For purposes of this chapter, unless otherwise stated, the following terms shall have the meanings respectively ascribed to them by this section:
(1) AFFILIATE. The term shall include an 'affiliate' of, or person 'affiliated' with, a specific person, and shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.
(2) COMMISSIONER. The Commissioner of Insurance, his or her deputies, or the Insurance Department as appropriate.
(3) CONTROL. The term shall include 'controlling,' 'controlled by,' or 'under common control with' and shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing five percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by subsection (i) of Section 27-29-4 that control does not exist in fact. Such 'control' as used in this section shall not be deemed to exist where proxies have been obtained by management of such insurer solely in connection with voting at an annual or other regular meeting of the shareholders of such insurer. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific finding of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.
(4) INSURANCE HOLDING COMPANY SYSTEM. A system which consists of two or more affiliated persons, one or more of which is an insurer.
(5) INSURER. An insurance company as set forth in Section 27-1-2, except that it shall not include:
a. 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;
b. Fraternal benefit societies; or
c. Nonprofit medical and hospital service associations.
Notwithstanding the foregoing, for purposes of Section 27-29-3, a domestic insurer shall include any other person controlling a domestic insurer unless such other person is either directly or through its affiliates primarily engaged in business other than the business of insurance.
(6) PERSON. An individual, a corporation, a partnership, a limited partnership, an association, a joint-stock company, a trust, an unincorporated organization, or any similar entity or any combination of the foregoing acting in concert, but shall not include any securities broker performing no more than the usual and customary broker's function.
(7) SECURITYHOLDER. One who owns any security of such person, including common stock, preferred stock, debt obligations, and other security convertible into, or evidencing, the right to acquire any of the foregoing.
(8) SUBSIDIARY. An affiliate controlled by such person, directly or indirectly, through one or more intermediaries.
(9) VOTING SECURITY. The term shall include any security convertible into, or evidencing, a right to acquire a voting security.
Whenever it appears to the commissioner that any insurer or any director, officer, employee or agent thereof has committed a willful violation of this chapter, the commissioner may cause criminal proceedings to be instituted by the district attorney for the county in which the principal office of the insurer is located, or if such insurer has no such office in the state, then by the District Attorney for Montgomery County, against such insurer or the responsible director, officer, employee or agent thereof. Any insurer which willfully violates this chapter may upon conviction be fined not more than $10,000.00. Any individual who willfully violates this chapter may upon conviction be fined not more than $1,000.00 or, if such willful violation involves the deliberate perpetration of a fraud upon the commissioner, imprisoned not more than two years, or both.
Whenever it appears to the commissioner that any person has committed a violation of this chapter which so impairs the financial condition of a domestic insurer as to threaten imminent insolvency or impairment as defined in subdivision (1) of Section 27-32-1 or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders or the public, then the commissioner may proceed as provided in Sections 27-32-3 through 27-32-7 to take possession of the property of such domestic insurer and to conduct the business thereof.
Whenever it appears to the commissioner that any person has committed a violation of this chapter which makes the continued operation of an insurer contrary to the interests of policyholders or the public, the commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke or refuse to renew such insurer's license or authority to do business in this state for such period as he finds is required for the protection of policyholders or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law.
(a) Any person aggrieved by any act, determination, rule, regulation or order or any other action of the commissioner pursuant to this chapter may appeal therefrom within 30 days after such action, determination, rule or regulation is taken or issued, in accordance with the provisions of Section 27-2-32, except that the court shall conduct its review without a jury and by trial de novo; provided, however, that all the parties, including the commissioner, may stipulate that 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 rule, 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, shareholders, creditors or the public.
(c) Any person aggrieved by any failure of the commissioner to act or to make a determination required by this chapter may petition the Circuit Court for Montgomery County for a writ in the nature of a mandamus or a peremptory mandamus directing the commissioner to act or make such determination forthwith.
This chapter may be cited as the Alabama Insurance Holding Company System Regulatory Act.
(a) Authorization. - Any domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries or affiliates in accordance with the provisions contained in this section. Such subsidiaries or affiliates may conduct any kind of business, or businesses, permitted by the Constitution and the laws of this state, and their authority to do so shall not be limited by reason of the fact that they are subsidiaries or affiliates of a domestic insurer.
(b) Additional investment authority. - In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under all other sections of this title, a domestic insurer may also:
(1) Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries or affiliates, including, without limitation, domestic or foreign insurance subsidiaries or affiliates, amounts which do not exceed the lesser of 10 percent of such insurer's assets or 50 percent of the total of the insurer's capital and surplus as shown in the latest annual report of the insurer filed pursuant to subsection (a) of Section 27-3-26, less the minimum capital and surplus required of said insurer for authority to transact insurance by Sections 27-3-7 and 27-3-8, provided that 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 and foreign insurance subsidiaries 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, debt obligations, and other securities and all contributions to the capital or 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 engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer provided that each such subsidiary 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 27-41-15 through 27-41-18 and 27-41-35. For the purpose of this subdivision, 'the total investment of the insurer' shall include:
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 investment by the percentage of the insurer's ownership of such subsidiary or affiliate;
(3) With the approval of the commissioner, invest any amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries or affiliates, provided that 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.
(c) Exemption from investment restrictions. - Investments in common stock, preferred stock, debt obligations, or other securities of subsidiaries or affiliates made pursuant to subsection (b) of this section shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in this title applicable to such investments of insurers.
(d) Qualification of investment; when determined. - Whether any investment pursuant to subsection (b) of this section meets the applicable requirements thereof is to be determined immediately after such investment is made, taking into account the then outstanding principal balance on all previous investments in debt obligations and the value of all previous investments in equity securities as of the date they were made.
(e) Cessation of control. - If an insurer ceases to control a subsidiary, it shall dispose of any investment therein made pursuant to this section within three years from the time of the cessation of control or within such further time as the commissioner may prescribe, unless at any time after such investment shall have been made such investment shall have met the requirements for investment under any other section of this title, and the insurer has notified the commissioner.
(a) Filing and approval requirements. - No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for or acquire in the open market any voting security of a domestic insurer 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 insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer unless, at the time any such offer, request, or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities if no offer or agreement is involved or within 15 days after any such offer, request, or invitation is made or any such agreement is entered into, such person has filed with the commissioner and has sent to such insurer a statement containing the information required by this section and such offer, request, invitation, agreement, or acquisition either:
(1) Has been approved by the commissioner in the manner prescribed in this section; or
(2) Expressly states that it is subject to approval by the commissioner in the manner prescribed in this section.
An offer, request, invitation, agreement, or acquisition which contains such a condition and which is approved by the commissioner in the manner so prescribed shall be effective and binding according to its terms from the date on which it was made.
(b) Content of statement. - The statement to be filed with the commissioner under this section 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
a. If such person is an individual, his or her 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 10 years; or
b. 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, or will perform, functions appropriate to such positions. Such list shall include for each such individual the information required by paragraph a. 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, and the identity of persons furnishing such consideration; provided, however, that 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 for the preceding five fiscal years of each such acquiring party, or 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 90 days prior to the filing of the statement; provided, however, that in the case of an acquiring party which is an insurer actively engaged in the business of insurance, the financial statements of such insurer need not be audited, except such audit may be required if the need therefor is determined by the commissioner;
(4) Any plans or proposals which each acquiring party may have to liquidate such insurer, to sell its assets, or to 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, the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section, 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 12 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, therefor;
(9) A description of any recommendations to purchase any security referred to in subsection (a) of this section made during the 12 calendar months preceding the filing of the statement by any acquiring party or by anyone based upon interviews 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, if distributed, of additional soliciting material relating thereto;
(11) The terms of any agreement, contract, or understanding 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; and
(12) Such additional information as the commissioner may, by rule or regulation, prescribe as necessary or appropriate for the protection of policyholders and securityholders of the insurer 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) through (12) 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) through (12) 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 15 percent 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 materials relevant to such change, shall be filed with the commissioner and sent to such insurer within two business days after the person learns of such change. Such insurer shall send such amendment to its shareholders.
(c) Alternative filing materials. - If any offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section 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, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) of this section may utilize such documents in furnishing the information called for by that statement.
(d) Approval by commissioner; hearings.
(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 thereon, he or she finds that:
a. After the change of control, the domestic insurer 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 insurance for which it is presently licensed;
b. The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or to create a monopoly therein;
c. The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer or prejudice the interest of its policyholders;
d. The plans or proposals which the acquiring party has to liquidate the insurer, to sell its assets, or to 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 insurer and not in the public interest; or
e. The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control.
(2) The public hearing referred to in subdivision (1) of this subsection shall be held within 45 days after the statement required by subsection (a) of this section is filed, and at least 20 days' notice thereof shall be given by the commissioner to the person filing the statement. Not less than 15 days' notice of such public hearing shall be given by the person filing the statement to the insurer and to such other persons as may be designated by the commissioner. The insurer shall give such notice to its securityholders. The commissioner shall make a determination within 30 days after the conclusion of such hearing. At such hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interest may be affected thereby shall have the right to present evidence, examine and cross-examine witnesses and offer oral and written arguments and, in connection therewith, shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the circuit courts of this state. All discovery proceedings shall be concluded not later than five days prior to the commencement of the public hearing.
(e) Mailings to stockholders; payments of expenses. - All statements, amendments, or other material filed pursuant to subsections (a) or (b) of this section and all notices of public hearings held pursuant to subsection (d) of this section shall be mailed by the insurer to its stockholders within 10 business days after the insurer has received such statements, amendments, other material, or notices. The expenses of mailing shall be borne by the person making the filing. As security for the payment of such expenses, such person shall file with the commissioner an acceptable bond or other deposit in an amount to be determined by the commissioner.
(f) Exemptions. - The provisions of this section shall not apply to any offer, request, invitation, agreement, or acquisition which the commissioner by order shall exempt therefrom as:
(1) Not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer; or
(2) As otherwise not comprehended within the purposes of this section.
(g) Violations. - The following shall be violations of this section:
(1) The failure to file any statement, amendment, or other material required to be filed pursuant to subsections (a) or (b) of this section; or
(2) The effectuation, or any attempt to effectuate, an acquisition of control of, or merger with, a domestic insurer unless the commissioner has given his or her approval thereto.
(h) Jurisdiction; consent to service of process. - The courts of this state are hereby 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 over all actions involving such person 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 or her true and lawful attorney upon whom may be served all lawful process in any action or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the commissioner and transmitted by registered or certified mail by the commissioner to such person at his or her last known address.
(a) Registration. - Every insurer 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, except a foreign insurer subject to registration 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 Section 27-29-5. Any insurer which is subject to registration under this section shall register within 60 days after September 3, 1973, or 15 days after it becomes subject to registration, and annually thereafter by June 1 of each year for the previous calendar year, unless the commissioner for good cause shown extends the time for registration and, then, within such extended time. 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 domiciliary jurisdiction.
(b) Information and form required. - Every insurer subject to registration shall file a registration statement on a form provided by the commissioner which shall contain current information about:
(1) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer;
(2) The identity of every member of the insurance holding company system;
(3) The following agreements in force, relationships subsisting, and transactions currently outstanding between such insurer and its affiliates:
a. Loans, other investments or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;
b. Purchases, sales, or exchanges of assets;
c. Transactions not in the ordinary course of business;
d. Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer's assets to liability, other than insurance contracts entered into in the ordinary course of the insurer's business;
e. All management and service contracts and all cost-sharing arrangements;
f. Reinsurance agreements;
g. Dividends and other distributions to shareholders; and
h. Consolidated tax allocation agreements;
(4) Any pledge of the insurer's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system;
(5) Other matters concerning transactions between registered insurers and any affiliates as may be included, from time to time, in any registration forms adopted or approved by the commissioner.
(c) Materiality. - 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 rule, regulation, or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit or investments involving one-half of one percent or less of an insurer's admitted assets as of December 31, next preceding, shall not be deemed material for purposes of this section.
(d) Amendments to registration statements. - Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on amendment forms provided by the commissioner within 15 days after the end of the month in which it learns of each such change or addition, but at least annually, as provided in subsection (a); provided, however, that subject to Section 27-29-5, each registered insurer shall so report all dividends and other distributions to shareholders within five business days following the declaration thereof.
(e) Termination of registration. - The commissioner shall terminate the registration of any insurer which demonstrated that it no longer is a member of an insurance holding company system.
(f) Consolidated filing. - The commissioner may require or allow two or more affiliated insurers subject to registration under this section to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements.
(g) Alternative registration. - The commissioner may allow an insurer 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 material required to be filed under this section.
(h) Exemptions. - The provisions of this section shall not apply to any insurer, information, or transaction if, and to the extent that, the commissioner by rule, regulation, or order shall exempt the same from the provisions of this section.
(i) Disclaimer. - Any person may file with the commissioner a disclaimer of affiliation with any authorized insurer or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurer as well as the basis for disclaiming such affiliation. After a disclaimer has been filed, the insurer shall be relieved of any duty to register or report under this section which may arise out of the insurer's relationship with such person, unless and until the commissioner disallows such a disclaimer. The commissioner shall disallow such a disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support such disallowance.
(j) Violations. - The failure to file a registration statement or any amendment thereto required by this section within the time specified for such filing shall be a violation of this section.
(a) Transactions with affiliates. - Material transactions by registered insurers with their affiliates shall be subject to the following standards:
(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 insurer in conformity with customary insurance accounting practices consistently applied;
(4) The books, accounts, and records of each party will be so maintained as to clearly and accurately disclose the precise nature and details of the transactions; and
(5) The insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.
(b) The following transactions involving a domestic insurer and any person in its holding company system may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into such transaction at least 30 days prior thereto, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within that period.
(1) Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments provided the transactions are equal to or exceed:
a. With respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding;
b. With respect to life insurers, three percent of the insurer's admitted assets as of the 31st day of December next preceding;
(2) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit provided the transactions are equal to or exceed:
a. With respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding;
b. With respect to life insurers, three percent of the insurer's admitted assets as of the 31st day of December next preceding;
(3) Reinsurance agreements or modifications thereto in which the reinsurance premium or a change in the insurer's liabilities equals or exceeds five percent of the insurer's surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer;
(4) All management agreements, service contracts, and all cost-sharing arrangements; and
(5) Any material transactions, specified by regulation, which the commissioner determines may adversely affect the interests of the insurer's policyholders.
Nothing herein contained shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law.
(c) A domestic insurer 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 occur otherwise. If the commissioner determines that such separate transactions were entered into over any 12-month period for that purpose, he or she may exercise his or her authority under Section 27-29-10.
(d) The commissioner, in reviewing transactions pursuant to subsection (b), shall consider whether the transactions comply with the standards set forth in subsection (a) and whether they may adversely affect the interests of policyholders.
(e) The commissioner shall be notified within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of the corporation's voting securities.
(f) Adequacy of surplus. - For purposes of this chapter in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered:
(1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria;
(2) The extent to which the insurer'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 extent of the geographical dispersion of the insurer's insured risks;
(5) The nature and extent of the insurer's reinsurance program;
(6) The quality, diversification, and liquidity of the insurer's investment portfolio;
(7) The recent past and projected future trend in the size of the insurer's surplus as regards policyholders;
(8) The surplus as regards policyholders maintained by other comparable insurers;
(9) The adequacy of the insurer's reserves;
(10) The quality and liquidity of investments in subsidiaries made pursuant to Section 27-29-2. The commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his or her judgment such investment so warrants; and
(11) The quality of the company's earnings and the extent to which the reported earnings include extraordinary items.
(g) Dividends and other distributions.
(1) A domestic insurer shall not pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until 30 days after the commissioner has received notice of the declaration of the dividend or distribution and has not disapproved such payment within the period, or until the time the commissioner has approved the payment within the 30-day period.
For purposes of this paragraph, an 'extraordinary dividend or distribution' includes 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 12 months exceeds the greater of the following:
a. Ten percent of the insurer's surplus as regards policyholders as of the 31st day of December next preceding; or
b. The net gain from operations of the insurer, if the insurer is a life insurer, or the net income, if the insurer is not a life insurer, for the 12-month period ending the 31st day of December next preceding.
An extraordinary dividend or distribution does not include pro rata distributions of any class of the insurer's own securities.
(2) A domestic insurer subject to registration under Section 27-29-4 shall report to the commissioner all dividends to shareholders within five business days following the declaration of the dividends and not less than 10 days prior to the payment of the dividends. This report shall also include a schedule setting forth all dividends or other distributions made within the previous 12 months.
(3) Notwithstanding any other provision of law, a domestic insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner's approval of the dividend or distribution. Such declaration does not confer any rights upon shareholders until the commissioner has approved the payment of the dividend or distribution or the commissioner has not disapproved the payment within the 30-day period as provided in subdivision (1).
(4) The commissioner shall assess such reasonable charges as he or she deems necessary for the review conducted pursuant to this section. All funds received shall be deposited in the State Treasury to the credit of the Special Examination Revolving Fund, from which the expenses incurred shall be paid.
(a) Power of commissioner. - Subject to the limitation contained in this section and in addition to the powers which the commissioner has under Sections 27-2-7, 27-2-21, 27-2-23 and 27-2-26, relating to the examination of insurers, the commissioner shall also have the power to order any insurer registered under Section 27-29-4 to produce such records, books or other information papers in the possession of the insurer, or its affiliates, as shall be necessary to ascertain the financial condition or legality of conduct of such insurer and to verify the information required to be contained in the insurer's registration statement and any additional information pertinent to transactions between the insurer and its affiliates. In the event such insurer fails to comply with such order, the commissioner shall have the power to examine such affiliates to obtain such information.
(b) Purpose and limitation of examination. - The commissioner shall exercise his power under subsection (a) of this section only if the examination of the insurer under Sections 27-2-7, 27-2-21, 27-2-23 and 27-2-26 is inadequate or the interests of the policyholders of such insurer may be adversely affected.
(c) Use of consultants. - The commissioner may retain at the registered insurer's expense such attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff as shall be reasonably necessary to assist in the conduct of the examination under subsection (a) of this section. Any persons so retained shall be under the direction and control of the commissioner and shall act in a purely advisory capacity.
(d) Expenses. - Each registered insurer producing for examination records, books and papers pursuant to subsection (a) of this section shall be liable for and shall pay the expense of such examination as provided in Section 27-2-25.
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 27-29-6 and all information reported pursuant to Section 27-29-4 shall be given confidential treatment, shall not be subject to subpoena and shall not be made public by the commissioner or any other person, except to insurance departments of other states, without the prior written consent of the insurer to which it pertains unless the commissioner, after giving the insurer and its affiliates who would be affected thereby not less than five days' written notice and opportunity to be heard, determines that the interests of policyholders, shareholders 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.
The commissioner may issue such rules, regulations and orders as shall be necessary to carry out the provisions of this chapter.
(a) Injunctions. - Whenever it appears to the commissioner that any insurer or any director, officer, employee or agent thereof has committed, or is about to commit, a violation of this chapter or of any rule, regulation or order issued by the commissioner under this chapter, the commissioner may apply to the circuit court for the county in which the principal office of the insurer is located or if such insurer has no such office in this state, then to the Circuit Court for Montgomery County for an order enjoining such insurer or such director, officer, employee or agent thereof from violating, or continuing to violate, this chapter or any such rule, regulation or order and for such other equitable relief as the nature of the case and the interests of the insurer's policyholders, creditors and shareholders or the public may require.
(b) Voting of securities; when prohibited. - 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 this chapter or of any rule, regulation or order issued by the commissioner under this chapter 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 this chapter or of any rule, regulation or order issued by the commissioner under this chapter, the insurer or the commissioner may apply to the Circuit Court for Montgomery County or to the circuit court for the county in which the insurer has its principal place of business to enjoin any offer, request, invitation, agreement or acquisition made in contravention of Section 27-29-3 or any rule, 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 interests of the insurer's policyholders, creditors and shareholders or the public may require.
(c) Sequestration of voting securities. - In any case where a person has acquired or is proposing to acquire any voting securities in violation of this chapter or any rule, regulation or order issued by the commissioner under this chapter, the Circuit Court for Montgomery County or the circuit court for the county in which the insured has its principal place of business may, on such notice as the court deems appropriate, upon the application of the insurer or the commissioner, seize or sequester any voting securities of the insurer owned, directly or indirectly, by such person and issue such orders with respect thereto as may be appropriate to effectuate the provisions of this chapter. Notwithstanding any other provision of law, for the purposes of this chapter the situs of the ownership of the securities of domestic insurers shall be deemed to be in this state.
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