, 136; P.A. 80-482, S. 277, 345, 348; P.A. 90-243, S. 18.)

      History: 1959 act increased the cost of examinations to 135%; P.A. 75-290 deleted "domestic" where the word precedes references to companies and entities; P.A. 77-614 and 78-303 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 90-243 inserted references to "foreign" and "alien" insurance companies replacing references to "nonresident" and "foreign" companies; Sec. 38-51 transferred to Sec. 38a-49 in 1991.

      Sec. 38a-50. (Formerly Sec. 38-52). Fraternal, foreign and alien life insurers to reimburse state for costs of valuation. All fraternal benefit societies and all foreign and alien life insurance companies and other foreign and alien life insurers whose policy or contract reserves are valued by the Insurance Commissioner shall annually reimburse the state for the costs of such valuations. The total cost of all valuations during the fiscal year, including supervision and other overhead, shall be one hundred and thirty-five per cent of the total salaries paid to the valuation personnel of the Insurance Department engaged in valuing such policy and contract reserves less any salary reimbursements. The commissioner shall apportion such total cost of valuations for the fiscal year among such life insurance companies and other life insurers whose policy or contract reserves are valued during such fiscal year on the basis of time involved in the several valuations and shall assess such fraternal benefit societies, foreign and alien insurance companies and other foreign and alien entities for their respective apportionments of the total cost. Such assessments shall be in addition to any other taxes and fees otherwise payable to the state.

      (1953, S. 2809d; 1959, P.A. 687, S. 2; P.A. 75-290, S. 2; P.A. 77-614, S. 163, 587, 610; P.A. 78-303, S. 85, 136; P.A. 80-482, S. 278, 345, 348; P.A. 90-243, S. 19.)

      History: 1959 act increased the cost of valuations to 135% of salaries and added the provision for charges in punchcard machine rentals; P.A. 75-290 made provisions applicable to all insurance companies and other life insurers where previously applicable to "domestic" companies and other insurers; P.A. 77-614 and 78-303 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 90-243 inserted references to "foreign" and "alien" insurance companies and deleted the provision for charges in punchcard machine rentals; Sec. 38-52 transferred to Sec. 38a-50 in 1991.

      Sec. 38a-51. (Formerly Sec. 38-53). Assessment of costs of examination and valuation. Payments credited to Insurance Fund. On or before August first, annually, the commissioner shall render to each insurance company or other entity liable to assessment under section 38a-49 or 38a-50 a statement of the total cost of examinations or valuations, as the case may be, for the preceding fiscal year ending June thirtieth, together with proposed assessments against each of the several such companies and other entities. On September first annually, the commissioner, after receiving any objections to the proposed assessments and making such changes as in his opinion may be indicated, shall assess each such insurance company or other entity for the costs of examinations and valuations. Each such insurance company or other entity shall pay to the commissioner the amount assessed against it within twenty days from date of invoice, with interest at the rate of six per cent per annum if the assessment is unpaid at the end of such twenty-day period. The commissioner shall deposit such receipts with the State Treasurer. On and after June 6, 1991, the moneys so deposited with the State Treasurer shall be credited to the Insurance Fund established under section 38a-52a and shall be accounted for as expenses recovered from insurance companies.

      (1953, S. 2810d; 1959, P.A. 687, S. 3; 1967, P.A. 88; P.A. 75-290, S. 3; P.A. 79-109, S. 1; June Sp. Sess. P.A. 91-14, S. 14, 30.)

      History: 1959 act increased the maximum assessment to $300,000; 1967 act deleted provision setting maximum assessments under Sec. 38-51, 38-52 and this section at $300,000 and providing for pro rata deduction in assessments which would otherwise exceed that amount; P.A. 75-290 made provisions applicable to insurance companies and entities generally where previously applicable to "domestic" companies and entities; P.A. 79-109 required that assessments be made on September first rather than "during the month of September" and required payment within twenty days "from date of invoice" rather than within twenty days "after receipt of a statement of the amount due"; Sec. 38-53 transferred to Sec. 38a-51 in 1991; June Sp. Sess. P.A. 91-14 provided that on and after June 6, 1991, moneys deposited with treasurer shall be credited to insurance fund, rather than general fund.

      Sec. 38a-52. (Formerly Sec. 38-54). Appeal from assessment. Any domestic insurance company or other domestic entity aggrieved because of any assessment levied under section 38a-48, or any fraternal benefit society or foreign or alien insurance company or other entity aggrieved because of any assessment levied under the provisions of sections 38a-49 to 38a-51, inclusive, may, within one month from the time provided for the payment of such assessment, appeal therefrom to the superior court for the judicial district of New Britain, which appeal shall be accompanied by a citation to the commissioner to appear before said court. Such citation shall be signed by the same authority, and such appeal shall be returnable at the same time and served and returned in the same manner, as is required in case of a summons in a civil action. The authority issuing the citation shall take from the appellant a bond or recognizance to the state, with surety to prosecute the appeal to effect and to comply with the orders and decrees of the court in the premises. Such appeals shall be preferred cases, to be heard, unless cause appears to the contrary, at the first session, by the court or by a committee appointed by the court. Said court may grant such relief as may be equitable, and, if such assessment has been paid prior to the granting of such relief, may order the Treasurer to pay the amount of such relief, with interest at the rate of six per cent per annum, to the aggrieved company. If the appeal has been taken without probable cause, the court may tax double or triple costs, as the case demands; and, upon all such appeals which may be denied, costs may be taxed against the appellant at the discretion of the court, but no costs shall be taxed against the state.

      (1953, S. 2811d; P.A. 75-290, S. 4; P.A. 78-280, S. 6, 127; P.A. 80-482, S. 279, 348; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; 90-243, S. 21; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4-6; P.A. 99-215, S. 24, 29.)

      History: P.A. 75-290 made provisions applicable to insurance companies and entities generally where previously applicable to "domestic" companies and entities; P.A. 78-280 replaced "Hartford county" with "judicial district of Hartford-New Britain"; P.A. 80-482 specified applicability to domestic and nonresident or foreign insurance companies and entities and to fraternal benefit societies and added reference to Sec. 38-53b; P.A. 88-230 replaced "judicial district of Hartford-New Britain" with "judicial district of Hartford", effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; P.A. 90-243 inserted references to "foreign" and "alien" insurance companies; Sec. 38-54 transferred to Sec. 38a-52 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 99-215 replaced "judicial district of Hartford" with "judicial district of New Britain", effective June 29, 1999.

      Sec. 38a-52a. Insurance Fund established. There is established a fund to be known as the "Insurance Fund". The fund may contain any moneys required by law to be deposited in the fund and shall be held by the Treasurer separate and apart from all other moneys, funds and accounts. The interest derived from the investment of the fund shall be credited to the fund. Amounts in the fund may be expended only pursuant to appropriation by the General Assembly. Any balance remaining in the fund at the end of any fiscal year shall be carried forward in the fund for the fiscal year next succeeding.

      (June Sp. Sess. P.A. 91-14, S. 11, 30.)

      Sec. 38a-53. (Formerly Sec. 38-24). Requirements re filing of annual reports and financial statements by company. Late filing fee. (a) Each insurance company or health care center doing business in this state shall, annually, on or before the first day of March, render to the commissioner a true report, signed and sworn to by its president or a vice president, and secretary or an assistant secretary, of its financial condition on the thirty-first day of December next preceding, prepared in accordance with the National Association of Insurance Commissioners annual statement instructions handbook and following those accounting procedures and practices prescribed by the National Association of Insurance Commissioners accounting practices and procedures manual, subject to any deviations in form and detail as may be prescribed by the commissioner.

      (b) In addition to such annual report, the commissioner, when he deems it necessary, may require any insurance company or health care center doing business in this state to file financial statements on a quarterly basis.

      (c) In addition to such annual report and the quarterly report required under subsection (b) of this section, the commissioner, whenever the commissioner determines that more frequent reports are required because of certain factors or trends affecting companies writing a particular class or classes of business or because of changes in the company's management or financial or operating condition, may require any insurance company or health care center doing business in this state to file financial statements on other than an annual or quarterly basis.

      (d) Any insurance company or health care center doing business in this state which fails to file any report or statement required under this section shall pay a late filing fee of one hundred dollars per day for each day from the due date of such report or statement to the date of filing.

      (e) Each insurance company or health care center doing business in this state shall include in all reports required to be filed with the commissioner under this section a certification by an actuary or reserve specialist of all reserve liabilities prepared in accordance with regulations which shall be adopted by the commissioner in accordance with chapter 54. The regulations shall: (1) Specify the contents and scope of the certification; (2) provide for the availability to the commissioner of the workpapers of the actuary or loss reserve specialist; and (3) provide for exemptions to the companies or centers from compliance with the requirements of this subsection. The commissioner shall maintain, as confidential, all workpapers of the actuary or loss reserve specialist and the actuarial report and actuarial opinion summary provided in support of the certification. Such workpapers, reports and summaries shall not be subject to subpoena or disclosure under the Freedom of Information Act, as defined in section 1-200.

      (1949 Rev., S. 6077; P.A. 76-167, S. 1; P.A. 88-326, S. 2; P.A. 90-243, S. 9; P.A. 92-112, S. 3; P.A. 05-29, S. 3; P.A. 06-117, S. 1.)

      History: P.A. 76-167 added Subsecs. (b) and (c) re quarterly financial reports and other reports; P.A. 88-326 added a new Subsec. (d) imposing a late filing fee of one hundred dollars per day; P.A. 90-243 added references to health care centers re filing of financial statements with the commissioner and added Subsec. (e) re certification of the disclosure of reserve liabilities; Sec. 38-24 transferred to Sec. 38a-53 in 1991; P.A. 92-112 amended Subsec. (a) to require that reports be filed in accordance with standards set by the National Association of Insurance Commissioners; P.A. 05-29 made technical changes in Subsec. (c); P.A. 06-117 amended Subsec. (e) to require commissioner to maintain, as confidential, all workpapers of actuary or loss reserve specialist and actuarial report and opinion summary provided in support of certification and to provide that such documents shall not be subject to subpoena or disclosure under the Freedom of Information Act.

      Annotations to former section 38-24:

      Unpaid stock subscription notes form part of the assets of a company. 65 C. 471. Cited. 113 C. 18.

      Sec. 38a-53a. Annual statement convention blank filing with the National Association of Insurance Commissioners. Financial statements and other information filing with the National Association of Insurance Commissioners. Each domestic, foreign and alien insurer authorized to transact insurance in this state shall annually on or before March first of each year, file electronically with the National Association of Insurance Commissioners a copy of its annual statement convention blank, along with such additional filings as prescribed by the commissioner for the preceding year. The information filed with the National Association of Insurance Commissioners shall include additional filings as prescribed by the commissioner and shall include the signed jurat page and the actuarial certification. Any amendments and addendums to the annual statement or other financial statements subsequently filed with the commissioner shall also be filed with the National Association of Insurance Commissioners. Foreign insurers that are domiciled in a state that has a law substantially similar to the provisions of this section shall be deemed in compliance with this section. Upon written application of any insurer domiciled in this state that transacts no insurance business in another state, the commissioner may grant an exemption from compliance with this section if compliance would constitute a financial or organizational hardship upon the insurer. All financial analysis ratios and examination synopses concerning insurance companies that are submitted to the Insurance Department by the National Association of Insurance Commissioners are confidential and may not be disclosed or otherwise made public by the department.

      (P.A. 92-112, S. 5; P.A. 95-168, S. 8; P.A. 01-139, S. 2; P.A. 03-199, S. 2.)

      History: P.A. 95-168 required that all financial statements filed subsequently to annual statement be filed with the National Association of Insurance Commissioners and required insurers to file, in diskette form, any information prepared in accordance with guidelines required by the insurance commissioner with the National Association of Insurance Commissioners; P.A. 01-139 required electronic filings and substituted "that" for "which"; P.A. 03-199 substituted "include additional filings as prescribed" for "be in the same format and scope as that required" re filings, deleted requirement that insurer also file a copy in electronic form, and deleted reference to the National Association of Insurance Commissioners' Insurance Regulatory Information System.

      Sec. 38a-54. Audited reports. (a) On or after December 31, 1990, each insurance company, health care center or fraternal benefit society doing business in this state shall have an annual audit conducted by an independent certified public accountant and shall annually file an audited financial report with the commissioner on or before the first day of June for the year ending the preceding December thirty-first.

      (b) The commissioner shall adopt regulations in accordance with the provisions of chapter 54 to: (1) Specify the scope of the examination required by this section; (2) specify the contents and scope of the annual audited financial report, provided such report shall include all incurred losses; (3) provide for the review of the controls; (4) provide for the availability to the commissioner of the workpapers of the certified public accountant; and (5) provide exemptions from compliance with the requirements of this section.

      (P.A. 90-243, S. 168; P.A. 91-276, S. 3; P.A. 98-98, S. 4.)

      History: P.A. 91-276 added a provision requiring the inclusion of all incurred losses in the annual audited financial report; P.A. 98-98 amended Subsec. (a) to substitute "first day of June" for "thirtieth day of June" re the deadline for filing financial reports, and substituted "the preceding December thirty-first" for "the thirty-first day of December next preceding".

      Sec. 38a-55. Hypothecation of assets. (a) No domestic insurer, health care center or fraternal benefit society may pledge, hypothecate or otherwise encumber its assets to secure the debt, guaranty or obligations of any other person without the prior written consent of the Insurance Commissioner. This prohibition shall not apply to obligations of the insurer under surety bonds or insurance contracts issued in the regular course of business.

      (b) (1) No domestic insurer, health care center or fraternal benefit society may, without the prior written consent of the Insurance Commissioner, pledge, hypothecate or otherwise encumber its assets to secure its own debt, guaranty or obligations if the amount of the assets pledged, hypothecated or otherwise encumbered, when the pledge, hypothecation or encumbrance is made, together with the aggregate amount of assets pledged, hypothecated or encumbered to secure all such debts, guarantees and obligations, exceeds the lesser of five per cent of admitted assets or twenty-five per cent of surplus as regards policyholders as reported in its last financial statement filed with the commissioner pursuant to section 38a-53 or 38a-614.

      (2) Nothing in this subsection shall be construed as prohibiting a domestic insurer, health care center or fraternal benefit society from pledging, hypothecating or encumbering any assets in connection with: (A) Transactions in the ordinary course of business, including, but not limited to: (i) Complying with any statutory requirement, (ii) reinsurance transactions otherwise in compliance with applicable statutory requirements, or (iii) investments or investment practices otherwise in compliance with applicable statutory requirements, including, but not limited to, securities lending, repurchase transactions, reverse repurchase transactions, swap, futures and options transactions, and any other transactions which are not prohibited by the investment law and regulations of this state; (B) transactions subject to the provisions of sections 38a-129 to 38a-140, inclusive; or (C) any other transaction deemed excluded by the Insurance Commissioner. Assets pledged, hypothecated or encumbered pursuant to subparagraph (A), (B) or (C) of this subdivision shall not be charged against the limits set forth in subdivision (1) of this subsection.

      (3) In the case of a domestic life insurance company, the provisions of this subsection shall apply to a separate account only to the extent that reserves for guarantees with respect to (A) benefits guaranteed as to dollar amount and duration or (B) funds guaranteed as to principal amount or stated rate of interest are held in a separate account in accordance with subdivision (iii) of subsection (a) of section 38a-433.

      (P.A. 90-243, S. 167; P.A. 98-60; P.A. 05-29, S. 4.)

      History: P.A. 98-60 designated existing language as Subsec. (a) and substituted "domestic" for "licensed" re insurers and "shall" for "does" re prohibition, and added new Subsec. (b) re assets of domestic companies; P.A. 05-29 made a technical change in Subsec. (b)(2)(C).

      Sec. 38a-56. (Formerly Sec. 38-19). False returns to commissioner. Any person who wilfully makes any false report to the commissioner or testifies or affirms falsely to any material fact in any matter wherein an oath or affirmation is required or authorized or makes any false entry or memorandum upon any book, paper, report or statement of any insurance company, with intent to deceive the commissioner or any agent appointed to examine the affairs of any such company or to deceive the stockholders or policyholders or any officer of any such insurance company or to injure or defraud any such company, and any person who, with like intent, aids or abets another in any violation of any provision of this section, shall be imprisoned not more than five years.

      (1949 Rev., S. 8708.)

      History: Sec. 38-19 transferred to Sec. 38a-56 in 1991.

      Sec. 38a-57. (Formerly Sec. 38-26a). Retention of records and assets in state. Each domestic insurance company shall maintain, within the state, such records as the commissioner may require and such portion of its assets as the commissioner may deem necessary for the purpose of adequately protecting the insured.

      (1967, P.A. 37.)

      History: Sec. 38-26a transferred to Sec. 38a-57 in 1991.

      Sec. 38a-58. (Formerly Sec. 38-40). Change of location of domestic insurance company. Any domestic insurance company may change its location from one town to another within this state, notwithstanding any inconsistent provision in its charter.

      (1949 Rev., S. 6096; 1953, S. 2792d.)

      History: Sec. 38-40 transferred to Sec. 38a-58 in 1991.

      Sec. 38a-58a. Transfer of domicile: By foreign insurance company to this state; by domestic insurance company to another state. Procedures. (a) Any insurer which is organized under the laws of any other state and is admitted to do business in this state for the purpose of writing insurance may become a domestic insurer by complying with all of the requirements of law relative to the organization and licensing of a domestic insurer of the same type and by designating its principal place of business at a location in this state. The domestic insurer shall be entitled to like certificates and licenses to transact business in this state and shall be subject to the authority and jurisdiction of this state. The articles of incorporation of the domestic insurer may be amended to provide that the corporation is a continuation of the corporate existence of the original foreign corporation through adoption of this state as its corporate domicile and that the original date of incorporation in its original domiciliary state is the date of incorporation of the domestic insurer.

      (b) Any domestic insurer may, upon the approval of the Insurance Commissioner, transfer its domicile to any other state in which it is admitted to transact the business of insurance, and upon such a transfer shall cease to be a domestic insurer, and shall be admitted to this state, if qualified, as a foreign insurer. The Insurance Commissioner may approve the proposed transfer if he determines that the transfer is in the interest of the policyholders of this state or in the public interest.

      (c) The certificate of authority, agents' appointments and licenses, rates and other criteria within the discretion of the Insurance Commissioner which are in existence at the time any insurer licensed to transact the business of insurance in this state transfers its corporate domicile to this state or any other state by merger, consolidation or any other lawful method shall continue in full force and effect upon the transfer if the insurer remains duly qualified to transact the business of insurance in this state. All outstanding policies of any transferring insurer shall be given full force and effect and need not be endorsed as to the new name of the company or its new location unless ordered by the Insurance Commissioner. Each transferring insurer shall file new policy forms with the Insurance Commissioner on or before the effective date of the transfer, but may use existing policy forms with appropriate endorsements if allowed by, and under such conditions as approved by, the Insurance Commissioner. Each transferring insurer shall notify the Insurance Commissioner of the details of the proposed transfer and shall file promptly any resulting amendments to corporate documents filed or required to be filed with the Insurance Department. Each such insurer, upon the transfer of its domicile to this state, shall file with the Secretary of the State a true copy of its original articles of incorporation, duly certified by the proper official of the state and a certificate in such form as prescribed by the Secretary of the State and approved by the Insurance Commissioner.

      (P.A. 91-232, S. 1, 2.)

      Sec. 38a-59. (Formerly Sec. 38-42a). Change of name of domestic insurance company or health care center with capital stock. An amendment to the certificate of incorporation of a domestic insurance company or health care center with capital stock that changes the name of the company or health care center shall not become effective until approved by the Insurance Commissioner after reasonable notice and a public hearing, if such notice and hearing are deemed by the commissioner to be in the public interest. A certificate of amendment conforming to the requirements of section 33-800 shall be filed in the office of the Insurance Commissioner before any amendment to the certificate of incorporation of a domestic insurance company or health care center with capital stock becomes effective.

      (February, 1965, P.A. 71; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 276, 348; P.A. 96-271, S. 210, 254; P.A. 03-199, S. 3.)

      History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; Sec. 38-42a transferred to Sec. 38a-59 in 1991; P.A. 96-271 replaced reference to Sec. 33-360 with Sec. 33-800, effective January 1, 1997; P.A. 03-199 added references to health care center and made technical changes.

      Sec. 38a-60. (Formerly Sec. 38-27a). Continuity of management during national emergencies. (a) The board of directors of a domestic insurance company may at any time, and from time to time, by resolution or amendment to the company's bylaws, provide for an emergency management plan as they consider necessary or appropriate, subject to repeal or change by action of those having power to adopt bylaws for the company.

      (b) If such emergency plan has not been adopted by any such corporation upon the occurrence of a national emergency caused by an attack on the United States or by a nuclear, atomic or other disaster, the following provisions shall automatically become effective and shall remain effective throughout the emergency or until superseded by such emergency plan: (1) Two directors shall constitute a quorum for the transaction of business at all meetings of the board. (2) Notice of any meeting of the board need be given only to such of the directors as it may be practical to reach at the time and by such means as may be practical at the time, including publication or radio broadcast. (3) Any vacancy in the board may be filled by a majority of the remaining directors, even if less than a quorum, or by the sole remaining director. (4) If there are no surviving directors able and willing to serve, or if no surviving directors can be located, all directorships shall be presumed to be vacant. Such vacancies in the board of directors, not to exceed three, shall be filled by the most senior surviving officers of the company able and willing to serve; seniority to be determined by rank and, within rank, first, by year of appointment to that rank and, second, by birth date. If thereafter a surviving director able and willing to serve is located, he shall automatically resume his position on the board of directors and the most junior officer serving as a director under the authority of this subdivision shall thereupon be considered to have resigned. In addition, if there are no surviving directors, one vacancy may be filled by the Insurance Commissioner or other person authorized to exercise his powers.

      (c) If such emergency plan is adopted, it may provide that it will become operative automatically during any such national emergency and, notwithstanding any contrary provision of the law or the charter or bylaws of the company, may contain any provisions reasonably necessary for the operation of the company during any such national emergency. Such provisions need not be consistent with the comparable provisions stated in subsection (b) of this section. Such provisions may provide, among other things, for (1) the designation of persons who may call a meeting of the board of directors; (2) the quorum and notice requirements for, and location of, any such meeting; (3) the filling of vacancies on the board of directors; (4) a succession list of persons by name or title who will succeed to positions of higher rank; (5) the establishment of the principal office of the company at a new location in or out of the state.

      (1963, P.A. 451, S. 1, 2, 3; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 272, 348; P.A. 05-29, S. 5.)

      History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; Sec. 38-27a transferred to Sec. 38a-60 in 1991; P.A. 05-29 made a technical change in Subsec. (c).

      Sec. 38a-61. (Formerly Sec. 38-134). Limitation of use of power of attorney. No power of attorney to vote at any meeting of any licensed insurance company shall be used at more than one meeting of such corporation. No power of attorney may be voted later than thirty-six months from the time it was granted.

      (1949 Rev., S. 6154; P.A. 77-65.)

      History: P.A. 77-65 made provisions applicable to "any licensed" insurance company rather than to "a life" insurance company and prohibited voting power of attorney later than thirty-six months from time it was granted; Sec. 38-134 transferred to Sec. 38a-61 in 1991.

      Sec. 38a-62. (Formerly Sec. 38-27b). Indemnification of directors, officers and employees of mutual insurance companies. (a) Except as otherwise provided in this section, a domestic mutual insurance company shall indemnify any person who was or is a party, or was threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the mutual insurance company, by reason of the fact that he, or the person whose legal representative he is, (1) is or was a director, officer or employee of the mutual insurance company, or (2) is or was serving at the request of the mutual insurance company (A) as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise or (B) as an agent of such other corporation, partnership, joint venture, trust, or other enterprise other than an employee benefit plan or trust, or (3) is or was a director, officer or employee of the mutual insurance company serving at the request of the mutual insurance company as a fiduciary of an employee benefit plan or trust maintained for the benefit of employees of the mutual insurance company or employees of any such other corporation, partnership, joint venture, trust, or other enterprise, against judgments, fines, penalties, amounts paid in settlement and expenses, including attorneys' fees, actually and reasonably incurred by him and the person whose legal representative he is, in connection with such action, suit or proceeding, or any appeal therein. The mutual insurance company shall not so indemnify any such person unless it shall be concluded as provided in subsection (c) of this section that such person, and the person whose legal representative he is, acted in good faith and in a manner he reasonably believed to be in the best interests of the mutual insurance company or, in the case of a person serving as a fiduciary of an employee benefit plan or trust, either in the best interests of the mutual insurance company or in the best interests of the participants and beneficiaries of such employee benefit plan or trust and consistent with the provisions of such employee benefit plan or trust and, with respect to any criminal action or proceeding, that he had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith or in a manner which he did not reasonably believe to be in the best interests of the mutual insurance company or of the participants and beneficiaries of such employee benefit plan or trust and consistent with the provisions of such employee benefit plan or trust, or, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful.

      (b) Except as otherwise provided in this section, a domestic mutual insurance company shall indemnify any person who was or is a party, or was threatened to be made a party, to any action, suit or proceeding, by or in the right of the mutual insurance company to procure a judgment in its favor by reason of the fact that he, or the person whose legal representative he is, (1) is or was a director, officer or employee of the mutual insurance company, or (2) is or was serving at the request of the mutual insurance company (A) as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise or (B) as an agent of such other corporation, partnership, joint venture, trust, or other enterprise other than an employee benefit plan or trust, or (3) is or was a director, officer, or employee of the mutual insurance company serving as a fiduciary of an employee benefit plan or trust maintained for the benefit of employees of the mutual insurance company or employees of any such other corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with such action, suit or proceeding, or any appeal therein, in relation to matters as to which such person, or the person whose legal representative he is, is finally adjudged not to have breached his duty to the mutual insurance company, or where the court, on application as provided in subsection (d) of this section, shall have determined that in view of all the circumstances such person is fairly and reasonably entitled to be indemnified, and then for such amount as the court shall determine. The mutual insurance company shall not so indemnify any such person for amounts paid to the mutual insurance company, to a plaintiff or to counsel for a plaintiff in settling or otherwise disposing of a threatened action or a pending action, with or without court approval; or for expenses incurred in defending a threatened action or a pending action which is settled or otherwise disposed of without court approval.

      (c) The conclusion provided for in subsection (a) of this section may be reached by any one of the following: (1) The board of directors of the mutual insurance company by a consent in writing signed by a majority of those directors who were not parties to such action, suit or proceeding; (2) independent legal counsel selected by a consent in writing signed by a majority of those directors who were not parties to such action, suit or proceeding; or (3) the members of the mutual insurance company entitled to vote at annual meetings, by the affirmative vote of at least a majority of such members who were not parties to such action, suit or proceeding, represented at an annual or a special meeting of voting members, duly called with notice of such purpose stated. Such person shall also be entitled to apply to a court for such conclusion, upon application as provided in subsection (d), even though the conclusion reached by any of the foregoing shall have been adverse to him or to the person whose legal representative he is.

      (d) An application for indemnification or for a conclusion as provided in this section shall be made to the court in which the action is pending or, in the absence thereof, to the superior court for the judicial district where the principal office of the domestic mutual insurance company is located. The application shall be made in such manner and form as may be required by the applicable rules of the court or, in the absence thereof, by direction of the court. The court may also direct that notice be given in such manner as it may require at the expense of the mutual insurance company to the members of the mutual insurance company and to such other persons as the court may designate.

      (e) Expenses which may be indemnifiable under this section incurred in defending an action, suit or proceeding may be paid by the domestic mutual insurance company in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors upon agreement by or on behalf of the director, officer, employee or agent, or his legal representative, to repay such amount if he is later found not entitled to be indemnified by the mutual insurance company as authorized in this section.

      (f) A domestic mutual insurance company shall not indemnify any director, officer, employee or agent or any director, officer, or employee serving at the request of the corporation as a fiduciary of an employee benefit plan or trust, against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, to an extent greater than that authorized by this section, but the mutual insurance company may procure insurance providing greater indemnification and may share the premium cost with any director, officer, employee or agent on such basis as may be agreed upon.

      (1971, P.A. 293; P.A. 76-299; P.A. 78-204, S. 16, 17; 78-280, S. 2, 127.)

      History: P.A. 76-299 made provisions applicable to agents of other corporations, partnerships, trusts etc. other than employee benefit plans or trusts and to directors, officers and employees of mutual insurance companies serving as fiduciaries of employee benefit plans or trusts; P.A. 78-204 added "penalties" in Subsec. (a)(3) and, with P.A. 78-280, substituted "judicial district" for "county" in Subsec. (d); Sec. 38-27b transferred to Sec. 38a-62 in 1991.

      Sec. 38a-63. Limitation of liability of director of mutual insurance company. (a) The personal liability of a director of a mutual insurance company to the company or its members for monetary damages for breach of duty as a director may be limited by the board to an amount that is not less than the compensation received by the director for serving the company during the year of the violation, provided such breach did not (1) involve a knowing and culpable violation of law by the director, (2) enable the director or an associate, as defined solely for the purposes of this section in subdivision (3) of section 33-843, to receive an improper personal economic gain, (3) show a lack of good faith and a conscious disregard for the duty of the director to the company under circumstances in which the director was aware that his conduct or omission created an unjustifiable risk of serious injury to the company, or (4) constitute a sustained and unexcused pattern of inattention that amounted to an abdication of the director's duty to the company, provided further no director who is a defendant in a lawsuit shall participate in the discussion or vote on such limitation of liability if it will affect his potential liability in such lawsuit. No such limitation shall limit or preclude the liability of a director for any act or omission occurring prior to the effective date of such provision.

      (b) Notwithstanding any inconsistent provision in the charter of a domestic mutual insurance company or in the general statutes, the provisions of this section shall become effective on the date it is approved by a majority of the members present and voting, in the manner customary for such company's meetings, in person or by proxy at an annual or other meeting of such domestic mutual insurance company.

      (P.A. 89-322, S. 3; P.A. 96-271, S. 211, 254.)

      History: P.A. 96-271 amended Subsec. (a) to replace reference to Sec. 33-374d with Sec. 33-843, effective January 1, 1997.

      Sec. 38a-64. (Formerly Sec. 38-41). Donations by domestic mutual companies. Each domestic mutual insurance company, in addition to all other powers specially granted to it by law, shall have power, subject to such provisions and limitations as may be contained in its charter, certificate of incorporation or bylaws, or in any statute affecting it, to make donations for the public welfare or for charitable or educational purposes.

      (1953, S. 2812d.)

      History: Sec. 38-41 transferred to Sec. 38a-64 in 1991.

      Sec. 38a-65. (Formerly Sec. 38-48). Disposition of unclaimed dividends of insolvent company. Section 38a-65 is repealed, effective October 1, 1998.

      (1949 Rev., S. 6051; 1961, P.A. 540, S. 25; P.A. 98-214, S. 32.)

      Sec. 38a-66. Reinsurance of insurance business with other insurers by agreement of bulk reinsurance. (a) Any insurance company authorized to do business in this state may, with respect to subjects of insurance resident, located or to be performed in this state, reinsure all or substantially all of its insurance business in force, or all or substantially all of a major class thereof, with another insurer by agreement of bulk reinsurance after compliance with this section. Each such agreement shall be filed with the Insurance Commissioner and shall become effective upon the expiration of twenty days after the date of filing unless disapproved by the commissioner.

      (b) The Insurance Commissioner shall disapprove such an agreement within twenty days after filing if it is found:

      (1) That the agreement is unfair and inequitable to any insurer or to any policyholder involved;

      (2) That the reinsurance, if effectuated, would reduce the provision of service to policyholders of any insurer involved;

      (3) That the agreement does not embody adequate provisions by which the reinsuring insurer becomes liable to the original insureds for any loss or damage occurring under the policies reinsured in accordance with the original terms of such policies or does not require the reinsuring insurer to furnish each such insured with a certificate evidencing such assumption of liability;

      (4) That the assuming reinsurer is not authorized to transact such insurance in this state;

      (5) That the assuming reinsurer will not appoint the commissioner or his successors as its irrevocable attorney for service of process, so long as any policy so reinsured or claim thereunder remains in force or outstanding;

      (6) That such reinsurance would materially tend to lessen competition in the insurance business in this state or elsewhere as to the kinds of insurance involved or would materially tend to create a monopoly as to such business; or

      (7) That the proposed bulk reinsurance is not free of other reasonable objections.

      (c) If the Insurance Commissioner disapproves the agreement, he shall notify in writing each insurer involved specifying his reasons for doing so.

      (P.A. 91-41.)

      Sec. 38a-67. Reporting requirement for cancellations and revisions of ceded reinsurance agreements. (a) Every insurer domiciled in this state shall file a report with the commissioner disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements unless such material acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements have been submitted to the commissioner for review, approval or information purposes pursuant to other provisions of the insurance code, laws, regulations or other requirements.

      (b) The report required in subsection (a) of this section is due within fifteen days after the end of the calendar month in which any of the foregoing transactions occur.

      (c) One complete copy of the report, including any exhibits or other attachments filed as part thereof, shall be filed with:

      (1) The insurance department of the insurer's state of domicile; and

      (2) The National Association of Insurance Commissioners.

      (d) All reports obtained by or disclosed to the commissioner pursuant to the provisions of this section and sections 38a-67a and 38a-67b shall be given confidential treatment, shall not be subject to subpoena and shall not be made public by the commissioner, the National Association of Insurance Commissioners or any other person, except to insurance regulatory officials of other states or countries so long as the commissioner determines that such officials agree to maintain the same level of confidentiality in their jurisdiction as is available in this state, without the prior written consent of the insurer to which it pertains unless the commissioner, after giving the insurer who would be affected thereby, notice and an 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 commissioner may publish all or any part thereof in such manner as he may deem appropriate.

      (P.A. 95-168, S. 5; P.A. 98-57, S. 2.)

      History: P.A. 98-57 amended Subsec. (d) to substitute "insurance regulatory officials of other states or countries" for "insurance departments of other states" and added condition re disclosure of information by commissioner that he determine that officials agree to maintain the same level of confidentiality as is available in this state.

      Sec. 38a-67a. Acquisitions and dispositions of assets, reporting requirement waived, when. Asset acquisitions and dispositions, defined. Information required to be disclosed. (a) No acquisitions or dispositions of assets need be reported pursuant to section 38a-67 if the acquisitions or dispositions are not material. For purposes of sections 38a-67 to 38a-67b, inclusive, a material acquisition, or the aggregate of any series of related acquisitions during any thirty-day period or disposition, or the aggregate of any series of related dispositions during any thirty-day period, is one that is nonrecurring and not in the ordinary course of business and involves more than five per cent of the reporting insurer's total admitted assets as reported in its most recent statutory statement filed with the insurance department of the insurer's state of domicile.

      (b) (1) Asset acquisitions subject to sections 38a-67 to 38a-67b, inclusive, include every purchase, lease, exchange, merger, consolidation, succession or other acquisition other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for such purpose.

      (2) Asset dispositions subject to sections 38a-67 to 38a-67b, inclusive, include every sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment, whether for the benefit of creditors or otherwise, abandonment, destruction or other disposition.

      (c) (1) The following information shall be disclosed in any report of a material acquisition or disposition of assets:

      (A) Date of the transaction;

      (B) Manner of acquisition or disposition;

      (C) Description of the assets involved;

      (D) Nature and amount of the consideration given or received;

      (E) Purpose of, or reason for, the transaction;

      (F) Manner by which the amount of consideration was determined;

      (G) Gain or loss recognized or realized as a result of the transaction; and

      (H) Name of the person or persons from whom the assets were acquired or to whom they were disposed.

      (2) Insurers are required to report material acquisitions and dispositions on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or one hundred per cent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and such insurer has ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars in total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five per cent of the insurer's capital and surplus.

      (P.A. 95-168, S. 6.)

      Sec. 38a-67b. Nonrenewals, cancellations or revisions, reporting requirement waived, when. Information required to be disclosed. (a)(1) Nonrenewals, cancellations or revisions of ceded reinsurance agreements need not be reported pursuant to section 38a-67 if the nonrenewals, cancellations or revisions are not material. For purposes of sections 38a-67 to 38a-67b, inclusive, a material nonrenewal, cancellation or revision is one that affects: (A) With respect to property and casualty business, including accident and health business written by a property and casualty insurer: (i) More than fifty per cent of an insurer's ceded written premium; or (ii) more than fifty per cent of the insurer's total ceded indemnity and loss adjustment reserves; (B) with respect to life, annuity and accident and health business: More than fifty per cent of the total reserve credit taken for business ceded, on an annualized basis, as indicated in the insurer's most recent annual statement; (C) with respect either to property and casualty or life, annuity and accident and health business, either of the following events shall constitute a material revision which shall be reported: (i) An authorized reinsurer representing more than ten per cent of a total cession is replaced by one or more unauthorized reinsurers; or (ii) previously established collateral requirements have been reduced or waived with respect to one or more unauthorized reinsurers representing collectively more than ten per cent of a total cession.

      (2) However, no filing shall be required if: (A) With respect to property and casualty business, including accident and health business written by a property and casualty insurer: The insurer's total ceded written premium represents, on an annualized basis, less than ten per cent of its total written premium for direct and assumed business; or (B) with respect to life, annuity and accident and health business: The total reserve credit taken for business ceded represents, on an annualized basis, less than ten per cent of the statutory reserve requirement prior to any cession.

      (b) (1) The following information shall be disclosed in any report of a material nonrenewal, cancellation or revision of ceded reinsurance agreements:

      (A) Effective date of the nonrenewal, cancellation or revision;

      (B) The description of the transaction with an identification of the initiator thereof;

      (C) Purpose of, or reason for, the transaction; and

      (D) If applicable, the identity of the replacement reinsurers.

      (2) Insurers shall report all material nonrenewals, cancellations or revisions of ceded reinsurance agreements on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or one hundred per cent reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer has ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five per cent of the insurer's capital and surplus.

      (P.A. 95-168, S. 7.)

      Sec. 38a-68. Reserved for future use.

PART II*
FINANCIAL REQUIREMENTS

      Sec. 38a-69. Scope of provisions. Except as otherwise provided in title 38a, sections 38a-11, 38a-50, 38a-52, 38a-70 to 38a-76, inclusive, 38a-81 to 38a-83, inclusive, and 38a-153, and the regulations adopted to implement said sections apply to all insurers, including reinsurers, licensed to do business in this state.

      (P.A. 90-243, S. 43; P.A. 98-214, S. 29.)

      History: (Revisor's note: In 1995 a reference to Sec. 38a-79 was deleted editorially by the Revisors, that section having been repealed by P.A. 94-39); P.A. 98-214 deleted reference to Sec. 38a-65.

      Sec. 38a-69a. Confidentiality of financial examination workpapers and operating and financial condition reports. Confidentiality of certain supplemental compensation exhibits and stockholder information supplements. Exceptions. (a) All financial analyses, financial examination workpapers, operating and financial condition reports concerning any insurance company, fraternal benefit society or health care center prepared by or on behalf of or for the use of the Insurance Commissioner or the Insurance Department examiner, shall be confidential unless such documents are otherwise a matter of public record, or the commissioner, in the commissioner's opinion deems it in the public interest to disclose or otherwise make available for public inspection the information contained in such documents.

      (b) Any supplemental compensation exhibit or stockholder information supplement in an annual report filed with the commissioner and prepared in accordance with the National Association of Insurance Commissioners Annual Statement Instructions shall be confidential and shall not be available for public inspection if submitted by a nonprofit insurance company that has fewer than one hundred fifty employees. The provisions of this subsection shall not apply to information in such exhibit or supplement concerning such company's three most highly compensated officers.

      (P.A. 92-95; P.A. 03-104, S. 1.)

      History: P.A. 03-104 designated existing provisions as Subsec. (a), made a technical change therein and added Subsec. (b) re supplemental compensation exhibits or stockholder information supplements.

      Sec. 38a-70. Accounting standards. When adopting accounting rules and minimum valuation standards, the commissioner shall follow those accounting and valuation procedures and practices published in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions, including the preamble, all appendices and actuarial guidelines, and the National Association of Insurance Commissioners Annual Statement Instructions Manual, subject to any deviations the commissioner may prescribe.

      (P.A. 90-243, S. 44; P.A. 92-112, S. 4; P.A. 00-30, S. 1, 14; P.A. 03-30, S. 1.)

      History: P.A. 92-112 amended section to require that accounting rules be filed in accordance with standards set by the National Association of Insurance Commissioners; P.A. 00-30 substituted "published in" for "prescribed by", inserted "version effective January 1, 2001, and subsequent revisions" re the practices and procedures manual, and made technical changes for purposes of gender neutrality, effective January 1, 2001; P.A. 03-30 added reference to minimum valuation standards and valuation procedures and referenced the procedure manual preamble, all appendices and actuarial guidelines.

      Sec. 38a-71. Minimum asset requirements. Minimum capital and minimum surplus requirements. (a) As used in this section:

      (1) "Qualified assets" means:

      (A) Investments, securities, properties and loans permitted or authorized by law, and the income due thereon;

      (B) The net amount of uncollected and deferred premiums for a life insurer which carries the full annual mean tabular reserve liability;

      (C) Premiums in the course of collection, other than for life insurance, not more than ninety days past due, with the ninety-day limitation being inapplicable to premiums payable directly or indirectly by the United States government or any of its instrumentalities;

      (D) Installment premiums, other than life insurance premiums, in accordance with the regulations adopted by the commissioner in accordance with the provisions of chapter 54, or in the absence of these regulations then in accordance with practices formulated or adopted by the National Association of Insurance Commissioners;

      (E) Notes and similar written obligations which are not past due, taken for premiums other than life insurance premiums, on policies permitted to be issued on that basis, to the extent of the unearned premium reserves carried on the policies;

      (F) Amounts recoverable or receivable from reinsurers under a reinsurance contract;

      (G) Tangible components of health care delivery systems for health care centers governed by sections 38a-175 to 38a-192, inclusive, with the cost of these assets having a finite useful life being depreciated in full over periods provided by regulations adopted by the commissioner in accordance with the provisions of chapter 54;

      (H) Electronic data processing equipment and operating software, the cost of which is depreciated in full over a period not to exceed three years;

      (I) Tangible components of the service delivery systems of legal service corporations governed by sections 38a-230 to 38a-245, inclusive, with the cost of these assets having a finite useful life being depreciated in full over periods provided by regulations adopted by the commissioner in accordance with the provisions of chapter 54;

      (J) Cash or currency; and

      (K) Other assets authorized by regulations adopted by the commissioner in accordance with the provisions of chapter 54.

      (2) "Minimum capital and minimum surplus" means the capital and surplus that must constantly be maintained by a stock insurance company as required by section 38a-72.

      (3) "Surplus" means total statutory surplus less capital stock, adjusted for the par value of any treasury stock, calculated in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions. Except for assessable mutuals, the minimum surplus of a mutual insurer is essentially the same as the minimum required capital requirement which applies to stock-insurers.

      (4) "Capital" means the capital stock component of statutory surplus, as defined in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

      (b) Each insurer authorized to do business in this state shall maintain qualified assets in the amount equal to the total of the insurer's (1) liabilities, and (2) minimum capital and minimum surplus required under section 38a-72.

      (P.A. 90-243, S. 45; P.A. 93-239, S. 2; P.A. 00-30, S. 2, 14.)

      History: P.A. 93-239 deleted former Subsecs. (c) and (d) re the commissioner's determination of the sufficiency of surplus and the evidence used to evaluate such sufficiency, respectively; P.A. 00-30 amended definition of "qualified assets" in Subsec. (a) to revise the calculation of premium in Subpara. (a)(1)(C) to delete reduction for commissions payable on premiums, and to amend Subpara. (a)(1)(H) to substitute "electronic data processing equipment and operating software" for "electronic and mechanical machines constituting a data processing and accounting system", amended Subdiv. (a)(2) to substitute "minimum capital and minimum surplus" for "minimum capital", amended definition of "surplus" in Subdiv. (a)(3), added Subdiv. (a)(4) to define "capital", and amended Subsec. (b) to substitute "minimum capital and minimum surplus" for "minimum capital or minimum surplus", effective January 1, 2001.

      Sec. 38a-72. (Formerly Sec. 38-93). Financial requirements to license an insurance company. (a) No property or casualty insurance company and no life insurance company shall be licensed initially to do business in this state unless the company complies with the following minimum capital and minimum surplus requirements to write these specified lines of insurance:

      Sec. 38a-72a. Regulations. The Insurance Commissioner shall adopt regulations, in accordance with chapter 54, to establish standards that will govern the reduction of liabilities or establishment of assets in the financial statements of life and accident and health insurers and property and casualty insurers with respect to their accident and health insurance business filed with him for reinsurance ceded to another insurer.

      (P.A. 92-112, S. 7, 35; P.A. 93-57, S. 2.)

      History: P.A. 93-57 amended the section to include "accident and health" insurers and "property and casualty insurers with respect to accident and health insurance business".

      Sec. 38a-73. (Formerly Sec. 38-110). Limitation of risks. No stock insurance company doing business in this state shall expose itself to loss on any one risk to an amount exceeding ten per cent of its paid-up capital and surplus; but, in determining the amount of such risk, no portion thereof which has been reinsured in any insurance company authorized to do business in this state shall be included. No mutual insurance company doing business in this state shall expose itself to loss on any one risk to an amount exceeding ten per cent of its net surplus which limit on any one risk shall, in no case, exceed the amount authorized by the charter, bylaws or board of directors of the company; but, in determining the amount of such risk, no portion thereof which has been reinsured in any insurance company authorized to do business in this state shall be included.

      (1949 Rev., S. 6115; P.A. 90-243, S. 52; P.A. 93-239, S. 18.)

      History: P.A. 90-243 deleted the references to "fire" insurance companies; Sec. 38-110 transferred to Sec. 38a-73 in 1991; P.A. 93-239 deleted references limiting applicability to risks "in this state", and eliminated provision including two and one-half times the amount of the total cash premiums or premium deposits in determining a limitation of risks.

      Sec. 38a-74. (Formerly Sec. 38-94). Estimation of trusteed surplus. The trusteed surplus of each alien insurance company transacting or desiring to transact business in this state shall, for all the purposes of the insurance laws of this state, be the aggregate value of its money or securities deposited as provided in section 38a-72, and all sums loaned on real estate security in any state in the United States in conformity with the laws of such state providing for the investment of the assets of insurance companies therein, and all other assets in the United States in which similar domestic insurance companies may invest; provided such real estate securities and assets shall be held in the United States by trustees who are citizens of the United States, approved by the commissioner, for the benefit of all the policyholders and creditors of such company in the United States, after making the same deduction from such aggregate value for losses and liabilities in the United States, and for premiums upon risks therein not expired, as is authorized or required by the laws of this state, or by the regulations of the commissioner, with respect to similar domestic insurance companies.

      (1949 Rev., S. 6100; 1951, S. 2825d; P.A. 90-243, S. 48.)

      History: P.A. 90-243 substituted "alien" for "foreign" insurance company; Sec. 38-94 transferred to Sec. 38a-74 in 1991.

      Sec. 38a-75. (Formerly Sec. 38-95). Appointment of trustees. Examinations by commissioner. The trustees referred to in section 38a-74 shall be appointed by the directors of such company, and a certified copy of the vote by which they are appointed and of the deed of trust shall be filed in the office of the commissioner; and the commissioner may examine such trustees or the agents of such company, under oath, and its assets, books and accounts in the same manner as he may examine the officers, agents, assets, books and accounts of any company authorized to do an insurance business in this state.

      (1949 Rev., S. 6101; 1951, S. 2826d.)

      History: Sec. 38-95 transferred to Sec. 38a-75 in 1991.

      See notes to Secs. 38a-17, 38a-18.

      Sec. 38a-76. (Formerly Sec. 38-25). Reserves. (a) Each insurance company transacting business in this state shall, at all times, maintain reserves equal in amount to its liability under all its policy contracts, as the same are computed in accordance with the provisions of the statutes or with the requirements of the commissioner adopted upon reasonable consideration of ascertained experience for the purpose of adequately protecting the insured or securing the solvency of such company.

      (b) A domestic insurer transacting insurance only in a foreign country may calculate its reserves on insurance written in that foreign country in accordance with the reserve standards required or otherwise approved by such foreign country. For purposes of this section and section 38a-77, (1) a domestic insurer shall be deemed to "transact insurance" or "do business" in a state, district or territory of the United States if, within any state, district or territory of the United States, that insurer sells or issues any policy contract or otherwise makes any solicitation or inducement or engages in any negotiations with respect to the same; but (2) an insurer shall not be deemed to transact insurance or do business in a state, district or territory of the United States by reason of the fact that such insurer (A) holds a license to transact insurance in a state, district or territory of the United States; (B) has issued insurance policies or contracts to residents of a foreign country who subsequently reside in a state, district or territory of the United States; or (C) performs administrative or oversight functions in a state, district or territory of the United States. A domestic insurer transacting insurance only in a foreign country may invest its funds in a manner consistent with the laws, regulations and administrative practices of the foreign country in which it transacts insurance without limitations under sections 38a-102 to 38a-102h, inclusive.

      (1949 Rev., S. 6078; P.A. 98-79, S. 2.)

      History: Sec. 38-25 transferred to Sec. 38a-76 in 1991; P.A. 98-79 designated existing language as Subsec. (a) and added new Subsec. (b) re calculating reserves and investments for a domestic insurer transacting insurance only in a foreign country.

      Sec. 38a-77. (Formerly Sec. 38-130). Valuation of reserve. (a) The commissioner, upon receipt of the annual report of each domestic, foreign and alien life insurance company doing business in this state, as determined under subsection (b) of section 38a-76, shall make a valuation of all its outstanding policies, additions thereto, unpaid dividends and other obligations. The provisions of this section shall not apply to policies or certificates in which the amount of insurance or benefit is determined by an assessment collected from the surviving and associated holders of like policies or certificates, and not by a guaranty or pledge of insurance irrespective of the amount thus collected; provided any amount collected upon such assessments, until expended for the purpose for which it was collected, shall be charged as a liability against the company or association holding the same.

      (b) All valuations made by the commissioner or by his authority shall be made upon the net premium basis, according to the standard of valuations adopted by the company for the obligation to be valued, provided, in each case, the standard of valuation employed shall be stated in his annual report. Any company may adopt different standards for obligations of different dates or classes, but, if the total value determined by any such standard for the obligations for which it has been adopted is less than that determined by the legal minimum standard hereinafter prescribed, or, if the company adopts no standard, the legal minimum standard shall be used.

      (c) The commissioner may vary the standards of interest and mortality in the case of corporations from foreign countries and in particular cases of invalid lives and other extra hazards, and may value policies in groups, use approximate averages for fractions of a year and otherwise and calculate value by net premiums or otherwise, and accept the valuation of the department of insurance of any other state in place of the valuation herein required if the insurance department of such state accepts as sufficient and valid for all purposes the certificate of valuation of the Insurance Commissioner of this state.

      (d) Except as otherwise provided herein, the legal minimum standard for contracts issued before January 1, 1901, shall be the actuaries' or combined experience table of mortality with interest at four per cent per annum and, for contracts issued on or after said day, shall be the "American Experience Table of Mortality" with interest at three and one-half per cent per annum. Any company may adopt as a legal minimum standard the "American Men Ultimate Table of Mortality" with three and one-half per cent per annum interest for contracts issued on or after January 1, 1928, in lieu of said "American Experience Table of Mortality". Any company may adopt as a legal minimum standard the "Commissioners' 1941 Standard Ordinary Table of Mortality" with three and one-half per cent per annum interest for contracts issued on or after January 1, 1945, in lieu of either of the legal minimum standards hereinabove allowed. Any company may adopt as a legal minimum standard any mortality table approved or adopted by the National Association of Insurance Commissioners and certified by the commissioner as adequate with three and one-half per cent per annum interest for contracts issued on or after January 1, 1957; and four per cent per annum interest for contracts issued on or after January 1, 1974, in lieu of any of the legal minimum standards hereinabove allowed. The valuation of contracts on female risks issued on or after January 1, 1957, may be calculated, at the option of the company with approval of the commissioner, according to an age not more than three years younger than the actual age of the insured. All annuity contracts written after January 1, 1973, and prior to January 1, 1981, other than single premium immediate annuity contracts and annuities purchased under group annuity contracts may be valued based on the 1971 individual annuity mortality table with the rate of interest not to exceed four per cent per annum. Single premium immediate annuity contracts and annuities purchased under group annuity contracts after January 1, 1973, and prior to January 1, 1981, may be valued based on the 1971 individual annuity mortality table for individual contracts and the 1971 group annuity mortality table for annuities issued under group contracts with interest not to exceed six per cent per annum. All annuity contracts, both individual and group, issued prior to January 1, 1973, will continue to be reserved on the tables in use prior to January 1, 1973, unless changes in the reserve bases of these annuity contracts are approved by the Insurance Commissioner.

      (e) This section shall apply only to those contracts, policies, and annuities to which sections 38a-78, 38a-439 and 38a-440 do not apply.

      (1949 Rev., S. 6138; 1957, P.A. 133, S. 1; P.A. 73-181; P.A. 78-312, S. 5; P.A. 90-243, S. 54; P.A. 98-79, S. 3.)

      History: P.A. 73-181 imposed four per cent per annum interest for contracts issued on or after January 1, 1974, and added provisions re contracts after January 1, 1973, and before January 1, 1981; P.A. 78-312 added provision limiting application of provisions to "contracts, policies and annuities to which sections 38-130c to 38-130e, inclusive, do not apply"; P.A. 90-243 divided the section into Subsecs. and made technical corrections substituting "foreign" for "nonresident", "alien" for "foreign", "the commissioner" for "him" and "the" for "said"; Sec. 38-130 transferred to Sec. 38a-77 in 1991; P.A. 98-79 amended Subsec. (a) to add reference to Subsec. 38a-76(b) re doing business in this state.

      See Sec. 38a-78 re Standard Valuation Law.

      See Secs. 38a-438 to 38a-440, inclusive, re Standard Nonforfeiture Law.

      Annotation to former section 38-130:

      Term "reinsurance reserve" discussed. 71 C. 751.

      Sec. 38a-78. (Formerly Sec. 38-130e). Ascertainment of reserves for life insurance policies and annuity and pure endowment contracts. Annual reporting of reserves to commissioner. Issuance of opinion by qualified actuary. Memorandum in support of opinion. Additional reserves as determined by qualified actuary not deemed a higher standard of valuation. Minimum standards of valuation for health insurance plans. Regulations. (a) The commissioner shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this state except that in the case of an alien company, the valuation shall be limited to its United States business, and may certify the amount of any such reserves, specifying the mortality table or tables, rate or rates of interest, and methods, including net level premium method or other, used in the calculation of such reserves. In calculating such reserves, he may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves herein required of any foreign or alien company, he may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard herein provided and if the official of such state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the commissioner when such certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction.

      (b) (1) Every life insurance company doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this state. The commissioner by regulation shall define the specifics of this opinion and add any other items deemed to be necessary to its scope.

      (2) The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after December 31, 1991.

      (3) The opinion shall apply to all business in force including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by regulation.

      (4) The opinion shall be based on standards adopted from time to time by the actuarial standards board and on such additional standards as the commissioner may by regulation prescribe.

      (5) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

      (6) For the purposes of this section, "qualified actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in regulations the commissioner may prescribe.

      (7) Except in cases of fraud or wilful misconduct, the qualified actuary shall not be liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision or conduct with respect to the actuary's opinion.

      (8) Disciplinary action by the commissioner against the company or the qualified actuary shall be as defined in such regulations by the commissioner.

      (9) A memorandum, in form and substance acceptable to the commissioner as specified by regulation, shall be prepared to support each actuarial opinion.

      (10) If the insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified by regulation or the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the regulations or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare such supporting memorandum as is required by the commissioner.

      (11) Any memorandum in support of the opinion, and any other material provided by the company to the commissioner in connection therewith, shall be kept confidential by the commissioner and shall not be made public and shall not be subject to subpoena, other than for the purpose of defending an action seeking damages from any person by reason of any action required by this section or by regulations adopted under this section provided the memorandum or other material may otherwise be released by the commissioner (A) with the written consent of the company or (B) upon the request of the American Academy of Actuaries stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material. Once any portion of the confidential memorandum is referred to by the company in its marketing or is referred to before any governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum shall no longer be confidential.

      (12) Any regulation adopted by the commissioner under the provisions of this subsection shall be adopted in accordance with the provisions of chapter 54.

      (c) (1) Every life insurance company, except as exempted by or pursuant to regulation, shall annually include in the opinion required by subdivision (1) of subsection (b) of this section, an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including but not limited to the benefits under and expenses associated with the policies and contracts.

      (2) The commissioner may provide by regulation for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this section.

      (d) Except as otherwise provided in subsections (e), (f) and (l) of this section, the minimum standard for the valuation of all such policies and contracts issued prior to the effective date specified in accordance with the provisions of subsection (h) of section 38-130e of the general statutes, revision of 1958, revised to 1981, shall be that provided by the laws in effect immediately prior to such date, except that the minimum standard for the valuation of annuities and pure endowments purchased prior to January 1, 1973, under group annuity and pure endowment contracts shall be the 1971 Group Annuity Mortality Table, or any modification of this table approved by the commissioner, and an interest rate of five per cent per annum. Except as otherwise provided in subsections (e), (f) and (l) of this section, the minimum standard for the valuation of all such policies and contracts issued on and after such effective date shall be the commissioner's reserve valuation methods defined in subsections (g), (h) and (j) of this section, four and one-half per cent interest for all other such policies and contracts, and the following tables: (1) For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, the Commissioners' 1958 Standard Ordinary Mortality Table for such policies issued prior to the compliance date established by subdivision (11) of subsection (e) of section 38a-439, provided that for any category of such policies issued on female risks, all modified net premiums and present values referred to in this section may be calculated according to an age not more than six years younger than the actual age of the insured and for such policies issued on or after the compliance date established by subdivision (11) of subsection (e) of section 38a-439, (A) the Commissioners' 1980 Standard Ordinary Mortality Table, or (B) at the election of the company for any one or more specified plans of life insurance, the Commissioners' 1980 Standard Ordinary Mortality Table with ten-year select mortality factors, or (C) on or after January 1, 2005, until January 1, 2009, at the election of the company for any one or more specified plans of life insurance issued on or after January 1, 2004, on the basis of the Commissioners' 2001 Standard Ordinary Mortality Table, except that with respect to such plans issued before April 1, 2005, such mortality table shall be used solely for the basis of valuation and nonforfeiture and shall not be used to increase the previously agreed required premium, or (D) issued on or after January 1, 2009, the Commissioners' 2001 Standard Ordinary Mortality Table, or (E) any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such policies; (2) for all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies, the Commissioners' 1961 Standard Industrial Mortality Table or any industrial mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such policies; (3) for total and permanent disability benefits in or supplementary to ordinary policies or contracts, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such policies. These tables shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies; (4) for accidental death benefits in or supplementary to policies, the 1959 Accidental Death Benefits Table or any accidental death benefits table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such policies. These tables shall be combined with a mortality table permitted for calculating the reserves for life insurance policies; and (5) for group life insurance, life insurance issued on the substandard basis and other special benefits, such tables as may be approved by the commissioner.

      (e) Except as otherwise provided in subsection (f) of this section, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after the effective date as specified in accordance with the provisions of subsection (h) of section 38-130e of the general statutes, revision of 1958, revised to 1981, and for all annuities and pure endowments purchased on or after such effective date under group annuity and pure endowment contracts, shall be the commissioners reserve valuation methods defined in subsections (g) and (h) of this section and the following tables and interest rates: (1) For individual single premium immediate annuity contracts issued on or after such effective date, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the commissioner, and seven and one-half per cent interest; (2) for individual annuity and pure endowment contracts issued on or after such effective date, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such contract, or any modification of these tables approved by the commissioner, and five and one-half per cent interest for single premium deferred annuity and pure endowment contracts and four and one-half per cent interest for all other such annuity and pure endowment contracts; (3) for all annuities and pure endowments purchased on or after such effective date under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table or any group annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with the provisions of chapter 54 for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one-half per cent interest.

      (f) (1) The interest rates used in determining the minimum standard for the valuation of (A) all life insurance policies issued in a particular calendar year, on or after the compliance date established by subdivision (11) of subsection (e) of section 38a-439, (B) all individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982, (C) all annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts, and (D) the net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts shall be the calendar year statutory valuation interest rates as defined in this subsection;

      (2) The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearest one-quarter of one per cent:

      (A) For life insurance,

      (B) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,

For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy.

      (ii) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in (i) increased by:

      (iii) For annuities and guaranteed interest contracts valued on an issue guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than twelve months beyond the valuation date, the factors shown in (i) or derived in (ii) increased by:

      (iv) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

      Sec. 38a-79. (Formerly Sec. 38-26). Valuation of securities. Section 38a-79 is repealed.

      (1949 Rev., S. 6084; P.A. 90-243, S. 10; P.A. 94-39, S. 10.)

      Sec. 38a-79a. Short title: Standard Valuation Law. Sections 38a-77 and 38a-78 shall be known as the "Standard Valuation Law".

      (P.A. 91-175, S. 1.)

      Sec. 38a-80. (Formerly Sec. 38-164). Premium reserve for health, accident and liability business. Each domestic, foreign and alien insurance company which, in this state, makes insurance upon the health of individuals or which, in this state, insures persons against bodily injury or death by accident, or any person, firm or corporation against loss or damage on account of the bodily injury or death by accident of any person for which loss or damage such person, firm or corporation is responsible, shall maintain a premium reserve on all such policies in force, whether issued in this state or elsewhere, calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

      (1949 Rev., S. 6176; P.A. 90-243, S. 67; P.A. 00-30, S. 5, 14.)

      History: P.A. 90-243 substituted "foreign" for "nonresident" and "alien" for "foreign" insurance companies; Sec. 38-164 transferred to Sec. 38a-80 in 1991; P.A. 00-30 substituted "calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions" for "equal to the unearned portion of the gross premiums charged for covering the risks", effective January 1, 2001.

      See Secs. 38a-199 to 38a-209, inclusive, re hospital service corporations.

      See Secs. 38a-214 to 38a-225, inclusive, re medical service corporations.

      Sec. 38a-81. (Formerly Sec. 38-132). Sale of property taken for debts. In any case in which any domestic life insurance company has legally acquired, in payment of a debt previously contracted, any property, real or personal, situated in this state or elsewhere, such company may, upon the sale of such property, take in payment or part payment thereof the stocks or bonds of any company or corporation purchasing such property.

      (1949 Rev., S. 6152.)

      History: Sec. 38-132 transferred to Sec. 38a-81 in 1991.

      Sec. 38a-82. (Formerly Sec. 38-133). Improvement of real estate. Domestic life insurance companies may improve any real estate obtained in conformity to law whether such estate is situated in this or any other state.

      (1949 Rev., S. 6153.)

      History: Sec. 38-133 transferred to Sec. 38a-82 in 1991.

      Sec. 38a-83. (Formerly Sec. 38-43). Securities required by other states deposited with State Treasurer. (a) When any state requires insurance companies of other states to deposit with some officer of such other state securities in trust for policyholders of the companies as a prerequisite to their transacting business in that state, the Treasurer of this state may receive on deposit from any domestic insurance company the securities required by the laws of that other state. The legal title to the securities shall be transferred to the Treasurer in trust for the policyholders of the insurance company, and the Treasurer shall hold the securities in trust for the policyholders. The insurance company may collect and receive the interest and dividends on the securities and may withdraw the securities on depositing with the Treasurer other securities of like character and par value. The Treasurer shall issue a certificate, under seal, of any such deposit for each state which requires such a certificate, which shall state the items and the par value of securities deposited. The Treasurer shall charge a fee of thirty-five dollars to the insurance company for each certificate so issued.

      (b) Any insurance company which has deposited securities with the State Treasurer, has caused all of its unexpired policies to be paid, cancelled or reinsured, and all of its liabilities under such policies to be extinguished or to be assumed by some other responsible company having a similar deposit with the treasurer or with the proper officer of some other state, or has subsequently made a similar deposit of the sum required with the proper officer of some other state, may apply to the Treasurer for a return of such deposited securities. The Treasurer, on receipt of an application from the company, verified by the oath of its president or secretary, and on being satisfied by an examination of the company's books, and of its officers under oath, that all of the company's policies are so paid, cancelled, extinguished or reinsured, or that such subsequent deposit was duly made and has not since been withdrawn, as evidenced by a certificate from the proper officer of such other state, shall deliver such securities to the company.

      (1949 Rev., S. 6046; P.A. 74-32, S. 1; P.A. 90-243, S. 16; P.A. 91-68, S. 2.)

      History: P.A. 74-32 rephrased certificate provisions re par value to delete reference to market value and treasurer's statement that he is satisfied market value is accurately represented; P.A. 90-243 divided section into Subsecs. and authorized state treasurer to receive, on deposit, legal title to securities required to be collected by the laws of other states as a prerequisite of doing business in that state, to hold the securities in trust for the policyholders and to return all deposited securities once all obligations have been met; Sec. 38-43 transferred to Sec. 38a-83 in 1991; P.A. 91-68 imposed a thirty-five-dollar fee for each certificate.

      Sec. 38a-84. (Formerly Sec. 38-47). Securities to be delivered to receiver. Whenever a receiver is appointed in this state of any insurance company which has deposited securities with the State Treasurer in trust for the policyholders of such company, the court to which such receiver is accountable shall, after finding that such receiver has qualified, authorize such receiver to receive the securities so deposited; and the State Treasurer, when tendered by such receiver a certified copy of the order authorizing such receiver to receive such securities, shall transfer and deliver such securities to such receiver; and such receiver shall administer the trust fund invested in such securities for the benefit of the policyholders of such company under the orders of the court to which such receiver is accountable.

      (1949 Rev., S. 6050.)

      History: Sec. 38-47 transferred to Sec. 38a-84 in 1991.

      Annotation to former section 38-47:

      Disposition of income received after securities delivered to receiver. 78 C. 442. See note to Sec. 38-43 (38a-83).

      Sec. 38a-85. Credit allowed a domestic ceding insurer. (a) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of subsection (b), (c), (d), (e) or (f) of this section. If credit is allowed on the basis of meeting the requirements of subsection (d) or (e) of this section, the requirements of subsection (g) of this section shall also be met.

      (b) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is licensed to transact insurance or reinsurance in this state.

      (c) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is accredited as a reinsurer in this state. No credit shall be allowed a domestic ceding insurer, if the assuming insurers' accreditation has been revoked by the commissioner after notice and hearing. An accredited reinsurer is one which (1) files with the commissioner evidence of its submission to this state's jurisdiction, (2) submits to this state's authority to examine its books and records, (3) is licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state and (4) files annually with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement, and either (A) maintains a surplus as regards policyholders in an amount which is not less than twenty million dollars and whose accreditation has not been denied by the commissioner within ninety days of its submission, or (B) maintains a surplus as regards policyholders in an amount less than twenty million dollars and whose accreditation has been approved by the commissioner.

      (d) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is domiciled and licensed in, or in the case of a United States branch of an alien assuming insurer is entered through, a state which employs standards regarding credit for reinsurance substantially similar to those applicable in this state and the assuming insurer or United States branch of an alien assuming insurer (1) maintains a surplus as regards policyholders in an amount not less than twenty million dollars and (2) submits to the authority of this state to examine its books and records. The requirement of subdivision (1) of this subsection does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.

      (e) (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which maintains a trust fund in a qualified United States financial institution, as defined in subsection (b) of section 38a-87, for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the commissioner information substantially the same as that required to be reported on in the National Association of Insurance Commissioners' Annual Statement form by licensed insurers to enable the commissioner to determine the sufficiency of the trust fund. In the case of a single assuming insurer, the trust shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars. In the case of a group including incorporated and individual unincorporated underwriters, the trust shall consist of a trusteed account representing the group's liabilities attributable to business written in the United States and, in addition, the group shall maintain a trusteed surplus of which one hundred million dollars shall be held jointly for the benefit of United States ceding insurers of any member of the group; the incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and control by the group's domiciliary regulator as are the unincorporated members; and the group shall make available to the commissioner an annual certification of the solvency of each underwriter by the group's domiciliary regulator and its independent public accountants.

      (2) Such trust shall be established in a form approved by the commissioner. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in the trustees of the trust for its United States policyholders and ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the commissioner. The trust described herein must remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust.

      (3) No later than the first day of March of each year the trustees of the trust shall report to the commissioner in writing setting forth the balance of the trust and listing the trust's investments at the end of the preceding year and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December thirty-first.

      (f) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subsection (b), (c), (d) or (e) of this section but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction.

      (g) If the assuming insurer is not licensed or accredited to transact insurance or reinsurance in this state, the credit permitted by subsections (d) and (e) of this section shall not be allowed unless the assuming insurer agrees (1) that in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall (A) submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, (B) comply with all requirements necessary to give such court jurisdiction and (C) abide by the final decision of such court or any appellate court in the event of an appeal, and (2) to designate the commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding company. This provision is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement.

      (P.A. 90-41, S. 1, 6; P.A. 94-19.)

      History: P.A. 94-19 added a reference in Subdiv. (1) of Subsec. (e) to "incorporated groups" of underwriters and a requirement that incorporated members of the group not be engaged in any business other than underwriting and subjecting such group to the same level of solvency regulation and control as is exercised on unincorporated members.

      Sec. 38a-86. Reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer. A reduction in liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of section 38a-85 shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer and such reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations thereunder, if such security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified United States financial institution, as defined in subsection (b) of section 38a-87. This security may be in the form of (1) cash, (2) securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets, (3) clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States financial institution, as defined in subsection (a) of section 38a-87, not later than December thirty-first in respect of the year for which filing is being made, and in the possession of the ceding company on or before the filing date of its annual statement; provided letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs or (4) any other form of security acceptable to the commissioner.

      (P.A. 90-41, S. 2, 6.)

      Sec. 38a-87. Qualified United States financial institutions. (a) For purposes of subdivision (3) of section 38a-86, a "qualified United States financial institution" means an institution that (1) is organized or, in the case of a United States office of a foreign banking organization, licensed, under the laws of the United States or any state thereof, (2) is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies and (3) has been determined by either the commissioner, or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.

      (b) For purposes of those provisions of sections 38a-85 to 38a-89, inclusive, specifying those institutions that are eligible to act as a fiduciary of a trust, "qualified United States financial institution" means an institution that (1) is organized, or, in the case of a United States branch or agency office of a foreign banking organization, licensed, under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers and (2) is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.

      (P.A. 90-41, S. 3, 6.)

      Sec. 38a-88. Regulations. The commissioner shall adopt regulations in accordance with the provisions of chapter 54 to implement the provisions of sections 38a-85 to 38a-89, inclusive.

      (P.A. 90-41, S. 4, 6.)

      Sec. 38a-88a. Connecticut insurance reinvestment funds, authorized. Tax credits. Regulations. (a) As used in this section:

      (1) "Facility" means an insurance business facility;

      (2) "Insurance business" means a business engaged in the business of insuring risks or of providing services necessary to the business of insuring risks;

      (3) "New job" means a job that did not exist in the business of a subject insurance business in this state prior to the subject insurance business's application to the commissioner for an eligibility certificate under this section for a new facility and that is filled by a new employee, but does not include a job created when an employee is shifted from an existing location of the subject insurance business in this state to a new facility;

      (4) "New employee" means a person hired by a subject insurance business to fill a position for a new job or a person shifted from an existing location of the subject insurance business outside this state to a new facility in this state, provided (A) in no case shall the total number of new employees allowed for purposes of this credit exceed the total increase in the taxpayer's employment in this state, which increase shall be the difference between (i) the number of employees employed by the subject insurance business in this state at the time of application for an eligibility certificate to the commissioner plus the number of new employees who would be eligible for inclusion under the credit allowed under this section without regard to this calculation and (ii) the highest number of employees employed by the subject insurance business in this state in the year preceding the subject insurance business's application for an eligibility certificate to the commissioner and (B) a person shall be deemed to be a "new employee" only if such person's duties in connection with the operation of the facility are on a regular, full-time, or equivalent thereof, and permanent basis;

      (5) "New facility" means a facility which (A) is acquired by, leased to, or constructed by, a subject insurance business on or after the date of the subject insurance business's application to the commissioner for an eligibility certificate under this section, unless, upon application of the subject insurance business and upon good and sufficient cause shown, the commissioner waives the requirement that such activity take place after the application and (B) was not in service or use during the one-year period immediately prior to the date of the subject insurance business's application to said commissioner for an eligibility certificate under this section, unless upon application of the subject insurance business and upon good and sufficient cause shown, the commissioner consents to waiving the one-year period;

      (6) "Related person" means (A) a corporation, limited liability company, partnership, association or trust controlled by the taxpayer or subject insurance business, as the case may be, (B) an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer or subject insurance business, as the case may be, (C) a corporation, limited liability company, partnership, association or trust controlled by an individual, corporation, limited liability company, partnership, association or trust that is in control of the taxpayer or subject insurance business, as the case may be, or (D) a member of the same controlled group as the taxpayer or subject insurance business, as the case may be. For purposes of this section, "control", with respect to a corporation, means ownership, directly or indirectly, of stock possessing fifty per cent or more of the total combined voting power of all classes of the stock of such corporation entitled to vote. "Control", with respect to a trust, means ownership, directly or indirectly, of fifty per cent or more of the beneficial interest in the principal or income of such trust. The ownership of stock in a corporation, of a capital or profits interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in Section 267(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, other than paragraph (3) of such section;

      (7) "Moneys of the taxpayer" means all amounts invested in a fund, directly or indirectly, on behalf of a taxpayer, including but not limited to (A) direct investments made by the taxpayer and (B) loans made to the fund for the benefit of the taxpayer which loans are guaranteed by the taxpayer, provided no amounts represented by any such loan shall be used for the purpose of obtaining any tax credit by any person making such loan against any tax levied by this state;

      (8) "Income year" means (A) with respect to corporations subject to taxation under chapter 208, the income year as determined under said chapter, (B) with respect to insurance companies, hospital and medical services corporations subject to taxation under chapter 207, the income year as determined under said chapter, and (C) with respect to taxpayers subject to taxation under chapter 229, the taxable year determined under said chapter;

      (9) "Taxpayer" means any person as defined in section 12-1, whether or not subject to any taxes levied by this state; and

      (10) "Commissioner" means the Commissioner of Economic and Community Development.

      (b) On or before July 1, 2000, the commissioner shall register managers of funds created for the purpose of investing in insurance businesses. Any manager registered under this subsection shall have its primary place of business in this state. Each applicant shall submit an application under oath to the commissioner to be registered and shall furnish evidence satisfactory to the commissioner of its financial responsibility, integrity, and professional competence to manage investments. Failure to maintain adequate fiduciary standards shall constitute cause for the commissioner to revoke, after hearing, any registration granted under this section. The fund manager shall make a report on or before the first day of March in each year, under oath, to the Commissioner of Revenue Services specifying the name, address and Social Security number or employer identification number of each investor, the year during which each investment was made by each investor, the amount of each investment and a description of the fund's investment objectives and relative performance.

      (c) There shall be allowed as a credit against the tax imposed under chapter 207, 208 or 229 or section 38a-743 an amount equal to the following percentage of the moneys of the taxpayer invested through a fund manager in an insurance business with respect to the following income years of the taxpayer: (1) With respect to the income year in which the investment in the subject insurance business was made and the two next succeeding income years, zero per cent; (2) with respect to the third full income year succeeding the year in which the investment in the subject insurance business was made and the three next succeeding income years, ten per cent; (3) with respect to the seventh full income year succeeding the year in which the investment in the subject insurance business was made and the two next succeeding income years, twenty per cent. The sum of all tax credit granted pursuant to the provisions of this section shall not exceed fifteen million dollars with respect to investments made by a fund or funds in any single insurance business, and with respect to all investments made by a fund shall not exceed the total amount originally invested in such fund. Any fund manager may apply to the Commissioner of Economic and Community Development for a credit that exceeds the limitations established by this subsection. The commissioner shall evaluate the benefits of such application and make recommendations to the General Assembly if he determines that the proposal would be of economic benefit to the state.

      (d) The credit allowed by this section may be claimed only by a taxpayer who has invested in an insurance business through a fund (1) which has a total asset value of not less than thirty million dollars for the income year for which the initial credit is taken; (2) has not less than three investors who are not related persons with respect to each other or to any insurance business in which any investment is made other than through the fund at the date the investment is made and (3) which invests only in insurance businesses that are not related persons with respect to each other.

      (e) The credit allowed by this section may be claimed only with respect to a subject insurance business which (1) occupies the new facility for which an eligibility certificate has been issued by the commissioner and with respect to which the certification required under subsection (g) of this section has been issued as its home office, and (2) employs not less than twenty-five per cent of its total work force in new jobs.

      (f) The credit allowed by this section may be claimed only with respect to an income year for which a certification of continued eligibility required under subsection (g) of this section has been issued. If, with respect to any year for which a tax credit is claimed, any subject insurance business ceases at any time to employ at least twenty-five per cent of its total work force in new jobs, then, except as provided in subsection (g) of this section, the entitlement to the credit allowed by this section shall not be allowed for the taxable year in which such employment ceases, and there shall not be a pro rata application of the credit to such taxable year; provided, if the reason for such cessation is the dissolution, liquidation or reorganization of such insurance business in a bankruptcy or delinquency proceeding, as defined in section 38a-905, the credit shall be allowed.

      (g) The commissioner, upon application, shall issue an eligibility certificate for an insurance business occupying a new facility in this state and employing new employees, after it has been established, to his satisfaction, that subject insurance business has complied with the provisions of this section. If the commissioner determines that such requirements have been met as a result of transactions with a related person for other than bona fide business purposes, he shall deny such application. The commissioner shall require the subject insurance business to submit annually such information as may be necessary to determine whether the appropriate occupancy and employment requirements have been met at all times during an income year. If the commissioner determines that such requirements have been so met, he shall issue a certification of continued eligibility to that effect to the subject insurance business on or before the first day of the third month following the close of the subject insurance business's income year.

      (h) The commissioner shall, upon request, provide a copy of the eligibility certificate and the certification required under subsection (g) of this section to the Commissioner of Revenue Services.

      (i) (1) If (A) the number of new employees on account of which a taxpayer claimed the credit allowed by this section decreases to less than twenty-five per cent of its total work force for more than sixty days during any of the taxable years for which a credit is claimed, (B) those employees are not replaced by other employees who have not been shifted from an existing location of the subject insurance business in this state and (C) the subject insurance business has relocated operations conducted in the new facility to a location outside this state, the taxpayer shall be required to recapture a percentage, as determined under the provisions of subdivision (2) of this subsection, of the credit allowed under this section on its tax return and no subsequent credit shall be allowed. If the credit claimed by the taxpayer under this section is attributable to investments made in more than one insurance business, the credit recaptured and disallowed under this subsection shall be that portion of the credit attributable to the investment in the insurance business as described in subparagraphs (A) to (C), inclusive, of subdivision (1) of this subsection. (2) If the taxpayer is required under the provisions of subdivision (1) of this subsection to recapture a portion of the credit during (A) the first year such credit was claimed, then ninety per cent of the credit allowed shall be recaptured on the tax return required to be filed for such year, (B) the second of such years, then sixty-five per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (C) the third of such years, then fifty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (D) the fourth of such years, then thirty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, (E) the fifth of such years, then twenty per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year, and (F) the sixth or subsequent of such years, then ten per cent of the credit allowed for the entire period of eligibility shall be recaptured on the tax return required to be filed for such year. Any credit recaptured pursuant to this subsection shall not be in excess of the credit that would be allowed for the applicable investment. The Commissioner of Revenue Services may recapture such credits from the taxpayer who has claimed such credits. If the commissioner is unable to recapture all or part of such credits from such taxpayer, the commissioner may seek to recapture such credits from any taxpayer who has assigned such credits to another taxpayer. If the commissioner is unable to recapture all or part of such credits from any such taxpayer, the commissioner may recapture such credits from the fund. (3) The recapture provisions of this subsection shall not apply and tax credits may continue to be claimed under this section if, for the entire period that the credit is applicable, such decrease in the percentage of total work force employed in this state does not result in an actual decrease in the number of persons employed by the subject insurance business in this state on a regular, full-time, or equivalent thereof, and permanent basis as compared to the number of new employees on account of which the taxpayer claimed the credit allowed by this section.

      (j) The tax credit allowed by this section shall only be available for investments in funds that are not open to additional investments or investors beyond the amount subscribed at the formation of the fund. No credits shall be allowed under this section for investments in any fund created on or after July 1, 2000. No credit shall be allowed under this section for investments made in an insurance business through such fund after December 31, 2015.

      (k) (1) The Commissioner of Revenue Services may treat one or more corporations that are properly included in a combined corporation business tax return under section 12-223 as one taxpayer in determining whether the appropriate requirements under this section are met. Where corporations are treated as one taxpayer for purposes of this subsection, then the credit shall be allowed only against the amount of the combined tax for all corporations properly included in a combined return that, under the provisions of subdivision (2) of this subsection, is attributable to the corporations treated as one taxpayer. (2) The amount of the combined tax for all corporations properly included in a combined corporation business tax return that is attributable to the corporations that are treated as one taxpayer under the provisions of this subsection shall be in the same ratio to such combined tax that the net income apportioned to this state of each corporation treated as one taxpayer bears to the net income apportioned to this state, in the aggregate, of all corporations included in such combined return. Solely for the purpose of computing such ratio, any net loss apportioned to this state by a corporation treated as one taxpayer or by a corporation included in such combined return shall be disregarded.

      (l) Any taxpayer allowed a credit under this section may assign such credit to another person, provided such person may claim such credit only with respect to a calendar year for which the assigning taxpayer would have been eligible to claim such credit. The fund manager shall include in the report filed with the Commissioner of Revenue Services in accordance with subsection (b) of this section information requested by the commissioner regarding such assignments including the current holders of credits as of the end of the preceding calendar year.

      (m) No taxpayer shall be eligible for a credit under this section and either section 12-217e or section 12-217m for the same investment. No two taxpayers shall be eligible for any tax credit with respect to the same investment, employee or facility.

      (n) Any tax credit not used in the income year for which it was allowed may be carried forward for the five immediately succeeding income years until the full credit has been allowed.

      (o) The commissioner, with the approval of the Commissioner of Revenue Services and the Secretary of the Office of Policy and Management, may adopt regulations in accordance with chapter 54 to carry out the purposes of this section.

      (P.A. 94-214, S. 1, 4; P.A. 95-79, S. 139, 189; 95-303, S. 2, 3; P.A. 97-292, S. 1, 4; P.A. 98-214, S. 31; P.A. 00-170, S. 30, 31, 42; P.A. 01-139, S. 3; June Sp. Sess. P.A. 01-6, S. 39, 72, 80, 85; P.A. 02-24, S. 1; P.A. 06-159, S. 21.)

      History: P.A. 94-214, effective June 7, 1994, and applicable (1) to income years of corporations under chapter 208 commencing on or after January 1, 1994, (2) to income years of insurance companies, hospital and medical services corporations under chapter 207 commencing on or after January 1, 1994, or (3) taxable years of taxpayers under chapter 229 commencing on or after January 1, 1994, as the case may be; P.A. 95-79 redefined "related person" to include a limited liability company, effective May 31, 1995; P.A. 95-303 amended Subsec. (a) to add new Subdiv. (7) defining "moneys of the taxpayer" and Subdiv. (8) defining "income year", Subsec. (c) to add reference to Sec. 38a-743, deleted Subdivs. (1) and (2) of Subsec. (c) and added new Subdivs. (1) to (3) re amount of credit, made technical changes to Subsec. (d), added proviso to Subsec. (f) re dissolution as the result of bankruptcy or delinquency proceeding, added provision to Subsec. (i) re credit claimed which is attributable to investments in more than one insurance business, deleted reference to Ch. 207 in Subsec. (l), and made technical changes to Subsec. (m), effective July 6, 1995, and applicable (1) to income years of corporations under Ch. 208 commencing on or after January 1, 1995, (2) to income years of insurance companies, hospital and medical services corporations under Ch. 207 commencing on or after January 1, 1995, or (3) to taxable years of taxpayers under Ch. 229 commencing on or after January 1, 1995, as the case may be; P.A. 97-292 amended Subsec. (a), to add Subdivs. (9) and (10) defining "taxpayer" and "commissioner", Subsec. (b) to transfer from Insurance Commissioner to the Commissioner of Economic and Community Development responsibility for registration of fund managers, added application requirements, Subsec. (c) to add cap for sum of all tax credit granted and provision for application for credit to exceed cap, Subsec. (d) to prohibit investments by related persons, Subsec. (e) to delete requirement of incorporation in this state, Subsec. (i) to allow Commissioner of Revenue Services to recapture credits from any taxpayer who has assigned credits to another taxpayer or from the fund, Subsec. (j) to delete existing language and to provide that tax credit is only available for investments in fund not open to additional investments beyond the amount subscribed at formation of fund, Subsec. (l) to add requirement re reporting of assignments and made technical changes, effective July 8, 1997, and applicable to income years commencing on or after January 1, 1997; P.A. 98-214 amended Subsec. (f) to delete reference to "subsection (d)" of Sec. 38a-905; P.A. 00-170 amended Subsec. (b) to provide that registration of fund managers be accomplished prior to July 1, 2000, and amended Subsec. (j) to restrict the applicability of the tax credit under this section to funds created prior to July 1, 2000, effective May 26, 2000; P.A. 01-139 amended Subsec. (e) to substitute "commissioner" for "Insurance Commissioner"; June Sp. Sess. P.A. 01-6 amended Subsec. (f) to add liquidation and reorganization to provision for treatment of credits in certain bankruptcy or delinquency cases, amended Subsec. (i) to make a technical change and add new Subdiv. (3) re application of recapture provisions and amended Subsec. (j) to provide that no credit shall be allowed for investments made after December 31, 2015, effective July 1, 2001; P.A. 02-24 amended Subsec. (f) to substitute "a bankruptcy" for "bankruptcy"; P.A. 06-159 amended Subsec. (h) to require commissioner, rather than taxpayer, to provide a copy of eligibility certificate and certificaton, effective June 6, 2006.

      See Sec. 38a-88b re applicability of this section.

      Sec. 38a-88b. Applicability of section 38a-88a. (a) The provisions of section 38a-88a of the general statutes, revision of 1958, revised to January 1, 1997, shall apply to any fund established prior to June 1, 1997, or to any fund which is formed on or after June 1, 1997, in connection with a memorandum of understanding executed by and among the fund manager, the investors and either the Commissioner of Revenue Services or the Insurance Commissioner prior to June 1, 1997.

      (b) The provisions of section 38a-88a, as amended by section 1 of public act 97-292, shall only apply to any fund established under section 38a-88a of the general statutes, revision of 1958, revised to January 1, 1997, to investments made by such a fund and to credits earned by such a fund if the fund manager of such fund notifies the Commissioner of Economic and Community Development that such fund wishes to be designated as a fund subject to said section 38a-88a, as amended by section 1 of public act 97-292.

      (c) Notwithstanding the provisions of subsection (a) of this section, the provisions of subsections (b) and (l) of section 38a-88a and subdivision (3) of subsection (i) of section 38a-88a shall be applicable to all funds.

      (P.A. 97-292, S. 3, 4; 97-295, S. 22, 25; P.A. 98-262, S. 14, 22; June Sp. Sess. P.A. 01-6, S. 81, 85; P.A. 02-24, S. 2; P.A. 04-10, S. 4.)

      History: P.A. 97-292 effective July 8, 1997, and applicable to income years of taxpayers commencing on or after January 1, 1997; P.A. 97-295 amended Subsec. (a) to specify execution of memorandum of understanding by either Commissioner of Revenue Services or Insurance Commissioner rather than by both commissioners, effective July 8, 1997, and applicable to income years commencing on or after January 1, 1998; P.A. 98-262 revised effective date of P.A. 97-295, but without affecting this section; June Sp. Sess. P.A. 01-6 amended Subsec. (c) to add a reference to Subsec. (i)(3) of Sec. 38a-88a, effective July 1, 2001; P.A. 02-24 amended Subsec. (c) to delete "as amended by section 1 of public act 97-292"; P.A. 04-10 made a technical change in Subsec. (c).

      Sec. 38a-89. Reinsurance agreements affected. Sections 38a-85 to 38a-88, inclusive, shall apply to reinsurance agreements which have had an inception, anniversary or renewal date not less than six months after January 1, 1991, with respect to all cessions under such agreements after such inception, anniversary or renewal date.

      (P.A. 90-41, S. 5, 6.)

PART IIa
MANAGING GENERAL AGENTS AND CONTROLLED INSURERS

      Sec. 38a-90. Short title: Managing General Agents Act. Sections 38a-90 to 38a-90h, inclusive, may be cited as the "Managing General Agents Act".

      (P.A. 91-262, S. 10, 19.)

      Sec. 38a-90a. Definitions. As used in sections 38a-90 to 38a-90h, inclusive:

      (a) "Actuary" means a person who is a member in good standing of the American Academy of Actuaries.

      (b) "Managing general agent" means any person, firm, association or corporation who manages all or part of the insurance business of an insurer, including the management of a separate division, department or underwriting office and acts as an agent for such insurer whether known as a managing general agent, manager or other similar term, who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross direct written premium which is equal to or more than five per cent of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year together with one or more of the following activities related to the business produced: (1) Adjusts or pays claims in excess of an amount determined by the commissioner, or (2) negotiates reinsurance on behalf of the insurer. Notwithstanding the above, the following persons shall not be considered as managing general agents for the purposes of sections 38a-90 to 38a-90h, inclusive: (A) Any employee of the insurer; (B) a United States manager of the United States branch of an alien insurer, as defined in section 38a-1; (C) an underwriting manager which, pursuant to contract, manages all or part of the insurance operations of the insurer, is under common control with the insurer, subject to the Holding Company Regulatory Act, and whose compensation is not based on the volume of premiums written; and (D) the attorney-in-fact authorized by and acting for the subscribers of a reciprocal insurer or interinsurance exchange under powers of attorney.

      (c) "Underwrite" means the authority to accept or reject risk on behalf of the insurer.

      (P.A. 91-262, S. 11, 19; P.A. 93-57, S. 3; 93-239, S. 19; P.A. 94-39, S. 2.)

      History: P.A. 93-57 redefined "managing general agent" to eliminate the requirement of negotiating and finding ceding reinsurance contracts on behalf of an insurer and certain technical corrections for clarity; P.A. 93-239 redefined "managing general agent" to require only five per cent of the policyholder surplus in lieu of ten per cent and to delete a provision excluding managers of insurers engaging in joint underwriting or joint reinsurance from consideration as managing general agents; P.A. 94-39 redefined "managing general agent" to specifically exclude attorneys-in-fact authorized by and acting for the subscribers of a reciprocal insurer or interinsurance exchange under powers of attorney.

      Sec. 38a-90b. Licensing of managing general agents. (a) No person, firm, association or corporation shall act in the capacity of a managing general agent with respect to risks located in this state for an insurer licensed in this state unless such person is licensed as a producer and holds an appointment by the insurer in this state.

      (b) No person, firm, association or corporation shall act in the capacity of a managing general agent representing an insurer domiciled in this state with respect to risks located outside this state unless such person is licensed as a producer and holds an appointment by the insurer in this state. A nonresident license is sufficient for this purpose.

      (c) The commissioner may require a bond in a reasonable amount for the protection of the insurer.

      (d) The commissioner may require the managing general agent to maintain an errors and omissions policy.

      (P.A. 91-262, S. 12, 19; P.A. 94-160, S. 2, 24.)

      History: P.A. 94-160 replaced references to agents with references to producers, effective January 1, 1996.

      Sec. 38a-90c. Contractual agreement between insurer and managing general agent. Minimum provisions of the contract. No person, firm, association or corporation acting in the capacity of a managing general agent shall place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibilities of each party and where both parties share responsibility for a particular function, specifies the division of such responsibilities, and such contract shall contain the following minimum provisions:

      (a) The insurer may terminate the contract for cause upon written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination.

      (b) The managing general agent shall render an accounting to the insurer detailing all transactions and remitting all funds due under the contract to the insurer on a monthly basis.

      (c) All funds collected for the account of an insurer shall be held by the managing general agent in a fiduciary capacity in a bank which is a member of the Federal Reserve System. This account shall be used for all payments on behalf of the insurer. The managing general agent may retain no more than three months estimated claims payments and allocated loss adjustment expenses.

      (d) Separate records of business written by the managing general agent shall be maintained. The insurer shall have access and right to copy all accounts and records related to its business in a form usable by the insurer and the commissioner shall have access to all books, bank accounts and records of the managing general agent in a form usable to the commissioner.

      (e) The contract may not be assigned in whole or part by the managing general agent.

      (f) Appropriate underwriting guidelines including: (1) The maximum annual premium volume; (2) the basis of the rates to be charged; (3) the types of risks which may be written; (4) maximum limits of liability; (5) applicable exclusions; (6) territorial limitations; (7) policy cancellation provisions; and (8) the maximum policy period. The insurer shall have the right to cancel or nonrenew any policy subject to the applicable laws and regulations.

      (g) If the contract permits the managing general agent to settle claims on behalf of the insurer: (1) All claims must be reported to the company in a timely manner; (2) a copy of the claim file shall be sent to the insurer at its request or as soon as it becomes known that the claim: (A) Has the potential to exceed an amount determined by the commissioner or exceeds the limit set by the company, whichever is less; (B) involves a coverage dispute; (C) may exceed the managing general agent claims settlement authority; (D) is open for more than six months or (E) is closed by payment of an amount set by the company. (3) All claim files will be the joint property of the insurer and managing general agent. However, upon an order of liquidation of the insurer such files shall become the sole property of the insurer or its estate and the managing general agent shall have reasonable access and the right to copy the files on a timely basis. (4) Any settlement authority granted to the managing general agent may be terminated for cause upon the insurer's written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.

      (h) Where electronic claims files are in existence, the contract must address the timely transmission of data.

      (i) If the contract provides for a sharing of interim profits by the managing general agent, and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments, or in any other manner, interim profits will not be paid to the managing general agent until one year after they are earned for property insurance and five years after they are earned on casualty insurance and not until the profits have been verified pursuant to section 38a-90d.

      (j) The managing general agent shall not: (1) Bind reinsurance or retrocessions on behalf of the insurer except that the managing general agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules; (2) commit the insurer to participate in insurance or reinsurance syndicates; (3) appoint any producer or agent without assuring that the producer or agent is lawfully licensed to transact the type of insurance for which he is appointed; (4) without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which shall not exceed one per cent of the insurer's policyholder's surplus as of December thirty-first of the last completed calendar year; (5) collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer, without prior approval of the insurer. If prior approval is given, a report must be promptly forwarded to the insurer; (6) jointly employ an individual who is employed with the insurer; (7) appoint a submanaging general agent; or (8) permit its subproducer or subagent to serve on the insurer's board of directors.

      (P.A. 91-262, S. 13, 19; P.A. 93-239, S. 20.)

      History: P.A. 93-239 amended Subsec. (j) to delete reference to "automatic" facultative agreements and to add a new Subdiv. (8) prohibiting a subproducer as subagent of a managing general agent to serve on an insurer's board of directors.

      Sec. 38a-90d. Duties of the insurer. (a) The insurer shall have on file an independent financial examination, in a form acceptable to the commissioner, of each managing general agent with which it has done business.

      (b) If a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. This shall be in addition to any other required loss reserve certification.

      (c) The insurer shall semiannually conduct an on-site review of the underwriting and claims processing operations of the managing general agent.

      (d) Binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicates shall rest with an officer of the insurer, who shall not be affiliated with the managing general agent.

      (e) Within thirty days of entering into or termination of a contract with a managing general agent, the insurer shall provide written notification of such appointment or termination to the commissioner. Notices of appointment of a managing general agent shall include a statement of duties which the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is authorized to act and any other information the commissioner may require.

      (f) An insurer shall review its books and records each quarter to determine if any agent has become, by operation of subsection (b) of section 38a-90a, a managing general agent. If the insurer determines that an agent has become a managing general agent, the insurer shall promptly notify the agent of such determination and the insurer and agent must fully comply with the provisions of sections 38a-90 to 38a-90h, inclusive, within thirty days.

      (g) An insurer shall not appoint to its board of directors an officer, director, employee or controlling shareholder of its managing general agents. This subsection shall not apply to any relationships governed by the Insurance Holding Company Act or, if applicable, the Broker Controlled Insurer Act.

      (P.A. 91-262, S. 14, 19.)

      Sec. 38a-90e. Acts of managing general agent considered to be acts of insurer. Examination of the managing general agent. The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer.

      (P.A. 91-262, S. 15, 19.)

      Sec. 38a-90f. Violations of the Managing General Agents Act. Hearing and notices. Fines. Loss or damage due to noncompliance rehabilitation or liquidation. Civil actions and other relief. (a) If the commissioner finds after reasonable notice and hearing that the managing general agent or any other person has not materially complied with any provision of sections 38a-90 to 38a-90h, inclusive, or any regulation or order promulgated thereunder, the commissioner may order: (1) For each separate violation, a penalty in an amount of ten thousand dollars and (2) revocation or suspension of the person's insurance license.

      (b) If he finds that because of such material noncompliance the insurer has suffered any loss or damage, the commissioner may maintain a civil action brought by or on behalf of the insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the insurer and its policyholders and creditors or other appropriate relief.

      (c) If an order of rehabilitation or liquidation of the insurer has been entered pursuant to section 38a-915 or section 38a-920, and the receiver appointed under that order determines that the managing general agent or any other person has not materially complied with sections 38a-90 to 38a-90h, inclusive, or any regulation or order promulgated thereunder, and the insurer has suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate relief for the benefit of the insurer and its policyholders and creditors.

      (d) Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided for in the provisions of this title.

      (e) Nothing contained in sections 38a-90 to 38a-90h, inclusive, shall in any manner limit or restrict the rights of policyholders, claimants and auditors.

      (P.A. 91-262, S. 16, 19; P.A. 93-57, S. 4; May 25 Sp. Sess. P.A. 94-1, S. 30, 130; P.A. 96-193, S. 2, 36.)

      History: P.A. 93-57 amended Subsec. (a) to make technical corrections for clarity, inserted new Subsecs. (b) and (c) to address loss or damage due to noncompliance and re provisions governing civil action for recovery of damages or relief when an order of rehabilitation or liquidation has been entered and relettered existing Subsecs. (b) and (c) as (d) and (e); May 25 Sp. Sess. P.A. 94-1 amended Subsecs. (b) and (c) by making technical grammatical changes, effective July 1, 1994; P.A. 96-193 amended Subsec. (a) to substitute "person's insurance" for "agent's", effective June 3, 1996.

      Sec. 38a-90g. Regulations. The Insurance Commissioner may adopt such reasonable regulations as he deems necessary in accordance with chapter 54 to carry out the purposes of sections 38a-90 to 38a-90h, inclusive.

      (P.A. 91-262, S. 17, 19.)

      Sec. 38a-90h. Utilization of managing general agent's services. Exceptions. No insurer may continue to utilize the services of a managing general agent on and after January 1, 1992, unless such utilization is in compliance with sections 38a-90 to 38a-90g, inclusive, or unless the commissioner extends the time for such compliance.

      (P.A. 91-262, S. 18, 19.)

      Sec. 38a-91. Definitions. As used in sections 38a-91 to 38a-91d, inclusive:

      (1) "Accredited state" means a state in which the insurance department or regulatory agency has qualified as meeting the minimum financial regulatory standards promulgated and established from time to time by the National Association of Insurance Commissioners.

      (2) "Captive insurer" means an insurance company owned by another organization whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, an insurance organization owned by the insureds whose exclusive purpose is to insure risks of member organizations and group members and their affiliates.

      (3) "Control" or "controlled" has the meaning assigned in section 38a-129.

      (4) "Controlled insurer" means a licensed insurer which is controlled, directly or indirectly, by a producer.

      (5) "Controlling producer" means a producer who, directly or indirectly, controls an insurer.

      (6) "Licensed insurer" or "insurer" means any person, firm, association or corporation duly licensed pursuant to section 38a-41 to transact a property casualty insurance business in this state. The terms "licensed insurer" or "insurer" shall not include any captive insurer.

      (7) "Producer" shall have the same meaning as "insurance producer", as defined in section 38a-702a.

      (P.A. 92-112, S. 8, 35; P.A. 96-193, S. 3, 36; P.A. 01-113, S. 23, 42.)

      History: P.A. 96-193 redefined "producer", effective June 3, 1996; P.A. 01-113 amended definition of "producer" in Subdiv. (7) to make a technical change and substitute "section 38a-702a" for "section 38a-702", effective September 1, 2002.

      Sec. 38a-91a. Insurers affected. Sections 38a-91 to 38a-91d, inclusive, shall apply to licensed insurers either domiciled in this state or domiciled in a state that is not an accredited state having in effect a substantially similar law. All provisions of sections 38a-129 to 38a-140, inclusive, to the extent they are not superseded by sections 38a-91 to 38a-91d, inclusive, shall continue to apply to all parties within holding company systems subject to said sections 38a-91 to 38a-91d, inclusive.

      (P.A. 92-112, S. 9, 35.)

      Sec. 38a-91b. Controlling insurers. Applicability. Minimum provisions. (a) (1) The provisions of this section shall apply if, in any calendar year, the aggregate amount of gross written premium on business placed with a controlled insurer by a controlling producer is equal to or greater than five per cent of the admitted assets of the controlled insurer, as reported in the controlled insurers' quarterly statement filed as of September thirtieth of the prior year.

      (2) Notwithstanding subdivision (1) of this subsection, the provisions of this section shall not apply if:

      (A) The controlling producer (i) places insurance only with the controlled insurer, or with the controlled insurer and a member or members of the controlled insurer's holding company system, or the controlled insurer's parent, affiliate or subsidiary and receives no compensation based upon the amount of premiums written in connection with such insurance; and (ii) accepts insurance placements only from nonaffiliated subproducers and not directly from insureds; and

      (B) The controlled insurer, except for insurance business written through a residual market facility accepts insurance business only from a controlling producer, a producer controlled by the controlled insurer or a producer that is a subsidiary of the controlled insurer.

      (b) A controlled insurer shall not accept business from a controlling producer and a controlling producer shall not place business with a controlled insurer unless there is a written contract between the controlling producer and the controlled insurer specifying the responsibilities of each party, which contract has been approved by the board of directors of the insurer and contains the following minimum provisions:

      (1) The controlled insurer may terminate the contract for cause, upon written notice to the controlling producer. The controlled insurer shall suspend the authority of the controlling producer to write business during the pendency of any dispute regarding the cause for the termination;

      (2) The controlling producer shall render accounts to the controlled insurer detailing all material transactions, including information necessary to support all commissions, charges and other fees received by, or owing to, the controlling producer;

      (3) The controlling producer shall remit all funds due under the terms of the contract to the controlled insurer on at least a monthly basis. The due date shall be fixed so that premiums or installments thereof collected shall be remitted no later than ninety days after the effective date of any policy placed with the controlled insurer under this contract;

      (4) All funds collected for the controlled insurer's account shall be held by the controlling producer in a fiduciary capacity, in one or more appropriately identified bank accounts in banks that are members of the Federal Reserve System, in accordance with the provisions of the insurance law as applicable. However, funds of a controlling producer not required to be licensed in this state shall be maintained in compliance with the requirements of the controlling producer's domiciliary jurisdiction;

      (5) The controlling producer shall maintain separate identifiable records of business written for the controlled insurer;

      (6) The contract shall not be assigned in whole or in part by the controlling producer;

      (7) The controlled insurer shall provide to the controlling producer its underwriting standards, rules and procedures, manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling producer shall adhere to the standards, rules, procedures, rates and conditions. The standards, rules, procedures, rates and conditions shall be the same as those applicable to comparable business placed with the controlled insurer by a producer other than the controlling producer;

      (8) The rates of the commissions, charges and other fees shall be no greater than those applicable to comparable business placed with the controlled insurer by producers other than controlling producers. For purposes of this subdivision and subdivision (7) of this subsection, examples of "comparable business" include the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits and similar quality of business;

      (9) If the contract provides the controlling producer, on insurance business placed with the insurer, to be compensated contingent upon the insurer's profits on that business, then such compensation shall not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event shall the commissions be paid until the adequacy of the controlled insurer's reserves on remaining claims has been independently verified pursuant to subdivision (1) of subsection (d) of this section;

      (10) The insurer may establish a different limit for each line or subline of business. The controlled insurer shall notify the controlling producer when the applicable limit is approached and shall not accept business from the controlling producer if the limit is reached. The controlling producer shall not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached; and

      (11) The controlling producer may negotiate but shall not bind reinsurance on behalf of the controlled insurer on business the controlling producer places with the controlled insurer, except that the controlling producer may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the controlled insurer contains underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules.

      (c) Every controlled insurer shall have an audit committee of the board of directors composed of independent directors. The audit committee shall annually meet with management, the insurer's independent certified public accountants and an independent casualty actuary or other independent loss reserve specialist acceptable to the commissioner to review the adequacy of the insurer's loss reserves.

      (d) (1) In addition to any other required loss reserve certification, the controlled insurer shall annually, on April first of each year, file with the commissioner an opinion of an independent casualty actuary or such other independent loss reserve specialist acceptable to the commissioner reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year-end including incurred but not reported on business placed by the controlling producer; and

      (2) The controlled insurer shall annually report to the commissioner the amount of commissions paid to the controlling producer, the percentage such amount represents of the net premiums written and comparable amounts and percentage paid to noncontrolling producers for placements of the same kinds of insurance.

      (P.A. 92-112, S. 10, 35.)

      History: (Revisor's note: In codifying public act 92-112 the words "The rates and terms of the controlling producer's commissions, charges or other fees and the purposes for those commissions, charges or fees.", and the words "A limit on the controlling producer's writings in relation to the controlled insurer's surplus and total writings.", were deleted editorially by the Revisors from the beginning of Subsecs. (b)(8) and (b)(10), respectively, since they were clearly Subdiv. catchlines, a form not traditionally used in the general statutes. These catchlines were inadvertently included when this legislation was imported from another jurisdiction and substitute House Bill 5189 was being drafted).

      Sec. 38a-91c. Disclosure to insured by controlling producer. Exception. The controlling producer, prior to the effective date of the policy, shall deliver written notice to the prospective insured disclosing the relationship between the controlling producer and the controlled insurer; except, if the business is placed through a subproducer who is not a controlling producer, the controlling producer shall retain in his records a signed commitment from the subproducer that the subproducer is aware of the relationship between the insurer and the controlling producer and that the subproducer has or will notify the insured.

      (P.A. 92-112, S. 11, 35.)

      Sec. 38a-91d. Noncompliance: Remedies allowed. (a) (1) If the commissioner believes that the controlling producer or any other person has not materially complied with sections 38a-91 to 38a-91d, inclusive, or any regulation or order promulgated hereunder, after notice and opportunity to be heard, the commissioner may order the controlling producer to cease placing business with the controlled insurer; and

      (2) If it was found that because of such material noncompliance the controlled insurer or any policyholder thereof has suffered any loss or damage, the commissioner may maintain a civil action or intervene in an action brought by or on behalf of the insurer or policyholder for recovery of compensatory damages for the benefit of the insurer or policyholder or other appropriate relief.

      (b) If an order for liquidation or rehabilitation of the controlled insurer has been entered pursuant to section 38a-920 or 38a-915 and the receiver appointed under that order believes that the controlling producer or any other person has not materially complied with sections 38a-91 to 38a-91d, inclusive, or any regulation or order promulgated hereunder, and the insurer suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer.

      (c) Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided for in this title.

      (d) Nothing contained in this section is intended to or shall in any manner alter or affect the rights of policyholders, claimants, creditors or other third parties.

      (P.A. 92-112, S. 12, 35.)

      Secs. 38a-91e to 38a-91j. Reserved for future use.

      Sec. 38a-91k. Captive insurers: Information to be submitted to commissioner. Each captive insurer that offers, renews or continues insurance in this state shall provide the information described in subdivisions (1) to (3), inclusive, of subsection (a) of section 38a-253 to the Insurance Commissioner in the same manner required for risk retention groups. If a captive insurer does not maintain information in the form prescribed in section 38a-253, the captive insurer may submit the information to the Insurance Commissioner on such form as the commissioner prescribes. As used in this section and section 38a-25, "captive insurer" means an insurance company owned by another organization whose primary purpose is to insure risks of a parent organization or affiliated persons, as defined in section 38a-1, or in the case of groups and associations, an insurance organization owned by the insureds whose primary purpose is to insure risks of member organizations and group members and their affiliates.

      (P.A. 05-275, S. 16.)

      History: P.A. 05-275 effective July 1, 2005.

PART IIb
FINANCIAL GUARANTY INSURANCE ACT

      Sec. 38a-92. Financial Guaranty Insurance Act, generally. (a) Sections 38a-92 to 38a-92n, inclusive, shall apply to financial guaranty insurance corporations engaged in financial guaranty insurance transactions in this state.

      (b) Except as otherwise expressly provided in sections 38a-92 to 38a-92n, inclusive, and except where the context otherwise requires, all provisions of this title applicable to insurance and insurance companies generally shall apply to financial guaranty insurance corporations engaged in financial guaranty insurance transactions in this state.

      (P.A. 93-136, S. 1.)

      Sec. 38a-92a. Definitions. As used in sections 38a-41, 38a-72 and 38a-92 to 38a-92n, inclusive:

      (1) (A) "Financial guaranty insurance" means a surety bond, an insurance policy or, when issued by an insurer, an indemnity contract and any guaranty similar to the foregoing types, under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee or indemnitee as a result of any of the following events: Failure of any obligor on any debt instrument or other monetary obligation, including common or preferred stock guaranteed under a surety bond, insurance policy or indemnity contract, to pay when due principal, interest, premium, dividend, purchase price of or on the instrument or obligation or other monetary payment when due when the failure is the result of a financial default or insolvency, regardless of whether the obligation is incurred directly or as guarantor by or on behalf of another obligor that has also defaulted, or any other failure to make payment, provided the payment obligation or risk which is insured is investment grade; changes in the levels of interest rates, whether short or long-term or the differential in interest rates between various markets or products; changes in the rate of exchange of currency; changes in the value of financial or commodity indices or price levels in general; or other events as determined by the commissioner.

      (B) "Financial guaranty insurance" shall not include:

      (i) Insurance of any loss resulting from any event described in subparagraph (A) of this subdivision if the loss is payable only upon the occurrence of any of the following, as specified in a surety bond, insurance policy or indemnity contract: A fortuitous physical event; a failure of or deficiency in the operation of equipment; or an inability to extract or recover a natural resource;

      (ii) Surety insurance, defined as insurance: Guaranteeing the fidelity of persons holding positions of public or private trusts; indemnifying financial institutions against loss of moneys, securities, negotiable instruments and other tangible items of personal property caused by larceny, misplacement, destruction or other stated perils; insuring against loss caused by forgery of signatures on, or alterations of specified documents, instruments and papers; becoming surety on or guaranteeing the performance of a bond which shall not exceed a period greater than five years, that guarantees the payment of a premium, deductible, or self-insured retention to an insurer issuing a workers' compensation or liability policy; guaranteeing the performance of contracts for services, including a bid, payment or performance bond where the bond is guaranteeing the execution of any contract other than a contract of indebtedness or other monetary obligation; and guaranteeing or otherwise becoming surety for the performance of any lawful contract, not specifically provided for in this subdivision, except any insurance contract which constitutes either mortgage guaranty insurance or financial guaranty insurance, as defined in subparagraph (A) of this subdivision;

      (iii) Credit unemployment insurance, defined as insurance on a debtor in connection with a specific loan or other credit transaction, to provide payments to a creditor in the event of unemployment of the debtor for the installments or other periodic payments becoming due while a debtor is unemployed;

      (iv) Credit insurance indemnifying a manufacturer, merchant or educational institution which extends credit against loss or damage resulting from nonpayment of debts owed to such entity for goods or services provided in the normal course of business;

      (v) Guaranteed investment contracts issued by a life insurance company which provides that the life insurer will make specified payments in exchange for specific premiums or contributions;

      (vi) Mortgage guaranty insurance, defined as insurance against financial loss by reason of the nonpayment of principal, interest and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust or other instrument constituting a first lien or charge on residential real estate consisting of less than five units;

      (vii) Indemnity contracts or similar guaranties, to the extent that they are not otherwise limited or proscribed by sections 38a-92 to 38a-92n, inclusive, in which a life insurer does any of the following: Guarantees its obligations or indebtedness or the obligations or indebtedness of a subsidiary, as defined in section 38a-1, other than a financial guaranty insurance corporation, provided: To the extent that any such obligations or indebtedness are backed by specific assets, those assets shall be at all times owned by the life insurer or the subsidiary, and in the case of the guaranty of the obligations or indebtedness of the subsidiary that are not backed by specific assets of the life insurer, the guaranty terminates once the subsidiary ceases to be a subsidiary; guarantees obligations or indebtedness, including the obligation to substitute assets where appropriate, with respect to specific assets acquired by a life insurer in the course of normal investment activities and not for the purpose of resale with credit enhancement or guarantees obligations or indebtedness acquired by a subsidiary, provided the assets acquired pursuant to this subparagraph have been either acquired by a special purpose entity, whose sole purpose is to acquire specific assets of the life insurer or the subsidiary and issue securities or participation certificates backed by the assets, or sold to an independent third party, or guarantees obligations or indebtedness of an employee or agent of the life insurer;

      (viii) Any cramdown bond or mortgage repurchase bond, as those phrases are used by nationally recognized rating agencies in respect to mortgage-backed securities;

      (ix) Residual value insurance, defined as insurance issued in connection with a lease or contract which sets forth a specific termination value at the end of the term of the lease or contract for the property covered by the lease or contract and which insures against loss of economic value, other than loss due to physical damage, of tangible personal property, real property and improvements thereto;

      (x) Any letter of credit or similar transaction effected by a bank, trust company or savings association;

      (xi) Accumulation fund arrangements of any life insurance contract or annuity contract made pursuant to section 38a-460, or any funding agreements made pursuant to section 38a-459; or

      (xii) Any other form of insurance covering risks that the commissioner determines to be substantially similar to any of the foregoing.

      (2) "Asset-backed securities" means securities of an issuer provided (A) the issuer of the securities is a special purpose corporation, trust or other entity, or provided the securities constitute an insurable risk, or the issuer is a bank, trust company or other financial institution, deposits in which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of Federal Deposit Insurance Corporation or any successors thereto; and (B) the securities are related to a pool of assets so that the pool of assets has been conveyed, pledged or otherwise transferred to or is otherwise owned or acquired by the issuer, the pool of assets backs the securities issued and no asset in the pool has a value exceeding twenty per cent of the aggregate value of the pool.

      (3) "Average annual debt service" means the amount of insured unpaid principal and interest on an obligation multiplied by the number of the insured obligations, assuming that each obligation represents a one-thousand-dollar par value, divided by the amount equal to the aggregate life of all of those obligations. This definition, expressed as a formula in regard to bonds, is as follows:

      Sec. 38a-92b. Licensing of financial guaranty insurance corporations. Reinsurance. (a) Each financial guaranty insurance corporation may transact financial guaranty insurance business in this state if licensed to do so by the commissioner.

      (b) A financial guaranty insurance corporation may only reinsure those lines of insurance which it is licensed to write direct business for in this state.

      (P.A. 93-136, S. 3.)

      Sec. 38a-92c. Contingency reserves. (a) Each licensed financial guaranty insurance corporation shall establish and maintain a contingency reserve calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

      (b) A financial guaranty insurance corporation may invest the contingency reserve in tax and loss bonds or similar securities purchased pursuant to Section 832 (e) of the Internal Revenue Code or any successor provision, only to the extent of the tax savings resulting from the deduction for federal income tax purposes of a sum equal to the annual contributions to the contingency reserve. The contingency reserve shall otherwise be invested only in classes of securities or types of investments permitted by this title.

      (P.A. 93-136, S. 4; P.A. 00-30, S. 6, 14.)

      History: P.A. 00-30 amended Subsec. (a) to substitute "calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions" for "computed in accordance with this section", deleted Subsecs. (b) to (f), inclusive, and redesignated Subsec. (g) as (b), effective January 1, 2001.

      Sec. 38a-92d. Reserves against unpaid losses and loss expense. (a) Each financial guaranty insurance corporation shall establish and maintain reserves against unpaid losses and loss expense. Such reserves shall be calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

      (b) Except as otherwise permitted by the commissioner, no deduction shall be made for anticipated salvage in computing case basis loss reserves, unless that salvage is held by or under the control of the financial guaranty insurance corporation and would qualify as an admitted asset under this title or unless that salvage constitutes or is secured by a letter of credit which is approved by the commissioner or complies with the criteria set forth in subdivision (4) of section 38a-92a.

      (c) If the insured principal and interest on a defaulted issue of obligations due and payable during any three years following the date of default exceed ten per cent of the financial guaranty insurance corporation's capital, surplus and contingency reserves, its reserves so established shall be supported by a report from an independent actuarial firm or other source acceptable to the commissioner.

      (P.A. 93-136, S. 5; P.A. 00-30, S. 7, 14; P.A. 05-29, S. 6.)

      History: P.A. 00-30 amended Subsec. (a) to delete reference to the case basis method or other method prescribed by the commissioner and to substitute the requirement that "reserves be calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions", effective January 1, 2001; P.A. 05-29 made a technical change in Subsec. (b).

      Sec. 38a-92e. Unearned premium reserve. Each licensed financial guaranty insurance corporation shall establish and maintain an unearned premium reserve calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

      (P.A. 93-136, S. 6; P.A. 00-30, S. 8, 14.)

      History: P.A. 00-30 added requirement that unearned premium reserve be "calculated in accordance with the accounting requirements of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions", and deleted prior method for calculating unearned premium reserve, effective January 1, 2001.

      Sec. 38a-92f. Disclosures in prospectus or other offering document. Each licensed financial guaranty insurance corporation shall adopt procedures reasonably calculated to ensure, to the extent it is commercially feasible for the financial guaranty insurance corporation to do so, that any prospectus or other offering document which discloses that a policy of financial guaranty insurance has been issued also discloses that in the event the financial guaranty corporation were to become insolvent, any claims arising under the policies of financial guarantee insurance are excluded from coverage by the Connecticut Insurance Guaranty Association.

      (P.A. 93-136, S. 7.)

      Sec. 38a-92g. Financial guaranty insurance transactions. Exceptions. (a) Except as otherwise provided in section 38a-92l or 38a-92m, inclusive, financial guaranty insurance may be transacted in this state only by an insurer licensed to transact financial guaranty insurance.

      (b) The following guaranties are permissible: Financial guaranty insurance shall be written only to insure timely payment of contractual obligations, including principal and interest, purchase obligations, dividends or any other payment obligation such as: (1) Municipal obligation bonds; (2) special revenue bonds; (3) industrial development bonds; (4) corporate obligations; (5) partnership obligations; (6) asset-backed securities, trust certificates and trust obligations other than mortgage-backed securities secured by mortgages on real property which are insurable by a mortgage guaranty insurer, unless: (A) The mortgage loans with loan-to-value ratios in excess of eighty per cent are insured by mortgage guaranty insurers licensed in this state or mortgage guaranty insurers licensed under the laws of any other state if that insurer has a claims paying rating of investment grade from a securities rating agency acceptable to the commissioner, or (B) additional mortgage loans with principal balances, collateral with a market value or excess spread reasonably projected to be an amount at least equal to the coverage that would otherwise be provided by those mortgage guaranty insurers in accordance with subparagraph (A) of this subdivision are pledged as additional support for the asset-backed securities; (7) installment purchase agreements executed as a condition of sale; (8) consumer debt obligations; (9) utility first mortgage obligations; and (10) any other debt instrument or monetary obligation that the commissioner determines to be substantially similar.

      (P.A. 93-136, S. 8.)

      Sec. 38a-92h. Copies of relevant materials. Each licensed financial guaranty insurance corporation shall keep copies of all relevant materials prepared by the insurer or used in the initial underwriting or ongoing monitoring of insured risk, all relevant documents pertaining to changes in the credit risk or performance of the insured on the obligation and all materials pertaining to the examination of the condition of collateral, assets or other security and any other materials requested by the commissioner. All those materials shall be maintained for the entire period during which the insurance is in force and shall be available for examination upon request by the commissioner or by any rating agency approved by the commissioner.

      (P.A. 93-136, S. 9.)

      Sec. 38a-92i. Net liability. Kinds of obligations. (a) At least ninety-five per cent of a financial guaranty insurance corporation's outstanding total net liability on the kinds of obligations enumerated in subdivisions (1) to (3), inclusive, of subsection (b) of section 38a-92g shall be investment grade.

      (b) The financial guaranty insurance corporation shall at all times maintain capital, surplus and contingency reserve in the aggregate no less than the sum of the following:

      (1) 0.3333 per cent of the total net liability under guaranties of municipal bonds and utility first mortgage obligations;

      (2) 0.6666 per cent of the total net liability under guaranties of investment grade asset-backed securities;

      (3) 1.0 per cent of the total net liability under guaranties secured by collateral or having a term of seven years or less of: (A) Investment grade industrial development bonds, and (B) other investment grade obligations;

      (4) 1.5 per cent of the total net liability under guaranties of other investment grade obligations;

      (5) 2.0 per cent of the total net liability under guaranties of: (A) Noninvestment grade consumer debt obligations, and (B) noninvestment grade asset-backed securities;

      (6) 3.0 per cent of the total net liability under guaranties of noninvestment grade obligations secured by first mortgages on commercial real estate and having loan-to-value ratios of eighty per cent or less;

      (7) 5.0 per cent of the total net liability under guaranties of other noninvestment grade obligations;

      (8) If the amount of collateral required by subdivision (3) of this subsection is no longer maintained, that proportion of the obligation insured which is not so collateralized shall be subject to the aggregate limits specified in subdivision (4) of this subsection; and

      (9) Additional surplus determined by the commissioner to be adequate to support the writing of surety insurance if the financial guaranty insurance corporation has been licensed to transact surety insurance.

      (P.A. 93-136, S. 10.)

      Sec. 38a-92j. Limiting of exposure to loss on any one risk. A financial guaranty insurance corporation licensed to transact financial guaranty insurance in this state shall limit its exposure to loss on any one risk, net of collateral and reinsurance, as follows:

      (1) For municipal obligation bonds and special revenue bonds: (A) The insured average annual debt service with respect to any one entity and backed by a single revenue source may not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve, and (B) the insured unpaid principal issued by a single entity and backed by a single revenue source may not exceed seventy-five per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

      (2) For each issue of asset-backed securities issued by a single entity the lesser of: (A) Insured average annual debt, or (B) the amount which is determined by dividing the insured unpaid principal, reduced by the extent to which the unpaid principal of the supporting assets and a reasonable projection of any excess spread exceeds the insured unpaid principal, by nine, shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve; provided no asset in the pool supporting the asset-backed securities exceeds the single risk limits described in subdivision (5) of this section if directly guaranteed, and provided further, if the issuer of such insured asset-backed securities is a special purpose corporation, trust or other entity and that issuer has indebtedness outstanding with respect to any other pool of assets, either such other indebtedness shall be entitled to the benefits of a financial guaranty policy of the same financial guaranty insurance corporation, or such other indebtedness shall (i) be fully subordinated to the insured obligation with respect to, or be nonrecourse with respect to the pool of assets that supports the insured obligation, (ii) be nonrecourse to the issuer other than with respect to the asset pool securing such other indebtedness and proceeds in excess of the proceeds necessary to pay the insured obligation, and (iii) not constitute a claim against the issuer to the extent that the asset pool securing such other indebtedness or excess proceeds are insufficient to pay such other indebtedness, and provided, if the issuer of the insured asset-backed security is in the business of issuing asset-backed securities for the purpose of acquiring pools of assets and each such pool is originated by a different entity, the single risk limits of this section shall apply with respect to each such pool that is sold to, conveyed or otherwise pledged to the issuer, rather than to the insured asset-backed security.

      (3) For obligations issued by a single entity and secured by commercial real estate and not meeting the definition of asset-backed securities, the insured unpaid principal, less fifty per cent of the appraised value of the underlying real estate, shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

      (4) For utility first mortgage obligations, the insured average annual debt service shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

      (5) For all other financial guaranties, the insured unpaid principal for any one entity and backed by a single revenue source may not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

      (6) When calculating the single risk limits provided by this section, the financial guaranty insurance corporation shall add to the insured exposure any investments of the financial guaranty insurance corporation in obligations issued by the same entity and payable solely from the same revenue source as the insured obligation except for obligations of a governmental unit of the United States government rated in one of the top two generic lettered rating classifications by a rating agency acceptable to the commissioner.

      (7) A financial guaranty insurance corporation shall not be deemed in violation of any limitation prescribed by this section with respect to any financial guaranty insurance outstanding prior to October 1, 1993, if the financial guaranty insurance corporation was in compliance with the applicable single risk limit in effect in the state at the time that the financial guaranty insurance policy was issued. If the financial guaranty insurance corporation was not in compliance it shall comply with the limitations prescribed by this section not later than July 1, 1994.

      (P.A. 93-136, S. 11.)

      Sec. 38a-92k. Exceeding of limitations by licensed financial insurance corporations. Notification of commissioner. Hearing. (a) If a licensed financial insurance corporation at any time exceeds any limitation prescribed by section 38a-92i or 38a-92j the corporation shall immediately notify the commissioner in writing. Upon receipt of the written notification, or if the commissioner has reason to believe that any such limitation has been exceeded, he may issue an order to show cause why the financial guaranty insurance corporation should not cease transacting any new financial guaranty insurance business. If the commissioner issues such an order, the commissioner shall serve notice of the hearing with the order to the financial guaranty insurance corporation stating the time and place and the conduct, condition or grounds upon which the commissioner has made the order. The hearing shall occur not less than twenty nor more than thirty days after notice is served. At the hearing, the burden to show cause why the financial guaranty insurance corporation should not cease transacting new financial guaranty insurance business shall be borne solely by the financial guaranty insurance corporation.

      (b) If the commissioner does not issue an order upon receiving written notice pursuant to subsection (a) of this section, the financial guaranty insurance corporation shall, within thirty days after any limitation is breached, submit a written plan to the commissioner detailing the steps that it will take or has taken to reduce its exposure to loss to no more than the amounts allowed in sections 38a-92i and 38a-92j. If, after review of the written plan, the commissioner determines that the corporation has not presented reasonable steps to reduce its exposure to loss to not more than the amounts allowable, the commissioner may issue an order to show cause following the same procedures as prescribed in subsection (a) of this section.

      (c) If, after notice and hearing pursuant to subsection (a) or (b) of this section, the commissioner determines that the financial guaranty insurance corporation has exceeded any limitation prescribed by section 38a-92i or 38a-92j, the commissioner may order the corporation to cease transacting any new financial guaranty insurance business until its exposure to loss no longer exceeds these limitations.

      (d) The provisions of this section shall not limit the authority of the commissioner under any other provision of this title.

      (P.A. 93-136, S. 12.)

      Sec. 38a-92l. Other licensed insurers transacting financial guaranty insurance to be subject to provisions of this part. On and after October 1, 1993, any insurer transacting financial guaranty insurance in this state which is not licensed to transact financial guaranty insurance but which is otherwise licensed by the commissioner to transact insurance in this state, shall be subject to all of the provisions of sections 38a-92 to 38a-92n, inclusive, and:

      (1) May continue to write financial guaranties of the type authorized by subsection (b) of section 38a-92g as follows: (A) For a period not to exceed five years from October 1, 1993, provided, by July 1, 1994, application shall be made to the commissioner to license a financial guaranty insurance corporation, controlled by or under common control with that insurer, which financial guaranty insurance corporation, once licensed, shall immediately assume all of the financial guaranty insurance in force on the books of the insurer which was written on or after October 1, 1993; or (B) in the case of an insurer transacting only financial guaranty insurance prior to October 1, 1993, which would comply with all of the requirements for licensing as a financial guaranty insurance corporation under sections 38a-92 to 38a-92n, inclusive, and which makes application not later than July 1, 1994, to become licensed to transact financial guaranty insurance business, such insurer may continue to write financial guaranty insurance until such time as the commissioner issues or denies the license application or the application is otherwise terminated;

      (2) Shall, if it does not make application for a license to transact financial guaranty insurance pursuant to subsection (1) of this section, cease writing any new financial guaranty insurance not later than July 1, 1994. An insurer subject to this subsection may do one or more of the following: (A) Reinsure its net in force business with a licensed financial guaranty insurance corporation; (B) subject to the prior approval of its domiciliary commissioner and the commissioner of this state, reinsure all or part of its net in force business in accordance with the requirements of subdivision (2) of subsection (a) of section 38a-92m, except that subparagraph (B)(v) of said subdivision (2) shall not be applicable. The assuming insurer shall maintain reserves for the reinsured business in the manner applicable to the ceding insurer under sections 38a-92 to 38a-92n, inclusive; or (C) thereafter continue the risks then in force, and with thirty days prior written notice to its domiciliary commissioner, write new financial guaranty policies, provided the writing of the policies is reasonably prudent to mitigate either the amount of or possibility of loss in connection with business written prior to October 1, 1993. However, an insurer shall receive the prior approval of its domiciliary commissioner and the commissioner of this state before writing any new financial guaranty insurance policies that would have the effect of increasing its risk of loss;

      (3) Shall, for all guaranties in force prior to October 1, 1993, including those that fall under the definition of financial guaranty insurance contained in subdivision (1) of section 38a-92a, be subject to the contingency reserve, reserves for loss and loss adjustment expenses and unearned premium reserve requirements applicable for municipal bond insurance policies which were in effect prior to July 1, 1989, or October 1, 1993, as appropriate. To the extent that the insurer's contingency reserves maintained as of October 1, 1993, are less than those required under subdivision (1) of subsection (b) of section 38a-92c, the insurer shall have until July 1, 1994, to bring its reserves into compliance, except that a part of the reserve may be released proportional to the reduction in net total liabilities resulting from reinsurance provided the reinsurer shall, on the effective date of the reinsurance, establish a reserve in an amount equal to the amount released and in addition, a part of the reserve may be released with the approval of the commissioner upon demonstration that the amount carried is excessive in relation to the corporation's outstanding obligations;

      (4) Shall be subject to the reserve requirements applicable to financial guaranty insurance corporations, for business transacted on or after October 1, 1993.

      (P.A. 93-136, S. 13.)

      Sec. 38a-92m. Credit for reinsurance as an asset or as a reduction from liability, when. (a) For financial guaranty insurance that takes effect on or after October 1, 1993, an insurer licensed under sections 38a-92 to 38a-92n, inclusive, to transact financial guaranty insurance shall receive credit for reinsurance as an asset or as a reduction from liability only if:

      (1) The reinsurance is subject to an agreement which provides for its stated term and with respect to any such reinsured financial guaranty insurance in force, the reinsurance agreement may only be terminated or amended if one or more of the following applies: (A) At the option of the reinsurer or the ceding insurer if the liability of the reinsurer with respect to policies in force as of the date of termination shall continue until the expiration or cancellation of each such policy; (B) at the option or with the consent of the ceding insurer, if the reinsurance agreement provides for a cutoff of the reinsurer's liability with respect to the reinsurance in force as of the date of termination; or (C) at the discretion of the commissioner acting as rehabilitator, liquidator or receiver of the ceding insurer or reinsurer; and

      (2) The reinsurance is ceded to one or more of the following:

      (A) An insurer licensed under sections 38a-92 to 38a-92n, inclusive, to transact financial guaranty insurance, provided if the insurer is an affiliate of the ceding insurance, (i) the value of the ceding insurer's ownership interest may not exceed the greater of (I) thirty-five per cent of the ceding insurer's capital and surplus or (II) fifty per cent of the excess of the ceding insurer's admitted assets over its liabilities and capital and (ii) the insurer providing the reinsurance is rated at the time of cession and thereafter in one of the two top generic rating classifications by a securities rating agency acceptable to the commissioner;

      (B) An insurer licensed in this state to transact surety insurance or reinsurance, but not financial guaranty insurance pursuant to sections 38a-92 to 38a-92n, inclusive, or accredited as a reinsurer in this state as provided in subsection (c) of section 38a-85 if the insurer or reinsurer meets all of the following criteria: (i) Has and maintains combined capital and surplus of at least fifty million dollars; (ii) establishes and maintains the reserves required in section 38a-92c, except that if the reinsurance agreement is nonproportional, the contribution to the contingency reserve shall be equal to fifty per cent of the quarterly written insurance premium; (iii) complies with the provisions of subsection (b) of section 38a-92i, except that its maximum aggregate assumed total net liability shall be one-half that permitted for a financial guaranty insurance corporation. For the purpose of determining compliance, the reinsurer, unless at the time of cession and thereafter it is rated in one of the two top generic rating classifications by a securities rating agency acceptable to the commissioner, shall be limited to using ten per cent of its capital and surplus in making this calculation; (iv) complies with the provisions of section 38a-92j; and (v) assumes, together with all other reinsurers subject to this subparagraph, less than fifty per cent of the ceding insurer's total liability after deducting any reinsurance ceded to any insurers pursuant to subparagraph (A) of this subdivision.

      (C) An insurer not licensed in this state but which is licensed in, or in the case of a United States branch of an alien insurer, is entered through, a state which employs standards regarding credit for reinsurance applicable to financial guaranty insurance corporations which are substantially similar to those in this state and the assuming insurer or United States branch of the alien insurer: (i) Otherwise complies with the provisions of subparagraph (B)(i) and (B)(ii) of this subdivision; (ii) submits to the authority of this state to examine its books and records; and (iii) meets the requirements of subsection (g) of section 38a-85;

      (D) An insurer not licensed in this state transacting only financial guaranty insurance as is or would be permitted by sections 38a-92 to 38a-92n, inclusive, and such other lines of insurance as is or would be permitted under section 38a-41, and that otherwise complies with the provisions of subparagraphs (B)(i) and (B)(ii) of this subdivision, in an amount not exceeding the liabilities carried by the ceding financial guaranty insurance corporation for amounts withheld under a reinsurance agreement for such reinsurer, including funds held in trust for the ceding insurer, or amounts deposited by such reinsurer as security for the payment of obligations under the agreement if such funds or deposits are held subject to withdrawal by and under the control of the ceding insurer, or in the case of a trust, held in a qualified United States financial institution, as defined in subsection (b) of section 38a-87; or

      (E) An insurer not licensed in this state and not transacting only financial guaranty insurance as is or would be permitted by sections 38a-92 to 38a-92n, inclusive, and such other lines of insurance as is or would be permitted under section 38a-41 and that otherwise complies with the provisions of subparagraphs (B)(i), (B)(iii) and (B)(v) of this subdivision in an amount not exceeding the liabilities carried by the ceding financial guaranty insurance corporation for amounts withheld under a reinsurance agreement for such reinsurer, including funds held in trust for the ceding insurer, or amounts deposited by such reinsurer as security for the payment of obligations under the agreement if such funds or deposits are held subject to withdrawal by and under the control of the ceding insurer, or in the case of a trust, held in a qualified United States financial institution, as defined in subsection (b) of section 38a-87.

      (b) In determining whether the financial guaranty insurance corporation meets the limitations imposed by section 38a-92j, in addition to credit for other types of qualifying reinsurance, the financial guaranty insurance corporation's aggregate risk may be reduced to the extent of the limit for aggregate reinsurance but in no event in an amount greater than the amount of the aggregate risk that will become due during the unexpired term of such reinsurance agreement in excess of the financial guaranty insurance corporation's retention pursuant to such reinsurance agreement.

      (P.A. 93-136, S. 14; P.A. 00-30, S. 9, 14.)

      History: P.A. 00-30 amended Subpar. (a)(2)(B) to substitute "written" for "earned" re insurance premium, effective January 1, 2001.

      Sec. 38a-92n. Filing of policy forms and amendments with commissioner. (a) Each licensed financial guaranty insurance corporation shall file all policy forms and any amendments thereto with the commissioner prior to the issuance of a financial guaranty insurance policy. Immediately upon filing, the financial guaranty insurance corporation may utilize any such policy form or amendment, unless and until the commissioner disapproves of the policy forms or amendments filed. Filings that otherwise comply with this section and that the commissioner does not disapprove within thirty days of filing shall be deemed approved.

      (b) Each policy shall provide that there shall be no acceleration of payments due under the policy with respect to guaranteed obligations except at the option of the financial guaranty insurance corporation. For purposes of this subsection, acceleration of payments shall mean any acceleration of a payment by reason of a payment default or insolvency of the obligor whose obligation is guaranteed or insured.

      (c) Each policy shall contain a statement that in the event the insurer becomes insolvent, any claims arising under the policy of financial guaranty insurance are excluded from coverage by the Connecticut Insurance Guaranty Association.

      (d) The commissioner may prescribe additional minimum policy provisions determined by the commissioner to be necessary or appropriate to protect policyholders, claimants, obligees or indemnitees.

      (P.A. 93-136, S. 15.)

      Sec. 38a-93. Reserved for future use.

PART III
INVESTMENTS

      Secs. 38a-94 to 38a-101. (Formerly Secs. 38-141a to 38-146a and 38-148). Domestic life insurers: Certain investments forbidden; unqualified loans and investments, limit permitted; investment in obligations guaranteed by federal or state government; approval of loans and investments; officers to receive no compensation for negotiating loan; security for loans; acquisition and organization of subsidiaries by domestic mutual life insurance companies; penalty for authorizing illegal investments. Sections 38a-94 to 38a-101, inclusive, are repealed.

      (1949 Rev., S. 6167, 6168, 6170-6172, 6174; 1951, S. 2832d, 2833d; 1961, P.A. 92; 1963, P.A. 168, S. 1; 1971, P.A. 460; P.A. 81-111, S. 6; P.A. 90-243, S. 61; P.A. 92-60, S. 28.)

      Sec. 38a-102. Investments. (a) Except as otherwise limited or prohibited by sections 38a-102 to 38a-102h, inclusive, or by regulation adopted by the Insurance Commissioner pursuant hereto, a domestic insurance company may make or acquire such investments as are prudent in respect of the business of said insurance company and diversification considerations.

      (b) Eligibility of an investment shall be determined at the time of its making or acquisition. Any instrument, including any extension or modification thereof, or collateral taken by a domestic insurer as a result of adverse financial circumstances affecting an investment shall not be considered a new investment for purposes of sections 38a-102 to 38a-102h, inclusive.

      (c) Any investment limitation based on the amount of an insurance company's admitted assets or capital and surplus shall relate to such assets or capital and surplus as shown by the insurance company's annual statement as of December thirty-first next preceding the date of acquisition.

      (d) In the case of a domestic life insurance company, the investment limitations set forth in section 38a-102c shall apply to a separate account only to the extent that reserves for guarantees with respect to (1) benefits guaranteed as to dollar amount and duration or (2) funds guaranteed as to principal amount or stated rate of interest are held in a separate account in accordance with section 38a-433(a)(iii).

      (e) Any limitation or prohibition appearing in sections 38a-102 to 38a-102h, inclusive, shall apply only with respect to the section in which it appears and shall not constitute a general prohibition applicable to any other section unless specifically stated. The qualification or disqualification of an investment under one section shall not prevent its qualification in whole or in part under another section and an investment authorized by more than one section may be held under whichever authorizing section the company first elects.

      (f) The provisions of sections 38a-102 to 38a-102h, inclusive, shall not apply in whole or in part to any activity which the Insurance Commissioner shall exempt therefrom as consistent with his purpose of preserving the financial integrity of insurance companies for their policyholders. The Insurance Commissioner may adopt such regulations as he deems necessary in accordance with chapter 54 to carry out the purposes of sections 38a-102 to 38a-102h, inclusive.

      (P.A. 91-262, S. 1, 19.)

      Sec. 38a-102a. Nonadmitted investment assets. Divestiture order, notice and hearing. (a) Investments made in excess of the limits prescribed in sections 38a-102 to 38a-102h, inclusive, shall be considered nonadmitted assets of an insurance company only to the extent of such excess and then only to the extent all such excess investments in the aggregate exceed fifty per cent of the amount by which capital and surplus exceeds the minimum requirements for such company.

      (b) Whenever a domestic insurer, as defined in section 38a-1, holds nonadmitted investment assets exceeding fifty per cent of the amount by which capital and surplus exceeds the minimum requirements for such company or whenever the investments in any category exceed twice the limitations imposed thereon, the Insurance Commissioner may, after reasonable notice to and hearing of such company, direct the orderly divestiture of any or all of such excess. In addition to such an order, the Insurance Commissioner may require the chief investment officer, or in the absence of any such designee, the chief executive officer, of such company to affix to each financial statement required to be filed with the commissioner, a certification that any such order has been complied with or containing the details and explanation of any noncompliance.

      (P.A. 91-262, S. 2, 19.)

      Sec. 38a-102b. Definitions. For the purposes of sections 38a-102 to 38a-102h, inclusive:

      (a) "Exempted country" means a foreign jurisdiction rated in one of the two highest rating categories by an independent, nationally recognized United States rating agency.

      (b) "Foreign obligations and investments" with respect to any single country means the obligations of the government of such country and political subdivisions, agencies and instrumentalities thereof together with obligations of and investments in entities created under the laws of that country, or a political subdivision thereof, and real estate and other tangible assets located in that country. Obligations issued, assumed or guaranteed by any institution created under the laws of the United States or any state thereof are not foreign obligations and investments.

      (c) "High yield obligations" means obligations which are not rated as investment grade by any nationally recognized United States rating agency or the National Association of Insurance Commissioners.

      (d) "Institution" includes business trusts, corporations, joint stock associations, partnerships and other legal entities organized under the laws of the United States, or any state or territory of the United States, but it shall not include agencies, authorities, or instrumentalities of or entities sponsored by the United States, its possessions or territories.

      (e) "Insurance company" shall have the meaning as set forth in section 38a-1 and shall include fraternal benefit societies as defined in section 38a-595 and health care centers as defined in section 38a-175, but it shall not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia or a state or political subdivision of a state.

      (f) "Nonadmitted investment assets" means nonadmitted assets excluding real and personal property used in insurance business operations.

      (g) "Obligations" includes bonds, debentures, notes and other evidences of indebtedness.

      (h) "Subsidiary" or "subsidiaries" shall have the same meaning as set forth in section 38a-1 but the term "controlled by", as used in said section, shall have the same meaning as set forth in section 38a-129, provided, however, that for purposes of sections 38a-102 to 38a-102h, inclusive, a person may rebut the presumption of control used to define a subsidiary by written notice to the commissioner of its intent to disavow control notwithstanding the direct or indirect ownership, control or holding with the power to vote, or holding of proxies representing ten per cent or more but less than a majority of the voting securities or voting power of any other person. Control shall be conclusively presumed to exist under said sections if any person, directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing over fifty per cent of the voting securities or voting power of any other person.

      (P.A. 91-262, S. 3, 19; P.A. 95-168, S. 3.)

      History: P.A. 95-168 amended Subsec. (h) by making technical clarifications re use of term "controlled by" in "subsidiary or subsidiaries" definition.

      Sec. 38a-102c. Investments of admitted assets. Limitations. (a) A domestic insurer may invest up to ten per cent of admitted assets per obligor in obligations (1) issued, assumed or guaranteed by any agency, political subdivision or instrumentality of any state which obligations are not general obligations thereof; and (2) issued, assumed or guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the International Finance Corporation and any other agency or entity engaged in similar activities and in which the government of the United States participates.

      (b) A domestic insurer may invest up to five per cent of admitted assets in obligations of any single institution other than high yield obligations. The foregoing limitation shall not apply to obligations with a final maturity of one year or less from the date of acquisition.

      (c) A domestic insurer may invest up to one per cent of admitted assets in high yield obligations of any one institution and up to ten per cent of admitted assets in the aggregate in high yield obligations registered under the Securities Act of 1933. The commissioner may adopt regulations limiting the percentage of admitted assets that may be invested in high yield obligations not registered under the Securities Act of 1933.

      (d) A domestic insurer may invest in foreign obligations and investments (1) up to ten per cent of admitted assets in any exempted country, and (2) up to two per cent of admitted assets in any other foreign country and up to fifteen per cent of admitted assets in the aggregate in all such other foreign countries. The aggregate foreign obligations and investments shall not exceed thirty per cent of admitted assets. All such foreign obligations and investments made within the limitation of this subsection shall also be subject to the percentage limitations prescribed by subsections (a), (b), (c), (e) and (f) of this section as applicable to such investment class, but this subsection shall not apply to investments which otherwise constitute an ownership interest in a subsidiary or affiliate of the domestic insurer. In addition to the foregoing, a domestic insurer transacting insurance in a foreign country or countries may invest funds necessary to meet its obligations in connection with such foreign insurance business without limitations under sections 38a-102 to 38a-102h, inclusive.

      (e) A domestic insurer may invest up to five per cent of admitted assets in the common stock, preferred stock, limited partnership interests or other equity interests of any single institution other than subsidiaries and affiliates or in the shares of investment companies and up to twenty-five per cent of admitted assets in all such investments other than preferred stocks, which shall not be subject to such aggregate limitation.

      (f) A domestic insurer may invest (1) up to five per cent of admitted assets in any single real estate investment or other tangible investment, and (2) up to ten per cent of admitted assets in the aggregate in (A) tangible investments and non-income-producing real estate and (B) that portion of any loan secured by mortgages or other interests in real estate which when made exceeds a loan-to-value ratio of more than seventy-five per cent. A "real estate investment" means any interest in real estate including, without limitation, a direct equity interest, joint venture interest, partnership interest and an interest in obligations secured by a mortgage or deed of trust but shall not include investments in subsidiaries.

      (P.A. 91-262, S. 4, 19; P.A. 93-60, S. 3.)

      History: P.A. 93-60 amended Subsec. (a) to include investments in the International Finance Corporation as admitted assets for domestic insurers and made certain technical changes for accuracy.

      Sec. 38a-102d. Affiliate relationships in the investment of admitted assets. Limitations. (a) In addition to investments in common stock, preferred stock, debt obligations and other securities permitted under sections 38a-102 to 38a-102h, inclusive, a domestic insurer may also: (1) Invest in common stock, preferred stock, debt obligations and other securities of one or more subsidiaries or affiliates, amounts which do not exceed the lesser of ten per cent of such insurer's assets or fifty per cent of such insurer's surplus as regards policyholders, provided after such investments, the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, investments in domestic or foreign insurance subsidiaries or affiliates shall be excluded, and there shall be included: (A) Total net moneys or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary or affiliate, including all organizational expenses and contributions to capital and surplus of such subsidiary or affiliate whether or not represented by the purchase of capital stock or issuance of other securities, and (B) all amounts expended in acquiring additional common stock, preferred stock, debt obligations and other securities and all contributions to the capital and surplus, of a subsidiary or affiliate subsequent to its acquisition or formation; (2) invest any amount in common stock, preferred stock, debt obligations and other securities of one or more subsidiaries or affiliates engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer, provided each such subsidiary or affiliate agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subdivision (1) of this subsection or in sections 38a-102 to 38a-102h, inclusive, applicable to the insurer. For purposes of this subdivision, "the total investment of the insurer" includes: (A) Any direct investment by the insurer in an asset, and (B) the insurer's proportionate share of any investment in an asset by any subsidiary or affiliate of the insurer, which shall be calculated by multiplying the amount of the subsidiary's or affiliate's investment by the percentage of the ownership of such subsidiary or affiliate; and (3) with the approval of the commissioner, invest any greater amount in common stock, preferred stock, debt obligations or other securities of one or more subsidiaries or affiliates, provided after such investment the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

      (b) In determining the financial condition of an insurance company, its investments in subsidiaries or affiliates shall be valued in accordance with any applicable valuation method approved by the commissioner and consistent with procedures promulgated by the National Association of Insurance Commissioners.

      (c) With respect to the activities conducted by a domestic insurer's subsidiaries, the commissioner shall have the power to: (1) Order said company to curtail the conduct of any activity if he finds, after notice and opportunity to be heard, that such activity is not lawful or is against public policy or that the continuation of such activity is materially adverse to the interests of the insurer's policyholders; and (2) require separate books, accounts and records for such classes of activities of the insurance company subsidiary as he shall determine, which books, accounts and records shall be so maintained as to disclose clearly and accurately the nature and details of such activities. The commissioner may determine that an activity is materially adverse to policyholders if he finds that subsidiaries are being used to avoid the quantitative limitations directly applicable to insurers under section 38a-102c.

      (P.A. 91-262, S. 5, 19; P.A. 93-239, S. 21; P.A. 95-168, S. 2; P.A. 06-54, S. 2.)

      History: P.A. 93-239 replaced former Subsec. (a) re investment limits with new provisions re certain investments and amounts allowed in relation to insurer's assets, liabilities and surplus and the formula for calculating such limits; P.A. 95-168 amended Subsec. (b) to provide that valuation method be consistent with the National Association of Insurance Commissioners standards and procedures; P.A. 06-54 amended Subsecs. (a) and (b) to allow insurer to invest in its affiliates, subject to the same limitations and requirements that apply to investments in subsidiaries.

      Sec. 38a-102e. Loan or investment prohibition. No domestic insurer shall make any loan or investment, other than a life insurance policy loan secured by its policies in an amount not exceeding the net reserve value thereof, unless authorized or approved by its board of directors or a committee thereof responsible for supervising or making such loan or investment or by committees or persons pursuant to a delegation of authority. The terms and limitations of any delegation of authority by the board of directors or any committee shall be by its actions which are duly recorded.

      (P.A. 91-262, S. 6, 19.)

      Sec. 38a-102f. Prohibition of compensation for negotiating a loan. No director or officer of a domestic insurer shall receive any money or valuable consideration for negotiating, procuring or recommending any loan from such domestic insurer or for selling or aiding in the sale of any stocks or securities to or by such domestic insurer.

      (P.A. 91-262, S. 7, 19.)

      Sec. 38a-102g. Investments of foreign and alien insurers. Foreign and alien insurers, as defined in section 38a-1, transacting the business of insurance in this state, shall have assets of the same general character and quality and policies and procedures relating to the approval of investments as specified in sections 38a-102 to 38a-102h, inclusive, for domestic insurers, except that other investments authorized by the law of such an insurer's state or country of domicile, may be recognized as admitted assets at the discretion of the commissioner.

      (P.A. 91-262, S. 8, 19.)

      Sec. 38a-102h. Policies and procedures re use of special knowledge or information. Each domestic insurer shall adopt policy and implementation procedures designed to prevent directors, officers, employees or any other person from inappropriately benefiting, either directly or indirectly, from a conflict of interest arising from their position in or special knowledge of the company. Such policy and procedures shall be maintained for inspection by the commissioner at the principal office of the insurer and shall be filed with the commissioner upon his request and along with any application for authority to do business within this state.

      (P.A. 91-262, S. 9, 19.)

      Sec. 38a-102i. Exceptions. None of the provisions of sections 38a-102 to 38a-102h, inclusive, shall be preempted by the provisions of section 106 of Title I of the Secondary Mortgage Market Enhancement Act of 1984, 15 USC Section 77r-1.

      (P.A. 91-356, S. 2, 3.)

      Secs. 38a-103 to 38a-116. Reserved for future use.

PART IV
INSIDER TRADING OF EQUITY SECURITIES

      Sec. 38a-117. (Formerly Sec. 38-68a). Insider trading of equity securities. Definitions. As used in sections 38a-118 to 38a-124, inclusive, "equity security" means any stock or similar security, or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or to purchase such a security, or any such warrant or right, or any other security which the Insurance Commissioner shall deem to be of similar nature and consider necessary or appropriate, by such regulations as he may prescribe in the public interest or for the protection of investors, to treat as an equity security.

      (February, 1965, P.A. 273, S. 1; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 283, 348.)

      History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior status and abolished the department of business regulation; Sec. 38-68a transferred to Sec. 38a-117 in 1991.

      Annotation to former section 38-68a:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Sec. 38a-118. (Formerly Sec. 38-68b). Beneficial owners of securities to file with commissioner. Every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of any equity security of a domestic stock insurance company or who is an officer, as defined by the Insurance Commissioner, or a director of such company shall file in the office of the commissioner on or before December 31, 1965, or within ten days after he becomes such beneficial owner, director or officer, whichever is later, a statement, in such form as the commissioner may prescribe, of the amount of all equity securities of such company of which he is the beneficial owner, and within ten days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file in the office of the commissioner a statement, in such form as the commissioner may prescribe, indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.

      (February, 1965, P.A. 273, S. 2; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 284, 348.)

      History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; Sec. 38-68b transferred to Sec. 38a-118 in 1991.

      Annotation to former section 38-68b:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Sec. 38a-119. (Formerly Sec. 38-68c). Disposition of certain profits realized by owners and officers. For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director or officer by reason of his relationship to such domestic stock insurance company, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such company within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the company, irrespective of any intention on the part of such beneficial owner, director or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the company or by the owner of any security of the company in the name and in behalf of the company if the company fails or refuses to bring such suit within sixty days after written request or fails diligently to prosecute the same thereafter; but no such suit shall be brought more than two years next after the filing with the commissioner of the report showing that the profit was realized. This section shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the commissioner by regulations may exempt as not comprehended within the purpose of this section.

      (February, 1965, P.A. 273, S. 3.)

      History: Sec. 38-68c transferred to Sec. 38a-119 in 1991.

      Annotation to former section 38-68c:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Sec. 38a-120. (Formerly Sec. 38-68d). Sales of securities restricted. No such beneficial owner, director or officer, directly or indirectly, shall sell any equity security of such company if the person selling the security or his principal (i) does not own the security sold, or (ii) if, owning the security, does not deliver it against such sale within twenty days thereafter, or does not within five days after such sale deposit it in the mails or other usual channels of transportation; but no person shall be deemed to have violated this section if he proves that, notwithstanding the exercise of good faith, he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.

      (February, 1965, P.A. 273, S. 4.)

      History: Sec. 38-68d transferred to Sec. 38a-120 in 1991.

      Annotation to former section 38-68d:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Sec. 38a-121. (Formerly Sec. 38-68e). Excepted transactions. The provisions of section 38a-119 shall not apply to any purchase and sale, or sale and purchase, and the provisions of section 38a-120 shall not apply to any sale, of an equity security of a domestic stock insurance company not then or theretofore held by him in any investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market for such security. The commissioner may, by such regulations as he deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

      (February, 1965, P.A. 273, S. 5.)

      History: Sec. 38-68e transferred to Sec. 38a-121 in 1991.

      Annotation to former section 38-68e:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Sec. 38a-122. (Formerly Sec. 38-68f). Foreign or domestic arbitrage transactions. The provisions of sections 38a-118, 38a-119 and 38a-120 shall not apply to foreign or domestic arbitrage transactions unless made in contravention of such regulations as the commissioner may adopt in order to carry out the purposes of sections 38a-117 to 38a-124, inclusive.

      (February, 1965, P.A. 273, S. 6.)

      History: Sec. 38-68f transferred to Sec. 38a-122 in 1991.

      Annotation to former section 38-68f:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Sec. 38a-123. (Formerly Sec. 38-68g). Securities of certain companies not covered. The provisions of sections 38a-118, 38a-119 and 38a-120 shall not apply to any equity securities of a domestic stock insurance company if (i) any class of its equity securities shall be registered, or shall be required to be registered, pursuant to section 12 of the Securities Exchange Act of 1934, as amended, or (ii) such domestic stock insurance company shall not have any class of its equity securities held of record by one hundred or more persons on the last business day of the year next preceding the year in which equity securities of the company would be subject to the provisions of sections 38a-118, 38a-119 and 38a-120 except for the provisions of this subdivision (ii).

      (February, 1965, P.A. 273, S. 7.)

      History: Sec. 38-68g transferred to Sec. 38a-123 in 1991.

      Annotation to former section 38-68g:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Sec. 38a-124. (Formerly Sec. 38-68h). Regulations. The commissioner may, by regulation, exempt in whole or in part any company or class of companies, and any officer, director or beneficial owner of securities of any company, from the provisions of sections 38a-117 to 38a-123, inclusive, upon such terms and conditions and for such period as he deems necessary or appropriate, if he finds, by reason of the number of public investors, amount of trading interest in the securities, the nature and extent of the activities of the company, or otherwise, that such action is not inconsistent with the public interest or the protection of investors. The commissioner may classify companies and prescribe requirements appropriate for each such class. No provision of sections 38a-118, 38a-119 and 38a-120 imposing any liability shall apply to any act done or omitted in good faith in conformity with any regulation of the commissioner, notwithstanding that such regulation may, after such act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason.

      (February, 1965, P.A. 273, S. 8.)

      History: Sec. 38-68h transferred to Sec. 38a-124 in 1991.

      Annotation to former section 38-68h:

      Sec. 38-62 et seq. cited. 207 C. 77.

      Secs. 38a-125 to 38a-128. Reserved for future use.

PART V
ACQUISITION OF CONTROLLING INTEREST

      Sec. 38a-129. (Formerly Sec. 38-39a). Purpose. Definition. (a) It shall be the purpose of sections 38a-129 to 38a-140, inclusive, to safeguard the financial security of Connecticut domestic insurance companies by empowering the Insurance Commissioner to supervise the activities of insurance companies doing business within this state which are affiliated with an insurance holding company system, to review the acquisition of control over the management of domestic insurance companies, however effectuated, and to provide standards for such supervision and review.

      (b) As used in sections 38a-129 to 38a-140, inclusive, the following terms shall have the respective meanings hereinafter set forth, unless the context shall otherwise require:

      (1) "Affiliate" and "affiliated" have the meaning assigned to them by section 38a-1;

      (2) "Commissioner" means the Insurance Commissioner and any assistant to the Insurance Commissioner designated and authorized by him while acting under such designation;

      (3) "Control", "controlled by" and "under common control with" have the meaning assigned to them by section 38a-1. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, ten per cent or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not exist in fact. The commissioner may, after furnishing all persons in interest notice and opportunity to be heard, determine that control exists in fact, notwithstanding the absence of a presumption to that effect;

      (4) "Insurance holding company system" means two or more affiliated persons, one or more of which is an insurance company;

      (5) "Insurance company" shall have the same meaning as set forth in section 38a-1, except that it shall not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;

      (6) "Person" means a person as defined in section 38a-1, or any combination of persons so defined acting in concert;

      (7) A "securityholder" of a specified person means one who owns any security of such person, including common stock, preferred stock, debt obligations and any other security convertible into or evidencing the right to acquire any of the foregoing;

      (8) "Subsidiary" is defined in section 38a-1;

      (9) "Voting security" is defined to include any security convertible into or evidencing a right to acquire a voting security.

      (1969, P.A. 444, S. 1; P.A. 77-614, S. 163, 587, 610; P.A. 78-303, S. 85, 136; P.A. 80-482, S. 275, 345, 348; P.A. 85-16, S. 1, 6; P.A. 90-243, S. 13; P.A. 92-93, S. 42; 92-112, S. 13, 35; P.A. 04-174, S. 3.)

      History: P.A. 77-614 and 78-303 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 85-16 inserted new Subsec. (a), stating the purpose of Secs. 38-39a to 38-39l, inclusive, designated prior provisions as Subsec. (b) and replaced alphabetic Subdiv. indicators with numeric indicators; P.A. 90-243 added a definition for "affiliate" and "affiliated" and made technical corrections for clarity; Sec. 38-39a transferred to Sec. 38a-129 in 1991; P.A. 92-93 and 92-112 amended Subsec. (a) to empower the commissioner to supervise insurers which are affiliated with an insurance holding company system, amended Subsec. (b) to add new Subdiv. (7) defining "securityholder", and new Subdiv. (9) defining "voting security", renumbering former Subdiv. (7) as (8), and made technical corrections for statutory consistency; P.A. 04-174 amended Subsec. (b)(3) to delete "pursuant to subsection (j) of section 38a-135" re rebutting presumption that control exists.

      Annotation to former section 38-39a:

      Cited. 184 C. 352.

      Sec. 38a-130. (Formerly Sec. 38-39b). Acquisition of control of domestic insurance companies. Information statement furnished commissioner and insurer. Violations. (a) No person other than the issuer shall make a tender offer for, or a request or invitation for tenders of, enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security, or solicit any proxy for the purpose of acquiring control, of a domestic insurance company or, subject to the provisions of subsection (c) of this section, any corporation controlling a domestic insurance company if, after the consummation thereof, such person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of such domestic insurance company or corporation controlling a domestic insurance company, and no person shall enter into an agreement to merge with or otherwise acquire control of a domestic insurance company or any corporation controlling a domestic insurance company unless, at the time any form of initial offer, request or invitation is made or the agreement is entered into, or prior to the acquisition of such securities or proxies if no offer or agreement is involved, such person has filed with the commissioner and has sent to such insurance company a statement containing the information required by subsection (b) of this section and such offer, request, invitation, agreement or acquisition has been approved by the commissioner in the manner hereinafter prescribed.

      (b) Such statement shall be made under oath or affirmation and shall contain the following information:

      (1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (a) of this section is to be effected hereinafter called "acquiring party", and (i) if such person is an individual, his principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years; (ii) if such person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform functions appropriate to such positions. Such list shall include for each such individual the information required by subparagraph (i) of this subdivision;

      (2) The source, nature and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose including any pledge of the insurance company's stock, or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing such consideration, provided, where a source of such consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential if the person filing such statement so requests;

      (3) Fully audited financial information as to the earnings and financial condition of each acquiring party or for the preceding five fiscal years of each such acquiring party for such lesser period as such acquiring party and any predecessors thereof shall have been in existence, and similar unaudited information as of a date not earlier than ninety days prior to the filing of the statement;

      (4) Any plans or proposals which each acquiring party may have to liquidate such insurance company, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management;

      (5) The number of shares of any security referred to in subsection (a) of this section which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement or acquisition referred to in said subsection (a), and a statement as to the method by which the fairness of the proposal was arrived at;

      (6) The amount of each class of any security referred to in subsection (a) of this section which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party;

      (7) A full description of any contracts, arrangements or understandings with respect to any security referred to in subsection (a) of this section in which any acquiring party is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into;

      (8) A description of the purchase of any security referred to in subsection (a) of this section during the twelve calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers and consideration paid or agreed to be paid;

      (9) A description of any recommendations to purchase any security referred to in subsection (a) of this section made during the twelve calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interview or at the suggestion of such acquiring party;

      (10) Copies of all tender offers for, requests, or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection (a) of this section and of additional soliciting material relating thereto;

      (11) The term of any agreement, contract or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities referred to in subsection (a) of this section for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto;

      (12) Such additional information as the commissioner may prescribe as necessary or appropriate for the protection of policyholders of the insurance company or in the public interest.

If the person required to file the statement referred to in subsection (a) of this section is a partnership, limited partnership, syndicate or other group, the commissioner may require that the information called for by subdivisions (1) to (12), inclusive, of this subsection shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member or person is a corporation, or the person required to file the statement referred to in subsection (a) of this section is a corporation, the commissioner may require that the information called for by subdivisions (1) to (12), inclusive, of this subsection shall be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than ten per cent of the outstanding voting securities of such corporation. If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the commissioner and sent to such insurance company within two business days after the person learns of such change.

      (c) Any person seeking to acquire control of any corporation which is not itself a domestic insurance company but which controls a domestic insurance company shall remain fully subject to all the provisions of sections 38a-129 to 38a-140, inclusive, except if such control is sought to be acquired by means of a tender offer, exchange offer or solicitation of proxies, the required approval of the commissioner need not be obtained prior to commencement of such tender offer, exchange offer or solicitation of proxies. Such person shall, however, be required to furnish the commissioner with a statement under oath or affirmation containing the information required in subsection (b) of this section no later than the date on which the tender offer, exchange offer or solicitation of proxies commences.

      (d) The following shall constitute violations of this section: (1) The failure to file any statement, amendment or other material required to be filed pursuant to subsection (a) or (b) of this section; or (2) the effectuation of, or any attempt to effectuate, an acquisition of control of, or merger with, a domestic insurance company, other than a domestic insurance company referred to in subsection (c) of this section, unless the commissioner has given his prior approval thereto after the hearing required under section 38a-132; or (3) the effectuation of an acquisition of control of, or merger with, a domestic insurance company referred to in subsection (c) of this section, unless the commissioner has given his prior approval thereto after the hearing required under section 38a-132. For purposes of subdivision (3) of this subsection, the acquisition, directly or indirectly, of ten per cent or more of the voting securities of any corporation which is not itself a domestic insurance company but which controls a domestic insurance company, whether by tender offer, exchange offer, or otherwise, or the voting of proxies representing ten per cent or more of the voting securities of any such corporation shall be presumed to be the effectuation of an acquisition of control of a domestic insurance company referred to in subsection (c) of this section.

      (e) The courts of this state hereby are vested with jurisdiction over every person not resident, domiciled or authorized to do business in this state who files a statement with the commissioner under this section, and overall actions involving such persons arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment by such a person of the commissioner to be his true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the commissioner in accordance with section 38a-26.

      (1969, P.A. 444, S. 2; P.A. 84-185, S. 2; P.A. 85-16, S. 2, 6; P.A. 92-112, S. 14, 35; P.A. 93-239, S. 12, 22.)

      History: P.A. 84-185 amended Subsec. (a) to include the control of proxies of a domestic insurance company and the control of any corporation controlling such a company within the limitations and requirements of the section; P.A. 85-16 added Subsec. (c) re acquisition of control of corporation which controls a domestic insurance company; Sec. 38-39b transferred to Sec. 38a-130 in 1991; P.A. 92-112 amended Subsec. (a) to provide that no entity may control a domestic insurance company without the approval of the commissioner, making technical corrections for statutory consistency, amended Subsec. (b) deleting the prior minimum provisions of the statement made under oath and added twelve new Subdivs. outlining new criteria, deleted the previous Subsec. (c)(1) and relettered and renumbered the previous Subsec. (c)(2), made technical changes re nondomestic insurance companies which control domestic insurers, deleted the requirement of the commissioner's approval, deleted language from the former Subsec. (c)(3) and created new Subsec. (c)(2) re public hearings given to review any acquisition of control and applicable exemptions, added new Subsec. (d) re minimum provisions of what constitutes a violation of this section and added new Subsec. (e) empowering the courts of this state with jurisdiction over persons not resident, domiciled or authorized to do business in this state who file a statement with the commissioner; P.A. 93-239 deleted Subsec. (c)(2) re public hearings given to review any acquisition of control and applicable exemptions and deleted obsolete references in Subsec. (d).

      Annotations to former section 38-39b:

      Cited. 166 C. 43. Cited. 184 C. 352.

      Sec. 38a-131. (Formerly Sec. 38-39c). Form of information statement. If any offer, invitation, request, agreement or acquisition referred to in section 38a-130 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, the person required to file the statement referred to in said section 38a-130 may utilize such documents in furnishing the information required by said section to the extent that the registration statement contains such information.

      (1969, P.A. 444, S. 3.)

      History: Sec. 38-39c transferred to Sec. 38a-131 in 1991.

      Annotation to former section 38-39c:

      Cited. 184 C. 352.

      Sec. 38a-132. (Formerly Sec. 38-39d). Disposition re acquisition. Hearing. Standard of review. (a) (1) The commissioner shall hold a public hearing on the question of the granting of his approval under section 38a-130 within thirty days after the statement required by said section containing all the information, as determined by the commissioner, is filed with him, and at least twenty days notice thereof shall be given by the commissioner to the person filing the statement. No less than fifteen days' notice of such public hearing shall be given by the person filing the statement to the insurance company and to such other persons as may be designated by the commissioner. If any amendment to the statement is filed, the public hearing may be postponed by the commissioner for a reasonable period not to exceed thirty days after the filing of such amendment. The commissioner shall make a determination within thirty days after the conclusion of the hearing.

      (2) The person filing the statement, the insurance company, any person to whom notice of hearing was sent and any other affected person shall have the right to present evidence, have counsel, examine or cross-examine witnesses and offer oral and written argument; and in connection therewith shall be entitled to conduct discovery proceedings in the same manner as is prescribed by the rules for the Superior Court. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearing.

      (3) The commissioner may engage the services of, at the acquiring person's expense, any attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control.

      (b) (1) The commissioner shall approve any merger or other acquisition of control referred to in subsection (a) of this section unless, after a public hearing, he finds that:

      (A) After the change of control, the domestic insurance company referred to in subsection (a) of this section would not be able to satisfy the requirements for the issuance of a license to write the line or lines of business for which it is presently licensed;

      (B) The effect of the merger or other acquisition of control would be to substantially lessen competition of insurance in this state or tend to create a monopoly herein;

      (C) The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurance company or prejudice the interests of its policyholders;

      (D) The plans or proposals which the acquiring party has to liquidate the insurance company, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurance company and not in the public interest;

      (E) The competence, experience and integrity of those persons who would control the operation of the insurance company are such that it would not be in the interest of policyholders of the insurance company and of the public to permit the merger or other acquisition of control; or

      (F) The acquisition is likely to be hazardous or prejudicial to those buying insurance.

      (2) For purposes of this subsection, "other acquisition of control" includes any offer, request, invitation, agreement, solicitation, or acquisition subject to section 38a-130.

      (c) All expenses incurred by the commissioner in connection with the proceedings under this section shall be paid by the person filing the statement required by section 38a-130.

      (1969, P.A. 444, S. 4; P.A. 75-289; P.A. 78-331, S. 17, 58; P.A. 85-16, S. 3, 6; P.A. 92-112, S. 15, 35.)

      History: P.A. 75-289 added Subsec. (c) re payment of commissioner's expenses; P.A. 78-331 substituted reference to Sec. 38-39b for reference to Sec. 38-39c in Subsec. (a); P.A. 85-16 inserted new Subsec. (c) to permit the commissioner to conduct public hearings to review the acquisition of control of any corporation which controls a domestic insurance company, and to establish standards for the commissioner's determination as to whether the acquisition is prejudicial to the interests of policyholders, relettering former Subsec. (c) as (d); Sec. 38-39d transferred to Sec. 38a-132 in 1991; P.A. 92-112 amended Subsec. (a) to change the time limitation from one hundred eighty days to thirty days for the commissioner to hold a public hearing after the statement required under Sec. 38a-130 has been submitted, divided the section into Subdivs., amended the public hearing procedure held to review the acquisition of control of any corporation which controls a domestic insurance company, created new Subdiv. (2) with language taken from old Subsec. (a) re right to present evidence, have counsel, examine and cross-examine witnesses in the public hearing, added a provision requiring that all discovery be completed three days prior to the public hearing, added new Subdiv. (3) allowing the commissioner to engage the services of various professionals at the acquiring person's expense, deleted former Subsecs. (b) and (c), added new Subsec. (b) re commissioner's grant of approval of a merger or acquisition based on the public hearing findings and relettered the previous Subsec. (d) accordingly.

      Annotations to former section 38-39d:

      Cited. 166 C. 43. Cited. 184 C. 352.

      Sec. 38a-133. (Formerly Sec. 38-39e). Exemptions. The provisions of sections 38a-130, 38a-131, 38a-132 and subsection (i) of section 38a-136 shall not apply to: Any offer, request, invitation, agreement or acquisition which the commissioner by order shall exempt therefrom as (A) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurance company, or (B) as otherwise not comprehended within the purposes of sections 38a-129 to 38a-140, inclusive.

      (1969, P.A. 444, S. 5; P.A. 92-112, S. 16, 35; P.A. 93-57, S. 1; P.A. 96-227, S. 4.)

      History: Sec. 38-39e transferred to Sec. 38a-133 in 1991; P.A. 92-112 made technical corrections for statutory consistency; P.A. 93-57 made technical corrections for statutory consistency and deleted specific exemption references; P.A. 96-227 corrected the citation to Sec. 38a-136.

      Annotation to former section 38-39e:

      Cited. 184 C. 352.

      Sec. 38a-134. (Formerly Sec. 38-39f). Nonvotable securities. Injunctive relief. (a) No security which is the subject of any agreement or arrangement regarding acquisition or which is acquired or to be acquired in contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or of any regulation or order promulgated by the commissioner hereunder may be voted at any securityholders' meeting or may be counted for quorum purposes, and any action of securityholders requiring the affirmative vote of a specified percentage of shares may be taken as though such securities were not issued and outstanding; but, in the event the status of any such securities is not challenged by the issuer or any stockholder at a meeting, such securities may be voted and counted for quorum purposes at the meeting and the voting of such securities shall not invalidate the action taken at any such meeting.

      (b) The insurance company or the commissioner may apply to the superior court for the judicial district of Hartford or to the superior court for the judicial district in which the insurance company has its principal place of business, or to any judge thereof, for equitable relief to enjoin any offer, request, invitation, agreement or acquisition made in contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or any regulation or order promulgated by the commissioner hereunder or the voting of any security so acquired. In any case where a person has acquired or is proposing to acquire any securities in violation of said sections or any regulation or order promulgated by the commissioner hereunder, the superior court for the judicial district of Hartford or the superior court for the judicial district in which the insurance company has its principal place of business may, on such notice as the court deems appropriate, upon the application of the insurance company or the commissioner, seize or sequester any securities of the insurance company owned directly or indirectly by such person with such orders with respect thereto as the court deems appropriate to effectuate the provisions of said sections. Notwithstanding any other provision of law, for the purposes of said sections the situs of the ownership of all securities of all domestic insurance companies shall be construed to be this state.

      (1969, P.A. 444, S. 6; P.A. 78-280, S. 2, 6, 127; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 92-112, S. 17, 35; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4-6.)

      History: P.A. 78-280 replaced "Hartford county" with "judicial district of Hartford-New Britain" and "county" with "judicial district" in Subsec. (b); P.A. 88-230 replaced "judicial district of Hartford-New Britain" with "judicial district of Hartford", effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-39f transferred to Sec. 38a-134 in 1991; P.A. 92-112 amended Subsec. (a) to make technical corrections for statutory consistency and replaced references to "stockholders" with "securityholders"; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995.

      Annotation to former section 38-39f:

      Cited. 184 C. 352.

      Sec. 38a-135. (Formerly Sec. 38-39g). Registration of insurance holding company members. Content of the registration statement. Termination of the registration statement. Disclaimer of affiliation. Penalty. Exemptions. (a) Every insurance company which is authorized to do business in this state and which is a member of an insurance holding company system shall register with the commissioner on a form prescribed by him. Any insurance company which is subject to registration under this section shall register within fifteen days after it becomes subject to registration, and annually thereafter by June first of each year for the previous calendar year, unless the commissioner, for good cause shown, extends the time for registration, in which case it shall register within such extended time.

      (b) Every insurance company subject to registration shall file a registration statement which shall contain the following current information:

      (1) The capital structure, general financial condition, ownership and management of the insurance company and any person controlling the insurance company;

      (2) The identity and relationship of every member of the insurance holding company system;

      (3) The following agreements in force, and transactions outstanding or which have occurred during the last calendar year between such insurance company and its affiliates: (i) Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurance company or of the insurance company by its affiliates; (ii) purchases, sales or exchanges of assets; (iii) transactions not in the ordinary course of business; (iv) guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurance company's assets to liability, other than insurance contracts entered into in the ordinary course of the insurance company's business; (v) management agreements, service contracts and cost-sharing arrangements; (vi) reinsurance agreements; (vii) dividends and other distributions to securityholders; and (viii) consolidated tax allocation agreements;

      (4) Any pledge of the insurance company's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system; and

      (5) Other matters concerning transactions between registered insurance companies and any affiliates as may be included from time to time in any registration forms adopted or approved by the commissioner.

      (c) All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.

      (d) No information need be disclosed on the registration statement filed pursuant to subsection (b) of this section if such information is not material for the purposes of this section. Unless the commissioner by regulation or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one per cent or less of the insurance company's admitted assets as of the thirty-first day of December next preceding shall not be deemed material for purposes of this section.

      (e) Subject to subsection (b) of section 38a-136, each registered insurance company shall report to the commissioner all dividends and other distributions to securityholders within fifteen business days following the declaration thereof or such other period as the commissioner shall prescribe by regulation.

      (f) Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurance company, where such information is reasonably necessary to enable the insurance company to comply with the provisions of sections 38a-129 to 38a-140, inclusive.

      (g) The commissioner shall terminate the registration of any insurance company which demonstrates that it no longer is a member of an insurance holding company system.

      (h) The commissioner may require or allow two or more affiliated insurance companies subject to registration hereunder to file a consolidated registration statement.

      (i) The commissioner may allow an insurance company which is authorized to do business in this state and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection (a) of this section and to file all information and materials required to be filed under this section.

      (j) Any person may file with the commissioner a disclaimer of affiliation with any insurance company and any insurance company may file a disclaimer of affiliation with any other person. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurance company as well as the basis for disclaiming such affiliation. After a disclaimer has been filed, the insurance company shall be relieved of any duty to register or report under this section which may arise out of the insurance company's relationship with such person unless and until the commissioner disallows such disclaimer. The commissioner shall disallow such disclaimer only after furnishing all parties in interest with notice and an opportunity to be heard, and after making specific findings of fact to support such disallowance.

      (k) The failure to file a registration statement or any amendment or addition thereto required by this section within the time specified for such filing shall be a violation of sections 38a-129 to 38a-140, inclusive.

      (l) The commissioner may by regulation or order exempt any insurance company or class of insurance companies from registration under this section if in his judgment registration by such company or class of companies is not necessary to effectuate the purposes of said sections.

      (m) A foreign or alien insurer shall not be required to register pursuant to this section if it is subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in this section and subsections (a), (b), (f) and (g) of section 38a-136 or if it is admitted in the domiciliary jurisdiction of the principal insurer in its holding company system and in said jurisdiction is subject to disclosure requirements and standards adopted by statute or regulation which are substantially similar to those contained in this section and subsections (a), (b), (f) and (g) of section 38a-136. The commissioner may require any authorized insurer which is a member of a holding company system which is not subject to registration under this section to furnish a copy of the registration statement or other information filed by such insurance company with the insurance regulatory authority of its domicile or the domicile of the principal insurer in its holding company system, as the case may be.

      (1969, P.A. 444, S. 7; 1971, P.A. 368, S. 1; P.A. 92-112, S. 18, 35; P.A. 93-239, S. 23.)

      History: 1971 act deleted Subdiv. (1) in Subsec. (d) which authorized exemption for company or class of companies "subject to adequate regulation where domiciled or elsewhere" and inserted new Subsec. (e) in its stead; Sec. 38-39g transferred to Sec. 38a-135 in 1991; P.A. 92-112 amended Subsec. (a) to change registration deadline from ninety days to fifteen days and to require annual registration, added new Subsec. (b) re filing of registration statement by insurers, added new Subsec. (c) re contents of the registration statements, added new Subsec. (d) re disclosure of information deemed immaterial, added new Subsec. (e) re reporting to the commissioner all dividends and other distributions to securityholders, added new Subsec. (f) requiring those subject to register within the insurance holding company system to provide complete and accurate information to insurance companies where necessary, added new Subsec. (g) re termination of registration if no longer a member of the insurance holding company system, added new Subsec. (h) re consolidated registration statement, added new Subsec. (i) allowing registration on behalf of an affiliate and relettered the remaining Subsecs. accordingly; P.A. 93-239 in Subsec. (m) added reference to relevant Subsecs. of Sec. 38a-136 for statutory consistency.

      Annotation to former section 38-39g:

      Cited. 184 C. 352.

      Sec. 38a-136. (Formerly Sec. 38-39h). Requirements re transactions between insurance companies and affiliates. Extraordinary dividends or distributions. Prohibited transactions between domestic insurance companies and controlling persons. (a) Transactions within a holding company system to which an insurance company subject to registration under section 38a-135 is a party shall be subject to the following requirements: (1) The terms shall be fair and reasonable; (2) charges or fees for services performed shall be reasonable; (3) expenses incurred and payment received shall be allocated to the insurance company in conformity with customary insurance accounting practices consistently applied; (4) the books, accounts and records of each party shall be so maintained as to clearly and accurately disclose the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and (5) the insurance company's surplus shall be reasonable in relation to such company's outstanding liabilities and adequate to its financial needs.

      (b) The following transactions involving a domestic insurance company and any person in its holding company system may not be entered into unless the insurance company has notified the commissioner in writing of its intention to enter into such transaction at least thirty days prior thereto, or such shorter period as the commissioner may permit, and the commissioner either has approved or not disapproved it within such period:

      (1) Sales, purchases, exchanges, loans or extensions of credit, guarantee or investments provided such transactions are equal to or exceed: (A) With respect to nonlife insurance companies, the lesser of three per cent of the insurance company's admitted assets or twenty-five per cent of surplus; or (B) with respect to life insurance companies, three per cent of the insurance company's admitted assets; each as of the thirty-first day of December next preceding;

      (2) Loans or extensions of credit to any person who is not an affiliate, where the insurance company makes such loans or extensions of credit with the agreement or understanding that the proceeds of such 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 insurance company making such loans or extensions of credit, provided such transactions are equal to or exceed: (A) With respect to nonlife insurance companies, the lesser of three per cent of the insurance company's admitted assets or twenty-five per cent of surplus; or (B) with respect to life insurance companies, three per cent of the insurance company's admitted assets; each as of the thirty-first day of December next preceding;

      (3) Reinsurance agreements or modifications thereto in which the reinsurance premium or a change in the insurance company's liabilities equals or exceeds five per cent of the insurance company's surplus, as of the thirty-first day of December next preceding, including those agreements which may require as consideration the transfer of assets from an insurance company to a nonaffiliate, if an agreement or understanding exists between the insurance company and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurance company;

      (4) All material management agreements, service contracts and cost-sharing arrangements; and

      (5) Any material transactions, specified by regulation, which the commissioner determines may adversely affect the interests of the insurance company's policyholders. Nothing contained in this section shall be deemed to authorize or permit any transactions which, in the case of an insurance company not a member of the same holding company system, would be otherwise contrary to law.

      (c) A domestic insurance company may not enter into transactions which 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 thus avoid the review that would otherwise occur. If the commissioner determines that such separate transactions were entered into over any twelve-month period for such purpose, the commissioner may exercise authority under section 38a-140.

      (d) The commissioner, in reviewing transactions pursuant to subsection (b) of this section, shall consider whether the transactions comply with the standards set forth in subsection (a) of this section and whether they may adversely affect the interests of policyholders.

      (e) Except as may be exempted pursuant to regulations adopted by the commissioner or otherwise waived by the commissioner, the commissioner shall be notified within thirty days of any material investment of the domestic insurance company in any one corporation if the total investment in such corporation by the insurance company holding company system exceeds ten per cent of such corporation's voting securities.

      (f) No insurance company subject to registration under section 38a-135 shall pay any extraordinary dividend or make any other extraordinary distribution to its stockholders until the commissioner has approved such payment or until thirty days after the commissioner has received notice from such company of the declaration thereof within which period the commissioner has not disapproved such payment, whichever is sooner. For the purposes of this subsection, an extraordinary dividend or distribution is any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding twelve months, exceeds the greater of (1) ten per cent of such insurance company's surplus as of the thirty-first day of December last preceding, or (2) the net gain from operations of such insurance company, if such company is a life insurance company, or the net income, if such company is not a life insurance company, for the twelve-month period ending the thirty-first day of December last preceding, but shall not include pro rata distributions of any class of the insurance company's own securities. Notwithstanding any other provision of law, an insurance company may declare an extraordinary dividend or distribution which is conditional upon the commissioner's approval thereof, but such a declaration shall confer no rights upon stockholders until (1) the commissioner has approved the payment of such dividend or distribution or (2) thirty days have elapsed without the commissioner's disapproval thereof as provided in this subsection, whichever is sooner.

      (g) For purposes of sections 38a-129 to 38a-140, inclusive, in determining whether an insurance company's surplus is reasonable in relation to the insurance company's outstanding liabilities and adequate to its financial needs, the following factors, in addition to others, shall be considered: (1) The size of the insurance company as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria; (2) the extent to which the insurance company's business is diversified among the several lines of insurance; (3) the number and size of risks insured in each line of business; (4) the nature of the geographical dispersion of the insurance company's insured risks; (5) the nature and extent of the insurance company's reinsurance program; (6) the quality, diversification and liquidity of the insurance company's investment portfolio; (7) the recent past and projected future trend in the size of the insurance company's surplus; (8) the surplus maintained by other comparable insurance companies; (9) the adequacy of the insurance company's reserves; (10) the quality of the company's earnings and the extent to which the reported earnings include extraordinary items; and (11) the quality and liquidity of investments in affiliates. The commissioner may discount any such investment or treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus whenever in the commissioner's judgment such investment warrants.

      (h) (1) Any domestic insurance company which is affiliated with an insurance holding company system shall report for informational purposes to the Insurance Commissioner all dividends and other distributions to securityholders within five business days following the declaration and at least ten days, commencing from the date of receipt by the Insurance Department, prior to payment thereof.

      (2) No dividend or other distribution may be paid when the surplus of the insurance company is less than the surplus required by section 38a-72 for the kind or kinds of business authorized to be transacted by such company, nor when the payment of a dividend or other distribution would reduce its surplus to less than such amount.

      (3) Except as otherwise provided by law, no dividend or other distribution exceeding an amount equal to an insurance company's earned surplus may be paid without the Insurance Commissioner's prior approval. For purposes of this subsection, "earned surplus" means "unassigned funds-surplus", as defined in the annual report of the insurance company which was most recently submitted pursuant to section 38a-53, reduced by twenty-five per cent of unrealized appreciation in value or revaluation of assets or unrealized profits on investments, as defined in such report.

      (i) (1) Any domestic insurance company of which control has been acquired pursuant to section 38a-130 shall be required to submit to a financial examination and a market conduct examination within thirty days after such acquisition in accordance with procedures set forth by the examiner's handbook of the National Association of Insurance Commissioners and such regulations as the commissioner may adopt.

      (2) No domestic insurance company of which control has been acquired pursuant to section 38a-130 shall, without the prior approval of the commissioner: (A) Pay or propose to pay any dividend during the period of two years from the date of acquisition of control of such insurance company; (B) acquire or enter into an agreement or understanding to acquire control, during the period of three years after the date of acquisition of control of such insurance company, of any other person or persons whose assets exceed twenty-five million dollars; (C) provide or propose to provide directly or indirectly, during the period of three years after the date of acquisition of control of such insurance company, any loans, advances, guarantees, pledges or other financial assistance; or (D) engage in any material transaction with any person during the period of three years after the date of acquisition of such insurance company. For purposes of this subsection, a "material transaction" shall include, but not be limited to, any transfer or encumbrance of assets not in the ordinary course of business which, together with all other transfers or encumbrances made within the preceding twelve months, exceeds in value the greater of (i) ten per cent of such insurance company's surplus as of the December thirty-first last preceding, or (ii) the net gain from operations of such insurance company, if such company is a life insurance company, or the net investment income of such company, if such company is not a life insurance company, for the twelve-month period ending the December thirty-first last preceding.

      (3) The commissioner shall, upon a written request from the controlled domestic insurance company and, upon public hearing after notice to all interested parties, determine whether any limitations contained in subdivision (2) of this subsection shall be continued, or whether and on what conditions they may be waived. Such determination shall be predicated on the results of the examinations provided in subdivision (1) of this subsection and such further examinations, if any, the commissioner may require concerning the adequacy of the insurance company's reserves, the effect any proposed transaction will have on the insurance company's surplus, its cash flow needs and its ability to satisfy any reasonably anticipated obligations in the foreseeable future, and any other effect the proposed transaction would have on the financial stability or solvency of the insurance company and the quality and liquidity of its assets. All fees and expenses relating to such examinations shall be paid by the insurance company.

      (4) Nothing in this subsection shall be interpreted to prohibit any transactions between a domestic insurance company and any of its subsidiaries in the ordinary course of business.

      (1969, P.A. 444, S. 8; 1971, P.A. 368, S. 2; P.A. 85-16, S. 4, 6; P.A. 92-112, S. 19, 35; P.A. 93-57, S. 6, 7, 12; 93-239, S. 29; P.A. 00-30, S. 10, 14.)

      History: 1971 act reduced basis of calculation of extraordinary dividend or distribution from fifteen to ten per cent of surplus in Subsec. (c)(1); P.A. 85-16 added Subsec. (d) re transactions between domestic insurance company and controlling entity; Sec. 38-39h transferred to Sec. 38a-136 in 1991; P.A. 92-112 amended Subsec. (a) to change requirements governing transactions of insurance companies subject to registration within a holding company system, replaced former Subsec. (b) with new provisions re transactions of domestic insurance companies, prior notification to the commissioner of certain transactions and the commissioner's approval, added new Subsec. (c) prohibiting domestic insurance companies from entering into transactions which seek to avoid statutory review, added new Subsec. (d) re commissioner's authority to review transactions of domestic insurance companies, added new Subsec. (e) requiring notification to the commissioner of any material investment of domestic insurance companies in one corporation, relettered Subsec. (c) as (f), changing reference to "stockholders" to "securityholders", specifying determination of when a dividend or distribution is extraordinary and making technical corrections for statutory consistency, effective December 1, 1993, added new Subsec. (g) re factors of reasonableness concerning surplus, deleted parts of former Subsec. (d) and incorporated the remainder in new Subsec. (h) re financial examination and market conduct examination of any domestic insurance company which has been acquired subject to Sec. 38a-130, and made technical corrections for statutory consistency; P.A. 93-57 deleted changes to Subsec. (f) made by P.A. 92-112, effective December 1, 1993, and amended Subsec. (g) to include the quality of the insurance company's earnings and the extent to which such earnings are included as extraordinary items as a factor used to determine the reasonableness of surplus re outstanding liability and adequacy of financial needs, inserted new Subsec. (h) re required reporting of all dividends and other distributions, restrictions on dividends or other distributions paid in relation to the surplus requirements and commissioner's approval of certain transactions, relettered previously existing Subsec. (h) as (i) and made technical corrections for accuracy, effective October 1, 1993; P.A. 93-239 changed effective date of Subsec. (f), as amended by P.A. 92-112 and P.A. 93-57, from December 1, 1993, to October 1, 1993; P.A. 00-30 deleted references to "with respect to policyholders" and "as regards policyholders", and made technical changes for purposes of gender neutrality, effective January 1, 2001.

      Annotation to former section 38-39h:

      Cited. 184 C. 352.

      Sec. 38a-137. (Formerly Sec. 38-39i). Information furnished commissioner confidential. Exceptions. All information, documents and copies thereof obtained by or disclosed to the commissioner or any other person in the course of an examination or investigation made pursuant to section 38a-14a and all information reported, furnished or filed pursuant to sections 38a-135 and 38a-136 shall be given confidential treatment and shall not be subject to subpoena, and shall not be made public by the commissioner, the National Association of Insurance Commissioners, or any other person, except to insurance departments of other states, without the prior written consent of the insurance company to which it pertains unless the commissioner, after giving the insurance company and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interests of policyholders, securityholders or the public will be served by the publication thereof, in which event he may publish all or any part thereof in such manner as he may deem appropriate.

      (1969, P.A. 444, S. 9; P.A. 92-112, S. 20, 35.)

      History: Sec. 38-39i transferred to Sec. 38a-137 in 1991; P.A. 92-112 authorized the National Association of Insurance Commissioners and insurance departments of other states to have access to confidential material in the insurance department's possession, made the provisions of this section not subject to subpoena and made technical corrections for statutory consistency.

      Annotation to former section 38-39i:

      Cited. 184 C. 352.

      Sec. 38a-138. (Formerly Sec. 38-39j). Regulations. The commissioner may, after a public hearing called for the purpose, notice of which hearing shall be published in the Connecticut Law Journal at least thirty days prior to the date of such hearing, promulgate such regulations as shall be necessary to carry out the provisions of sections 38a-129 to 38a-140, inclusive.

      (1969, P.A. 444, S. 10.)

      History: Sec. 38-39j transferred to Sec. 38a-138 in 1991.

      Annotation to former section 38-39j:

      Cited. 184 C. 352.

      Sec. 38a-139. (Formerly Sec. 38-39k). Appeals. (a) Any person aggrieved by any regulation, order or other action of the commissioner pursuant to sections 38a-129 to 38a-l40, inclusive, or any failure of the commissioner to act as required by said sections may appeal therefrom to the superior court for the judicial district of Hartford. The court shall conduct its review without a jury and by trial de novo, except if all parties so stipulate, the review shall be confined to the record. Portions of the record may be introduced by stipulation into evidence in a trial de novo as to those parties so stipulating.

      (b) The filing of an appeal pursuant to this section shall stay the application of any such regulation, order or other action of the commissioner to the appealing party unless the court, after giving such party notice and an opportunity to be heard, determines that such a stay would be detrimental to the interests of policyholders, securityholders, creditors or the public.

      (1969, P.A. 444, S. 11; P.A. 78-280, S. 6, 127; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4-6.)

      History: P.A. 78-280 substituted "judicial district of Hartford-New Britain" for "Hartford county" in Subsec. (a); P.A. 88-230 replaced "judicial district of Hartford-New Britain" with "judicial district of Hartford", effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-39k transferred to Sec. 38a-139 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995.

      Annotations to former section 38-39k:

      Cited. 184 C. 352.

      Subsec. (a):

      Party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in subject matter of decision and must successfully establish that this specific, personal and legal interest has been specifically and injuriously affected by the decision. 166 C. 43.

      Sec. 38a-140. (Formerly Sec. 38-39l). Remedial and penal provisions. (a)(1) Whenever it appears to the commissioner that any insurance company or any director, officer, employee or agent thereof has committed or is about to commit a violation of sections 38a-129 to 38a-140, inclusive, or of any regulation or order issued by the commissioner hereunder, the commissioner may apply to the superior court or any judge thereof for the judicial district in which the principal office of the insurance company is located or, if such insurance company has no such office in this state, to the superior court or any judge thereof for the judicial district of Hartford, for an order enjoining such insurance company or such director, officer, employee or agent thereof from violating or continuing to violate said sections or any such regulation or order, and for such other equitable relief as the nature of the case and the interests of the insurance company's policyholders, creditors and securityholders or the public may require.

      (2) No security which is the subject of any agreement or arrangement regarding acquisition, or which is acquired or to be acquired, in contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or of any regulation or order issued by the commissioner hereunder may be voted at any shareholders' meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding; but no action taken at any such meeting shall be invalidated by the voting of such securities, unless the action would materially affect control of the insurer or unless the courts of this state have so ordered. If an insurer or the commissioner has reason to believe that any security of the insurer has been or is about to be acquired in contravention of the provisions of sections 38a-129 to 38a-140, inclusive, or of any regulation or order issued by the commissioner hereunder, the insurer or the commissioner may apply to the superior court or any judge thereof for the judicial district of Hartford, to enjoin any offer, request, invitation, agreement or acquisition made in contravention of sections 38a-129 to 38a-140, inclusive, or any regulation or order issued by the commissioner thereunder to enjoin the voting of any security so acquired, to void any vote of such security already cast at any meeting of shareholders and for such other equitable relief as the nature of the case and the interest of the insurer's policyholders, creditors and shareholders or the public may require.

      (3) In any case where a person has acquired or is proposing to acquire any voting securities in violation of sections 38a-129 to 38a-140, inclusive, or any regulation or order issued by the commissioner hereunder, the superior court for the judicial district of Hartford, on notice as the court deems appropriate, upon application of the insurer or the commissioner, may seize or sequester any voting securities of the insurer owned directly or indirectly by the person, and issue the order with respect thereto as may be appropriate to effectuate the purposes of sections 38a-129 to 38a-140, inclusive.

      (4) Notwithstanding any other provisions of law, for the purposes of sections 38a-129 to 38a-140, inclusive, the situs of the ownership of the securities of domestic insurers shall be deemed to be in this state.

      (b) Whenever it appears to the commissioner that any person has committed a violation of sections 38a-129 to 38a-l40, inclusive, which so impairs the financial condition of a domestic insurance company as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, securityholders or the public, the commissioner may proceed as provided in section 38a-18 to take possession of the property of such domestic insurance company and to conduct the business thereof.

      (c) (1) Whenever it appears to the commissioner that any insurance company or any director, officer, employee or agent thereof has committed a wilful violation of sections 38a-129 to 38a-140, inclusive, the commissioner may cause criminal proceedings to be instituted by the state's attorney for the judicial district in which the principal office of the insurance company is located or, if such insurance company has no such office in the state, by the state's attorney for the judicial district of Hartford against such insurance company or the responsible director, officer, employee or agent thereof. Any insurance company which wilfully violates said sections shall be fined not more than ten thousand dollars. Any individual who wilfully violates said sections shall be fined not more than three thousand dollars or, if such wilful violation involves the deliberate perpetration of a fraud upon the commissioner, shall be imprisoned not more than two years or so fined or both.

      (2) Any officer, director or employee of an insurance holding company system who wilfully and knowingly subscribes to or makes or causes to be made any false statements or false reports or false filings with the intent to deceive the commissioner in the performance of his duties under sections 38a-129 to 38a-140, inclusive, upon conviction thereof, shall be imprisoned not more than five years or fined not more than twenty-five thousand dollars or both. Any fines imposed shall be paid by the officer, director or employee in his or her individual capacity.

      (d) Whenever it appears to the commissioner that any person has committed a violation of sections 38a-129 to 38a-140, inclusive, which makes the continued operation of an insurance company contrary to the interests of its policyholders or the public, the commissioner may, after giving notice and an opportunity to be heard, suspend, revoke or refuse to renew such insurance company's license or authority to do business in this state for such period as he finds is required for the protection of its policyholders or the public.

      (e) Any insurance company failing, without just cause, to file any registration statement as required in section 38a-135 shall be required, after notice and hearing, to pay a penalty of one hundred dollars for each day's delay, to be recovered by the commissioner and the penalty so recovered shall be paid into the Insurance Fund established under section 38a-52a. The maximum penalty under this section is ten thousand dollars. The commissioner may reduce the penalty if the insurance company demonstrates to the commissioner that the imposition of the penalty would constitute a hardship to the insurance company.

      (f) Every director or officer of any insurance holding company system who wilfully and knowingly violates, participates in, or assents to, or who wilfully and knowingly shall permit any of the officers or agents of the insurance company to engage in transactions or make investments which have not been properly reported or submitted pursuant to section 38a-135 or 38a-136, or which violate sections 38a-129 to 38a-140, inclusive, shall pay, in their individual capacity, a civil forfeiture of not more than five thousand dollars per violation, after notice and hearing before the commissioner. Any civil forfeiture so recovered shall be paid into the Insurance Fund as established under section 38a-52a. In determining the amount of the civil forfeiture, the commissioner shall take into account the appropriateness of the forfeiture with respect to the gravity of the violation, the history of previous violations, and such other matters as he deems necessary.

      (g) Whenever it appears to the commissioner that any insurance company subject to sections 38a-129 to 38a-140, inclusive, or any director, officer, employee or agent thereof has engaged in any transaction or entered into a contract which is subject to section 38a-136 and which would not have been approved had such approval been requested, the commissioner may order the insurance company to cease and desist immediately any further activity under that transaction or contract. After notice and hearing, the commissioner may also order the insurance company to void any such contracts and restore the status quo if such action is in the best interests of the policyholders, creditors or the public.

      (h) If any person required to file an information statement under subsection (c) of section 38a-130 or any required amendment thereto has (1) failed to do so within the prescribed time, or (2) files a false or misleading information statement or amendment thereto, or (3) obstructed the conduct of any hearing required by the commissioner, or (4) consummated a change of control of the domestic insurance company in the absence of a determination by the commissioner that such change of control would not be prejudicial to the interest of its policyholders, the commissioner, and any interested party, including the domestic insurance company, may apply to the superior court for the judicial district of Hartford or to the superior court for the judicial district in which the domestic insurance company has its principal place of business, or to any judge thereof for any injunctive or other relief necessary to remedy any such act or failure to act. Such relief may include an injunction prohibiting any consummation of the change of control until such act or failure to act is remedied. In addition, the commissioner may proceed under section 38a-912 for an order permitting him to take possession and control of the property and affairs of the domestic insurance company in accordance with the provisions of said section.

      (1969, P.A. 444, S. 12-15; P.A. 78-280, S. 2, 6, 127; P.A. 85-16, S. 5, 6; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 92-93, S. 43; P.A. 93-142, S. 4, 7, 8; 93-239, S. 24; May 25 Sp. Sess. P.A. 94-1, S. 34, 130; P.A. 95-220, S. 4-6.)

      History: P.A. 78-280 replaced "county" with "judicial district" and "Hartford county" with "judicial district of Hartford-New Britain" where necessary; P.A. 85-16 added Subsec. (e); P.A. 88-230 replaced "judicial district of Hartford-New Britain" with "judicial district of Hartford", effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 38-39l transferred to Sec. 38a-140 in 1991; P.A. 92-93 amended Subsec. (c) to add Subdiv. (2) re false statements intended to deceive the commissioner in the performance of his duties, added new Subsec. (e) re insurance company failure to file registration statement, added new Subsec. (f) re improperly reported investments, added new Subsec. (g) re transactions resulting from unapproved contracts, relettered former Subsec. (e) as (h) and made technical corrections for statutory consistency; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 93-239 amended Subsec. (a) and added new Subdivs. (2) to (4) re securities acquired in contravention of Secs. 38a-129 to 38a-140, inclusive, and voting by the shareholders based on such acquisition; May 25 Sp. Sess. P.A. 94-1 amended Subdiv. (3) of Subsec. (a) by making technical change, effective July 1, 1994; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995.

      Annotation to former section 38-39l:

      Cited. 184 C. 352.

      Sec. 38a-141. (Formerly Sec. 38-39m). Financial and market conduct examination of acquired domestic insurance company. Transactions limited. Penalties. Regulations. Section 38a-141 is repealed.

      (P.A. 87-302, S. 1, 2; P.A. 90-243, S. 14; P.A. 92-112, S. 34, 35.)

      Secs. 38a-142 to 38a-145. Reserved for future use.

PART VI
MONOPOLIES. SALE OR EXCHANGE OF STOCK.
MERGERS. CONVERSIONS

      Sec. 38a-146. (Formerly Sec. 38-37). Domestic insurance company may acquire stock of other companies. Any domestic insurance company may retain or acquire the whole or any part of the stock or other share capital of other insurance corporations, provided no insurance corporation shall, by reason of such retention or acquisition of stock or other share capital, conduct its business with the public in a manner which substantially lessens competition or tends to create a monopoly.

      (1949 Rev., S. 6093.)

      History: Sec. 38-37 transferred to 38a-146 in 1991.

      Sec. 38a-147. (Formerly Sec. 38-37a). Solicitation of proxies. (a) No person shall, in contravention of such regulations as the Insurance Commissioner may prescribe as necessary or appropriate in the public interest or for the protection of investors, solicit or permit the use of his name to solicit any proxy or consent or authorization in respect of any security issued by any domestic stock insurance company. No proxy, consent or authorization solicited in contravention of such regulations shall be valid or effective. Such regulations shall conform to those prescribed or approved by the National Association of Insurance Commissioners, including such exemptive provisions as may be prescribed by or contained in the regulations of said association.

      (b) Unless proxies, consents or authorizations in respect of a security of a domestic stock insurance company are solicited by or on behalf of the management of such company from the holders of record of such security in accordance with the regulations prescribed under subsection (a) of this section, prior to any annual or other meeting of the holders of such security, such company shall, in accordance with regulations prescribed by the Insurance Commissioner, file with the commissioner and transmit to all holders of record of such security information substantially equivalent to the information which would be required to be transmitted if a solicitation were made.

      (c) Any person aggrieved by any act of the Insurance Commissioner hereunder may appeal therefrom to the superior court for the judicial district of Hartford.

      (February, 1965, P.A. 113, S. 1, 2, 3; 1971, P.A. 870, S. 96; P.A. 76-436, S. 629, 681; P.A. 77-614, S. 163, 610; P.A. 78-280, S. 4-6, 127; P.A. 80-482, S. 274, 348; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4-6.)

      History: 1971 act replaced superior court with court of common pleas in Subsec. (c), effective September 1, 1971, except that courts with cases pending retain jurisdiction unless pending matters deemed transferable; P.A.