CHAPTER 698
INSURERS

Table of Contents

Sec. 38a-47. (Formerly Sec. 38-53a). Payments by domestic insurance companies for expenditures of Insurance Department.
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.
Sec. 38a-53. (Formerly Sec. 38-24). Requirements re filing of annual reports and financial statements by company. Late filing fee.
Sec. 38a-91hh. Examinations of captive insurance companies. Costs. Confidentiality of financial examination workpapers and reports.
Sec. 38a-91nn. Premium receipts tax.
Sec. 38a-102. Investments. Derivative financial transactions. Regulations.
Sec. 38a-102b. Definitions.

PART I
IN GENERAL. COSTS

      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 (1) 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, and (2) the amount appropriated to the Department of Social Services for the fall prevention program established in section 17b-33 from the Insurance Fund for the fiscal 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; Sept. Sp. Sess. P.A. 09-5, S. 53.)

      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 70% to 100% and eliminated the 8% 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; Sept. Sp. Sess. P.A. 09-5 designated provision re expenditures from Capital Equipment Purchase Fund as Subdiv. (1) and added Subdiv. (2) re payment for amount appropriated to Department of Social Services for fall prevention program, effective October 5, 2009.

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      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 (A) 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, (B) the cost of fringe benefits for department and office personnel for such year, as estimated by the Comptroller, (C) 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, and (D) the amount appropriated to the Department of Social Services for the fall prevention program established in section 17b-33 from the Insurance Fund for the fiscal 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, and the amount appropriated to the Department of Social Services from the Insurance Fund for the fiscal year for the fall prevention program established in section 17b-33 shall be deemed to be the actual expenditures for the program.

      (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) If the actual expenditures for the fall prevention program established in section 17b-33 are less than the amount allocated, the Commissioner of Social Services shall notify the Insurance Commissioner and the Healthcare Advocate. 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, the actual expenditures made on behalf of the department and the office from the Capital Equipment Purchase Fund pursuant to section 4a-9 and the actual expenditures for the fall prevention program. 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 twenty-five 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; P.A. 08-178, S. 3; Sept. Sp. Sess. P.A. 09-5, S. 54.)

      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 $10 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 Subsec. (c)(2) concerning assessments which exceed 25% of the expenditures of the insurance department; P.A. 89-165 amended Subsec. (b)(1) 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 Subsec. (b)(3) 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 amended Subsec. (e) to make assessment procedure therein applicable to state fiscal years ending prior to July 1, 1990, and 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 25% 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 25% of actual expenditures of Insurance Department and Office of the Healthcare Advocate, effective July 1, 2006; P.A. 08-178 increased penalty from $10 to $25 in Subsec. (h); Sept. Sp. Sess. P.A. 09-5 amended Subsec. (a) by making a technical change, amended Subsec. (b)(1) by designating existing provisions re content of statement as Subparas. (A) to (C) and adding Subpara. (D) requiring statement to include amount appropriated to Department of Social Services for fall prevention program, amended Subsec. (b)(3) by adding provision re amount appropriated to Department of Social Services for fall prevention program deemed to be actual program expenditures, and amended Subsec. (g) by adding provision requiring Commissioner of Social Services to notify Insurance Commissioner and Healthcare Advocate if expenditures for fall prevention program are less than amount allocated and adding provision requiring recalculated proposed assessment to include actual expenditures for fall prevention program, effective October 5, 2009.

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      Sec. 38a-53. (Formerly Sec. 38-24). Requirements re filing of annual reports and financial statements by company. Late filing fee. (a)(1) Each domestic insurance company or health care center shall, annually, on or before the first day of March, submit to the commissioner, and electronically to the National Association of Insurance Commissioners, a true and complete 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. An electronically filed report in accordance with section 38a-53a that is timely submitted to the National Association of Insurance Commissioners does not exempt a domestic insurance company or health care center from timely filing a true and complete paper copy with the commissioner.

      (2) Each accredited reinsurer, as defined in subdivision (1) of subsection (c) of section 38a-85, and assuming insurance company, as provided in section 38a-85, shall file an annual report in accordance with the provisions of section 38a-85.

      (b) Each foreign insurance company doing business in this state shall, annually, on or before the first day of March, submit to the commissioner, by electronically filing with the National Association of Insurance Commissioners, a true and complete 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. An electronically filed report in accordance with section 38a-53a that is timely submitted to the National Association of Commissioners is deemed to have been submitted to the commissioner in accordance with this section.

      (c) 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. An electronically filed true and complete report filed in accordance with section 38a-53a that is timely filed with the National Association of Insurance Commissioners shall be deemed to have been submitted to the commissioner in accordance with the provisions of this section.

      (d) In addition to such annual report and the quarterly report required under subsection (c) 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.

      (e) 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 seventy-five dollars per day for each day from the due date of such report or statement to the date of filing.

      (f) 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 granting companies or centers exemptions 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; P.A. 07-54, S. 1; 07-225, S. 1; P.A. 08-147, S. 3; 08-178, S. 4; P.A. 09-74, S. 10.)

      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 $100 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; P.A. 07-54 made technical changes in Subsec. (e)(3), effective May 22, 2007; P.A. 07-225 amended Subsec. (a) to limit its application to domestic insurance companies, to require such companies to "submit", in lieu of "render", a true and complete report of financial condition electronically to National Association of Insurance Commissioners and to require such companies to timely file a true and complete paper copy of such report with commissioner, inserted new Subsec. (b) requiring foreign insurance companies to submit report of financial condition in same manner as specified in Subsec. (a), except for submission of paper copies to commissioner, redesignated existing Subsecs. (b) to (e) as Subsecs. (c) to (f), and amended redesignated Subsec. (c) to require that electronically filed true and complete report filed in accordance with Sec. 38a-53a that is timely filed with National Association of Insurance Commissioners be deemed to have been submitted to commissioner in accordance with the provisions of section; P.A. 08-147 amended Subsec. (a) by designating existing provisions as Subdiv. (1) and adding Subdiv. (2) re filing requirements for accredited reinsurers and assuming insurance companies; P.A. 08-178 increased per day late filing fee from $100 to $175 in Subsec. (e); P.A. 09-74 made a technical change in Subsec. (a)(2), effective May 27, 2009.

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PART IIa
MANAGING GENERAL AGENTS AND CONTROLLED INSURERS.
CAPTIVE INSURANCE COMPANIES

      Sec. 38a-91hh. Examinations of captive insurance companies. Costs. Confidentiality of financial examination workpapers and reports. (a) At least once every five years, and additionally whenever the Insurance Commissioner determines it to be prudent, the commissioner or the commissioner's designee shall visit each captive insurance company and thoroughly inspect and examine its affairs to ascertain its financial condition, its ability to fulfill its obligations and whether it has complied with the provisions of sections 38a-91aa to 38a-91qq, inclusive, and any applicable provisions of this title.

      (b) In scheduling and determining the nature, scope and frequency of such examinations, the commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and such other criteria as set forth in the examiners' handbook adopted by the National Association of Insurance Commissioners and in effect at the time the commissioner exercises discretion under this section.

      (c) (1) To carry out examinations under this section, the commissioner may appoint as examiners one or more competent persons, not officers of or connected with or interested in any insurance company, other than as a policyholder. The commissioner may engage the services of attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists to assist in conducting the examinations under this section as examiners, the cost of which shall be borne by the company which is the subject of the examination. Notwithstanding the provisions of this subdivision, no domestic captive insurance company subject to examination under this section shall pay, as costs associated with the examination, the salaries, fringe benefits, traveling and maintenance expenses of examining personnel of the Insurance Department engaged in such examination if such domestic company is otherwise liable to assessment levied under section 38a-47, except that such company shall pay the traveling and maintenance expenses of examining personnel of the department when such company is examined outside the state.

      (2) In conducting the examination, the commissioner, the commissioner's actuary or any examiner authorized by the commissioner may examine, under oath, the officers and agents of such a company and all persons deemed to have material information regarding the company's property or business. Each such company, its officers and agents shall produce the books and papers, in its or their possession, relating to its business or affairs, and any other person may be required to produce any book or paper, in his custody, deemed to be relevant to such examination for the inspection of the commissioner, the commissioner's actuary or examiners, when required. The officers and agents of the company shall facilitate the examination and aid the examiners in making the same so far as it is in their power to do so. The refusal of any company by its officers, directors, employees or agents to submit to examination or to comply with any reasonable written request of the examiners shall be grounds for suspension of, or revocation of or nonrenewal of any license or authority held by the company to engage in an insurance or other business subject to the commissioner's jurisdiction. Any such proceedings for suspension, revocation or nonrenewal of any license or authority shall be conducted pursuant to section 38a-91ii.

      (3) In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the examiners' handbook adopted by the National Association of Insurance Commissioners. The commissioner may also adopt such other guidelines or procedures as the commissioner may deem appropriate.

      (d) (1) Nothing contained in this section shall be construed to limit the commissioner's authority to terminate or suspend any examination in order to pursue legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

      (2) Nothing contained in this section shall be construed to limit the commissioner's authority in such legal or regulatory action to use and, if appropriate, to make public any final or preliminary examination report, any examiner or company workpapers or other documents, or any other information discovered or developed during the course of any examination.

      (3) Not later than sixty days after completion of the examination, the examiner in charge shall file, under oath, with the Insurance Department a verified written report of examination. Upon receipt of the verified report, the Insurance Department shall transmit the report to the company examined, together with a notice which shall afford the company examined a reasonable opportunity, not to exceed thirty days, to make a written submission or rebuttal with respect to any matters contained in the examination report. Not later than thirty days after the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's workpapers and enter an order: (A) Adopting the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, regulation or prior order of the commissioner, the commissioner may order the company to take any action the commissioner considers necessary and appropriate to cure such violation; or (B) rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation or information, and refiling pursuant to subparagraph (A) of this subdivision; or (C) calling for an investigatory hearing with no less than twenty days notice to the company for purposes of obtaining additional documentation, data, information and testimony.

      (e) (1) All orders entered pursuant to subdivision (3) of subsection (d) of this section shall be accompanied by findings and conclusions resulting from the commissioner's consideration and review of the examination report, relevant examiner workpapers and any written submissions or rebuttals. The findings and conclusions, which form the basis of any such order of the commissioner, shall be subject to review as provided in section 38a-19.

      (2) Any investigatory hearing conducted under subparagraph (C) of subdivision (3) of subsection (d) of this section by the commissioner or authorized representative shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies or disputed issues apparent (A) upon the filed examination report, (B) raised by or as a result of the commissioner's review of relevant workpapers, or (C) by the written submission or rebuttal of the company. Not later than twenty days after conclusions of any such hearing, the commissioner shall enter an order pursuant to subparagraph (A) of subdivision (3) of subsection (d) of this section. The commissioner shall not appoint an examiner as an authorized representative to conduct the hearing. The hearing shall proceed expeditiously with discovery by the company limited to the examiner's workpapers which tend to substantiate any assertions set forth in any written submission or rebuttal. The commissioner or the commissioner's authorized representative may issue subpoenas for the attendance of any witnesses or the production of any documents deemed relevant to the investigation whether under the control of the department, the company or other persons. The documents produced shall be included in the record and testimony taken by the commissioner or the commissioner's authorized representative shall be under oath and preserved for the record. Nothing contained in this section shall require the department to disclose any information or records which would indicate or show the existence or content of any investigation or activity of a criminal justice agency. The hearing shall proceed with the commissioner or the commissioner's authorized representative posing questions to the persons subpoenaed. Thereafter the company and the Insurance Department may present testimony relevant to the investigation. Cross-examination shall be conducted only by the commissioner or the commissioner's authorized representative. The company and the Insurance Department shall be permitted to make closing statements and may be represented by counsel of their choice.

      (f) The commissioner may, if the commissioner deems it in the public interest, publish any such report or the result of any such examination contained in such report in one or more newspapers of the state.

      (g) Nothing contained in this section shall prevent or be construed as prohibiting the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating to such report to (1) the Insurance Department of this or any other state or country, (2) law enforcement officials of this or any other state, or (3) any agency of the federal government at any time, so long as such agency or office receiving the report or matters relating to such report agrees, in writing, that such documents shall be confidential.

      (h) All working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the commissioner or any other person in the course of an examination made under this section shall (1) be confidential, (2) not be subject to subpoena, and (3) not be made public by the commissioner or any other person, except to the extent provided in subsection (g) of this section. Access to such information may be granted by the commissioner to the National Association of Insurance Commissioners, so long as it agrees, in writing, that such information shall be confidential.

      (i) (1) The commissioner may engage the services of, from time to time, on an individual basis, qualified actuaries, certified public accountants or other similar individuals who are independently practicing their professions, even though such persons may, from time to time, be similarly employed or retained by persons subject to examination under this section.

      (2) No cause of action shall arise nor shall any liability be imposed against the commissioner, the commissioner's authorized representatives or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out the provisions of this section.

      (3) No cause of action shall arise, nor shall any liability be imposed, against any person for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative examiner pursuant to an examination made under this section, if such act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.

      (4) This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision (2) of this subsection.

      (5) A person identified in subdivision (2) of this subsection shall be entitled to an award of attorney's fees and costs if he is the prevailing party in a civil cause of action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of this section and the party bringing the action was not substantially justified in doing so. For purposes of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

      (P.A. 08-127, S. 8; P.A. 09-74, S. 11, 12.)

      History: P.A. 08-127 effective January 1, 2009; P.A. 09-74 made technical changes in Subsecs. (c)(2), (g), (h) and (i)(1), effective May 27, 2009.

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      Sec. 38a-91nn. Premium receipts tax. (a) Each captive insurance company shall pay to the Commissioner of Revenue Services, in the month of February of each year, a tax at the rate of thirty-eight hundredths of one per cent on the first twenty million dollars and two hundred eighty-five thousandths of one per cent on the next twenty million dollars and nineteen hundredths of one per cent on the next twenty million dollars and seventy-two thousandths of one per cent on each dollar thereafter, on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive insurance company during the year ending December thirty-first next preceding, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums which shall include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders, except that no tax shall be due or payable as to considerations received for annuity contracts.

      (b) The annual minimum aggregate tax to be paid by a captive insurance company calculated under subsection (a) of this section shall be seven thousand five hundred dollars, and the annual maximum aggregate tax shall be two hundred thousand dollars.

      (c) A captive insurance company failing to file returns as required in this section or failing to pay within the time required all taxes assessed by this section shall be subject to penalty under section 12-229.

      (d) Two or more captive insurance companies under common ownership and control shall be taxed as though they were a single captive insurance company.

      (e) For the purposes of this section common ownership and control means:

      (1) In the case of stock corporations, the direct or indirect ownership of eighty per cent or more of the outstanding voting stock of two or more corporations by the same shareholder or shareholders; and

      (2) In the case of mutual or nonprofit corporations, the direct or indirect ownership of eighty per cent or more of the surplus and the voting power of two or more corporations by the same member or members.

      (f) The tax provided for in this section shall constitute all taxes collectible under the laws of this state from any captive insurance company, and no other occupation tax or other taxes shall be levied or collected from any captive insurance company by the state or any county, city or municipality within this state, except taxes on real and personal property used in the production of income.

      (g) The tax provided for in this section shall be calculated on an annual basis, notwithstanding policies or contracts of insurance or contracts of reinsurance issued on a multiyear basis. In the case of multiyear policies or contracts, the premium shall be prorated for purposes of determining the tax under this section.

      (P.A. 08-127, S. 14; P.A. 09-74, S. 13.)

      History: P.A. 08-127 effective January 1, 2009; P.A. 09-74 made technical changes in Subsecs. (a) and (b), effective May 27, 2009.

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PART III
INVESTMENTS

      Sec. 38a-102. Investments. Derivative financial transactions. Regulations. (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 subsection (a)(iii) of section 38a-433.

      (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) (1) A domestic insurance company doing business in this state may enter into derivative financial transactions, including swaps, options, forwards, futures, caps, floors and collars or similar instruments or combinations thereof, in accordance with subsection (a) of this section. Any such company shall include with its audited financial report a statement by the independent certified public accountant conducting such audit that describes such accountant's assessment of the internal controls of such company relative to such transactions.

      (2) If the independent certified public accountant determines the internal controls relative to such derivative financial transactions to be deficient, such company shall include with the statement set forth in subdivision (1) of this subsection such accountant's report of such deficiencies and a description of remedial actions taken or proposed to be taken to correct such deficiencies, if such actions are not already described in the accountant's assessment.

      (g) 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 the purpose of preserving the financial integrity of insurance companies for their policyholders. The Insurance Commissioner may adopt such regulations, in accordance with chapter 54, as the commissioner deems necessary to carry out the purposes of sections 38a-102 to 38a-102h, inclusive.

      (P.A. 91-262, S. 1, 19; P.A. 09-48, S. 1.)

      History: P.A. 09-48 added new Subsec. (f) re filing and internal controls requirements for derivative financial transactions, redesignated existing Subsec. (f) as Subsec. (g), and made technical changes in Subsec. (d) and redesignated Subsec. (g), effective May 20, 2009.

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

      (1) "Cap" means an option contract wherein the seller, in return for a premium, agrees to limit the purchaser's risk associated with an increase in a reference rate or index.

      (2) "Collar" means a contract that combines a cap and a floor.

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

      (4) "Floor" means an option contract wherein the seller, in return for a premium, agrees to limit the purchaser's risk associated with a decline in a reference rate or index.

      (5) "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.

      (6) "Forward" means a contract, other than a future, between two parties that commits one party to purchase and the other to sell the instrument or commodity underlying the contract on a specified future date.

      (7) "Future" means a standardized forward contract traded on a United States or qualified foreign exchange.

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

      (9) "Institution" means 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 does not include agencies, authorities, or instrumentalities of or entities sponsored by the United States, its possessions or territories.

      (10) "Insurance company" has the same meaning as provided in section 38a-1 and includes fraternal benefit societies as defined in section 38a-595 and health care centers as defined in section 38a-175, but does 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.

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

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

      (13) "Option" means a contract that gives the purchaser the right, but not the obligation, to enter into a transaction with the seller for option rights on terms specified in the contract.

      (14) "Subsidiary" or "subsidiaries" has the same meaning as provided in section 38a-1 except that the term "controlled by", as used in said section, has the same meaning as provided in section 38a-129. For the purposes of sections 38a-102 to 38a-102h, inclusive, a person may rebut the presumption of control used to define a subsidiary by providing written notice to the commissioner of such person's 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 sections 38a-102 to 38a-102h, inclusive, 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.

      (15) "Swap" means a contract to exchange, for a period of time, the investment performance of one underlying instrument for the investment performance of another underlying instrument without exchanging the instruments themselves.

      (P.A. 91-262, S. 3, 19; P.A. 95-168, S. 3; P.A. 09-48, S. 2.)

      History: P.A. 95-168 amended Subsec. (h) by making technical clarifications re use of term "controlled by" in "subsidiary or subsidiaries" definition; P.A. 09-48 defined "cap" and "collar" in Subdivs. (1) and (2), "floor" in Subdiv. (4), "forward" and "future" in Subdivs. (6) and (7), "option" in Subdiv. (13) and "swap" in Subdiv. (15), redesignated existing Subdivs. (a) to (h) as Subdivs. (3), (5), (8) to (12) and (14), and made conforming and technical changes throughout, effective May 20, 2009.

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