THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY MICOZZIE, DeLUCA, SONNEY, GRELL, KILLION, KOTIK, MATZIE, HARRIS, D. COSTA, FABRIZIO, PASHINSKI, M. SMITH, CALTAGIRONE AND WATERS, MAY 21, 2012

REFERRED TO COMMITTEE ON INSURANCE, MAY 21, 2012  

AN ACT

Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An

act relating to insurance; amending, revising, and

consolidating the law providing for the incorporation of

insurance companies, and the regulation, supervision, and

protection of home and foreign insurance companies, Lloyds

associations, reciprocal and inter-insurance exchanges, and

fire insurance rating bureaus, and the regulation and

supervision of insurance carried by such companies,

associations, and exchanges, including insurance carried by

the State Workmen's Insurance Fund; providing penalties; and

repealing existing laws," further providing for definitions,

for acquisition of control of or merger or consolidation with

domestic insurer, for acquisitions involving insurers not

otherwise covered, for registration of insurers, for

standards and management of an insurer within a holding

company system and for examination; providing for supervisory

colleges and for group-wide supervision for international 

insurance groups; further providing for confidential

treatment, for rules and regulations, for injunctions and

certain prohibitions and for sanctions.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definitions of "control" and "NAIC" in

section 1401 of the act of May 17, 1921 (P.L.682, No.284), known

as The Insurance Company Law of 1921, added December 18, 1992

(P.L.1519, No.178), are amended and the section is amended by

adding definitions to read:

Section 1401.  Definitions.--As used in this article, and for

the purposes of this article only, the following words and

phrases shall have the meanings given to them in this section:

* * *

"Company action level event."  As defined in section 501-A or

501-B of the act of May 17, 1921 (P.L.789, No.285), known as

"The Insurance Department Act of 1921."

"Control," "controlling," "controlled by" and "under common

control with."  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 ten per centum (10%) or more

of the [voting securities of any other person] votes that all

shareholders would be entitled to cast in the election of

directors. This presumption may be rebutted by a showing that

control does not exist in fact. The Insurance Department may

determine, after furnishing all persons in interest notice and

opportunity to be heard and making specific findings of fact to

support such determination, that control exists in fact,

notwithstanding the absence of a presumption to that effect or

that another person has control.

* * *

"Enterprise risk."  An activity, circumstance, event or

series of events involving one or more affiliates of an insurer

that, if not remedied promptly, would likely have a material

adverse effect on the financial condition or liquidity of an

insurer or its insurance holding company system, including, but

not limited to, anything that would:

(1)  trigger a company action level event for the insurer or

(2)  cause the insurer to be deemed to be in hazardous

financial condition under:

(i)  Article V of the act of May 17, 1921 (P.L.789, No.285),

known as "The Insurance Department Act of 1921."

(ii)  31 Pa. Code Ch. 160 (relating to standards to define

insurers deemed to be in hazardous financial condition).

"IAIS."  The International Association of Insurance

Supervisors or successor organization.

* * *

"NAIC."  The National Association of Insurance Commissioners

or successor organization. 

* * *

"SEC."  The Securities and Exchange Commission of the United

States.

* * *

Section 2.  Section 1402(a)(2), (b)(12), (f)(3), (h) and (j)

of the act, amended July 9, 2008 (P.L.885, No.62), are amended

and subsections (a), (b) and (f) are amended by adding

paragraphs to read:

Section 1402.  Acquisition of Control of or Merger or

Consolidation with Domestic Insurer.--(a)  * * *

(2)  [For purposes of this section, a "domestic insurer"

shall include any person controlling a domestic insurer unless

such person as determined by the department is either directly

or through its affiliates primarily engaged in business other

than the business of insurance. Such person shall, however, file

a preacquisition notification with the department containing the

information set forth in section 1403(c)(2) thirty (30) days

prior to the proposed effective date of the acquisition. Failure

to file is subject to section 1403(e)(3). For purposes of this

section, "person" shall not include any securities broker

holding, in the usual and customary manner, less than twenty per

centum (20%) of the voting securities of an insurance company or

of any person which controls an insurance company.] For purposes

of this section:

(i)  "Domestic insurer" includes a person controlling a

domestic insurer unless the department determines that the

person is primarily engaged in business other than the business

of insurance either directly or through its affiliates.

(ii)  "Person" does not include a securities broker who

holds, in the usual and customary manner, less than twenty per

centum (20%) of the voting securities of an insurer or of a

person that controls an insurer.

(3)  A controlling person of a domestic insurer seeking to

divest its controlling interest in the insurer in any manner

shall file with the department, with a copy to the insurer, a

notice of the proposed divestiture at least thirty (30) days

prior to the cessation of control except that notice under this

paragraph is not required if a statement is filed under

paragraph (1). The notice must contain information sufficient

for the department to determine if the proposed divestiture

requires filing and approval under paragraph (1). Information

obtained by or disclosed to the department under this paragraph

shall be given confidential treatment as provided under section

1407.

(4)  The acquiring person for transactions subject to this

section must file a preacquisition notification as required

under section 1403(c) or be subject to a penalty as provided

under section 1403(e)(3).

(5)  A person seeking to rebut the presumption of control

under this article shall file with the department, with a copy

to the insurer, a rebuttal filing containing information

sufficient for the department to determine whether control

exists in fact. The filing is not effective unless the

department finds that control does not exist or accepts a

disclaimer of control. Information obtained by or disclosed to

the department under this subsection must be given confidential

treatment as provided under section 1407.

(b)  The statement to be filed with the department under this

section shall be made under oath or affirmation and shall

contain the following information:

* * *

(11.1)  An agreement by the person required to file the

statement referred to in subsection (a) that it will provide the

annual enterprise risk report specified in section 1404(k.1) as

long as control exists.

(11.2)  An acknowledgment by the person required to file the

statement referred to in subsection (a) that the person and the

subsidiaries within its control in the insurance holding company

system will provide information to the commissioner upon request

as necessary to evaluate enterprise risk to the insurer.

(12)  Such additional information as the department may by

[rule or] regulation prescribe as necessary or appropriate for

the protection of policyholders of the insurer or in the public

interest.

* * *

(f)  * * *

(2.1)  If the proposed acquisition of control requires the

approval of more than one chief insurance regulatory official,

the public hearing under paragraph (2) may be held on a

consolidated basis upon request of the person filing the

statement under subsection (a). He shall file the statement

under subsection (a) with the NAIC within five (5) days of

making the request for a public hearing. A chief insurance

regulatory official may opt out of a consolidated hearing, and

shall provide notice to the applicant of the decision to opt out

within ten (10) days of the receipt of the statement under

subsection (a). A hearing conducted on a consolidated basis must

be public and held in the United States before the chief

insurance regulatory officials of the states in which the

insurers are domiciled. The chief insurance regulatory officials 

shall hear and receive evidence. A chief insurance regulatory

official may attend the hearing in person or participate using

telecommunication.

(3)  The department may retain at the acquiring [person's]

party's expense any attorneys, actuaries, accountants and other

experts not otherwise a part of the department's staff as may be

reasonably necessary to assist the department in reviewing the

proposed acquisition of control.

* * *

(h)  The following shall constitute a violation of this

section:

(1)  the failure to file any statement, amendment or other

material required to be filed pursuant to subsection (a) or (b);

(2)  the effectuation or any attempt to effectuate an

acquisition of control of or divestiture of or merger or

consolidation with a domestic insurer unless the department has

given its approval thereto; or

(3)  a violation of section 819-A.

* * *

(j)  [As used in this section, the term "annual statement"

shall mean the annual report of the financial condition required

to be filed under 40 Pa.C.S. § 6331 (relating to reports and

examinations)] (Reserved). 

Section 3.  Section 1403(b)(2)(ii) and (vii) of the act,

amended July 9, 2008 (P.L.885, No.62), are amended to read:

Section 1403.  Acquisitions Involving Insurers not Otherwise

Covered.--* * *

(b)  * * *

(2)  This section shall not apply to any of the following:

* * *

(ii)  A purchase of securities solely for investment purposes

so long as such securities are not used by voting or otherwise

to cause or attempt to cause the substantial lessening of

competition in any insurance market in this Commonwealth. If a

purchase of securities results in a presumption of control as

described in the definition of "control" in section 1401, it is

not solely for investment purposes unless the [insurance

department of the insurer's state of] chief insurance regulatory

official in the jurisdiction of the insurer's domicile accepts a

disclaimer of control or affirmatively finds that control does

not exist and such disclaimer action or affirmative finding is

communicated by the domiciliary insurance [department to the

Insurance Department of the Commonwealth] regulator to the

department.

* * *

(vii)  An acquisition of an insurer whose domiciliary

insurance [department] regulator affirmatively finds that such

insurer is in failing condition; there is a lack of feasible

alternative to improving such condition; the public benefits of

improving such insurer's condition through the acquisition

exceed the public benefits that would arise from not lessening

competition; and such findings are communicated by the

domiciliary insurance [department to the Insurance Department of

the Commonwealth] regulator to the department.

* * *

Section 4.  Section 1404(a)(2), (b) introductory paragraph,

(d), (j), (k), and (l) of the act, added December 18, 1992

(P.L.1519, No.178), are amended, subsection (b) is amended by

adding paragraphs and the section is amended by adding a

subsection to read:

Section 1404.  Registration of Insurers.--(a)  * * *

(2)  Any insurer which is subject to registration under this

section shall register within fifteen (15) days after it becomes

subject to registration, and annually thereafter by the thirty-

first day of March of each year for the previous calendar year,

unless the department for good cause shown extends the time for

registration, and then within such extended time. The department

may require any insurer authorized to do business in this

Commonwealth which is a member of [a] an insurance holding

company system and which is not subject to registration under

this section to furnish a copy of the registration statement,

the summary specified in subsection (c) or other information

filed by such insurance company with the insurance regulatory

authority of its domiciliary jurisdiction.

(b)  Every insurer subject to registration shall file the

registration statement with the department on a form and in a

format prescribed by the NAIC, which shall contain all of the

following current information:

* * *

(4.1)  If requested by the department, the insurer shall

include financial statements of an insurance holding company

system, including its affiliates. Financial statements may

include, but are not limited to:

(i)  annual audited financial statements filed with the SEC

under the Securities Exchange Act of 1933 (48 Stat. 74, 15

U.S.C. § 77a et seq.); or

(ii)  the Securities Exchange Act of 1934 (48 Stat. 881, 15

U.S.C. § 78a et seq.).

An insurer required to file financial statements under this

paragraph may satisfy the request by providing the department

with the most recent parent corporation financial statements

filed with the SEC.

(4.2)  Statements that the insurer's board of directors

oversees corporate governance and internal controls and that the

insurer's officers or senior management have approved,

implemented and continue to maintain and monitor corporate

governance and internal control procedures.

* * *

(6)  Other necessary or appropriate information as required

by the department by regulation.

* * *

(d)  No information need be disclosed on the registration

statement filed pursuant to subsection (b) if such information

is not material for the purposes of this section. Unless the

department by [rule,] regulation or order provides otherwise,

sales, purchases, exchanges, loans or extensions of credit,

investments or guarantees involving one-half of one per centum

(0.5%) or less of an insurer's admitted assets as of the thirty-

first day of December next preceding shall not be deemed

material for purposes of this section.

* * *

(j)  The provisions of this section shall not apply to any

insurer, information or transaction if and to the extent that

the department by [rule,] regulation or order shall exempt the

same from the provisions of this section.

(k)  Any person may file with the department 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 department disallows such a

disclaimer. The department 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] A disclaimer of affiliation

is deemed granted unless the department notifies the filing

party the disclaimer is disallowed within thirty (30) days

following receipt of a complete disclaimer. In the event of

disallowance, the disclaiming party may request an

administrative hearing under the provisions of 2 Pa.C.S.

(relating to administrative law and procedure), which must be

granted. If the commissioner approves the disclaimer or if the

disclaimer is deemed approved, the disclaiming party is relieved

of the duty to register under this section.

(k.1)  The ultimate controlling person of every insurer

subject to registration shall also file an annual enterprise

risk report. The report must, to the best of the ultimate

controlling person's knowledge and belief, identify the material

risks within the insurance holding company system that could

pose enterprise risk to the insurer. The report must be filed

with the lead state regulator of the insurance holding company

system as determined by the procedures within the Financial

Analysis Handbook adopted by the NAIC. Beginning in 2014 and

every year thereafter, the report shall be filed by March 31 for

the previous calendar year.

(l)  The failure to file a registration statement [or], any

summary of the registration statement [thereto] or enterprise

risk report required by this section within the time specified

for such filing shall be a violation of this section.

Section 5.  Section 1405(a)(1), (2) and (3), (b)(1) and (c)

(5) of the act, amended February 17, 1994 (P.L.92, No.9),

December 20, 2000 (P.L.967, No.132) and July 9, 2008 (P.L.885,

No.62), are amended and subsection (a) is amended by adding a

paragraph to read:

Section 1405.  Standards and Management of an Insurer within

[a] an Insurance Holding Company System.--(a)  (1)  Transactions

within [a] an insurance holding company system to which an

insurer subject to registration is a party shall be subject to

all of the following standards:

(i)  The terms shall be fair and reasonable.

(ii)  Charges or fees for services performed shall be

reasonable.

(iii)  Expenses incurred and payment received shall be

allocated to the insurer in conformity with customary insurance

accounting practices consistently applied and all cost-sharing

or expense allocation arrangements must be formalized in writing

and authorized by the board of directors of the domestic

insurer.

(iv)  The books, accounts and records of each party to all

such transactions shall be so maintained as to clearly and

accurately disclose the nature and details of the transactions,

including such accounting information as is necessary to support

the reasonableness of the charges or fees to the respective

parties.

(v)  The insurer's surplus as regards policyholders after any

material transaction with an affiliate and after any dividends

or distributions to shareholder affiliates shall be reasonable

in relation to the insurer's outstanding liabilities and

adequate to its financial needs.

(2)  The following transactions involving a domestic insurer

and any person in its insurance holding company system,

including an amendment or modification of affiliate agreements

previously filed under this section that are subject to

materiality standards contained in subparagraphs (i), (ii),

(iii), (iv) and (v), may not be entered into unless the insurer

has notified the department in writing of its intention to enter

into such transaction at least thirty (30) days prior thereto or

such shorter period as the department may permit and the

department has not disapproved it within such period:

(i)  Sales, purchases, exchanges, loans or extensions of

credit, guarantees, investments, pledges of assets or assets to

be received by the domestic insurer as contributions to its

surplus, provided that, as of the thirty-first day of December

next preceding, such transactions are equal to or exceed the

lesser of [five per centum (5%)] three per centum (3%) of the

insurer's admitted assets or twenty-five per centum (25%) of

surplus as regards policyholders. 

(ii)  Loans or extensions of credit to any person who is not

an affiliate, where the insurer makes such loans or extensions

of credit with the agreement or understanding that the proceeds

of such transactions, in whole or in substantial part, are to be

used to make loans or extensions of credit to, to purchase

assets of or to make investments in any affiliate of the insurer

making such loans or extensions of credit provided that, as of

the thirty-first day of December next preceding, such

transactions are equal to or exceed the lesser of [five per

centum (5%)] three per centum (3%) of the insurer's admitted

assets or twenty-five per centum (25%) of surplus as regards

policyholders.

(iii)  Reinsurance agreements or modifications thereto [where

either], including:

(A)  [the reinsurance premium] agreements where the

reinsurance premium or the projected reinsurance premium in any

of the next three twelve-month periods equals or exceeds five

per centum (5%) of the insurer's surplus as regards

policyholders as of the thirty-first day of December next

preceding; [or]

(B)  agreements where the change in the insurer's liabilities

or any transfer of assets required to fund the transaction in

any of the next three twelve-month periods equals or exceeds

twenty-five per centum (25%) of the insurer's surplus as regards

policyholders as of the thirty-first 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.

Nothing in this paragraph shall affect or limit the requirements

and applicability of section 3 of the act of July 31, 1968

(P.L.941, No.288), entitled "An act providing for reporting to

the Insurance Commissioner by domestic insurance companies,

associations, or exchanges, of certain conveyances of interests

in the assets of such companies, associations, or exchanges[.]";

or

(C)  reinsurance pooling agreements.

(iv)  Any material transactions, specified by regulation,

which the department determines may adversely affect the

interests of the insurer's policyholders.

(v)  Management agreements, service contracts, tax allocation

agreements, guarantees and cost-sharing arrangements.

The notice for amendments or modifications must include the

reasons for the change and the financial impact on the domestic

insurer.

Nothing in this paragraph 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. 

(2.1)  Within thirty (30) days after termination of an

agreement previously filed in accordance with paragraph (2), a

domestic insurer shall provide notice of the termination to the

department.

(3)  A domestic insurer may not enter into transactions which

are part of a plan or series of like transactions with persons

within the insurance 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 department determines that such separate transactions were

entered into over any twelve-month period for such purpose, it

may exercise its authority under section 1410.

* * *

(b)  (1)  No domestic insurer shall pay any extraordinary

dividend to its [stockholders] shareholders until:

(i)  thirty (30) days after the commissioner has received

written notice from the insurer of the declaration of the

dividend and has not within such period disapproved the payment;

or

(ii)  the commissioner shall have approved the payment within

such thirty-day period.

* * *

(c)  * * *

(5)  The provisions of paragraphs (3), (4) and (4.1) shall

not apply to a domestic insurer if the person controlling such

insurer is an insurer [or another business entity], an attorney

in fact for a reciprocal exchange, a mutual insurance holding

company or a publicly held corporation having a board of

directors and committees thereof which already meet the

requirements of paragraphs (3), (4) and (4.1).

* * *

Section 6.  Section 1406 of the act, added December 18, 1992

(P.L.1519, No.178), is amended to read:

Section 1406.  Examination.--(a)  Subject to the limitation

contained in this section and in addition to the powers which

the department has under law relating to the examination of

insurers, the department shall also have the power to [order any

insurer registered under section 1404 to produce such records,

books or other information papers in the possession of the

insurer or its affiliates as are reasonably necessary to

ascertain the financial condition of such insurer or to

determine compliance with this article. In the event an insurer

fails to comply with such order, the department shall have the

power to examine affiliates to obtain this information.] examine

an insurer registered under section 1404 and its affiliates to

ascertain the financial condition of the insurer, including the

enterprise risk to the insurer by:

(1)  the ultimate controlling person;

(2)  an entity or combination of entities within the

insurance holding company system; or

(3)  the insurance holding company system on a consolidated

basis.

(a.1)  The department may order an insurer registered under

section 1404 to produce records, books or other information

papers in the possession of the insurer or its affiliates as are

reasonably necessary to ascertain the financial condition of the

insurer or to determine compliance with this article.

(a.2)  To ascertain the financial condition of the insurer,

including the enterprise risk to the insurer by:

(1)  the ultimate controlling person;

(2)  an entity or combination of entities within the

insurance holding company system; or

(3)  the insurance holding company system on a consolidated

basis,

the department may order an insurer registered under section

1404 to produce information not in the possession of the insurer

if the insurer can obtain access to the information under a

contractual relationship, a statutory obligation or other

method. If the insurer may not obtain the information requested

by the department, the insurer shall provide the department a

detailed explanation of the reason the insurer may not obtain

the information and the identity of the holder of information.

If the insurer fails to comply with this subsection or the

department determines that the detailed explanation is without

merit, the department may suspend or revoke the insurer's

license or require the insurer to pay an administrative penalty

of one thousand dollars ($1,000) per day until the information

is produced. The proceeding for suspension, revocation or

imposition of a penalty shall be conducted pursuant to 2 Pa.C.S.

(relating to administrative law and procedure).

(b)  The department may retain at the registered insurer's

expense such attorneys, actuaries, accountants and other experts

not otherwise a part of the department's staff as shall be

reasonably necessary to assist in the conduct of the examination

under [subsection (a)] subsections (a), (a.1) and (a.2). Any

persons so retained shall be under the direction and control of

the [commissioner] department and shall act in a purely advisory

capacity.

(c)  Each registered insurer producing for examination

records, books and papers pursuant to [subsection (a)] 

subsections (a), (a.1) and (a.2) shall be liable for and shall

pay the expense of such examination as provided for in Article

IX of the act of May 17, 1921 (P.L.789, No.285), known as "The

Insurance Department Act of one thousand nine hundred and

twenty-one."

(d)  If the insurer fails to comply with an order issued

under this section, the department has the power to examine the

insurer's affiliates to obtain the information necessary to

determine an insurer's compliance with this section. The

department also has the power to:

(1)  issue subpoenas;

(2)  administer oaths; and

(3)  examine under oath any person as to any matter pertinent

to determining compliance with this section.

Upon the failure or refusal of a person to obey a subpoena, the

department may petition a court of competent jurisdiction and,

upon proper showing, the court may enter an order compelling the

witness to appear and testify or produce documentary evidence.

Failure to obey the court order shall be punishable as contempt

of court. When subpoenaed, a person shall attend as a witness at

the place specified in the subpoena. Witnesses shall be paid the

same fees and mileage as are paid to witnesses in the courts of

this Commonwealth. Fees, mileage and expense necessarily

incurred in securing the attendance and testimony of witnesses

shall be itemized, charged against and paid by the person being

examined.

Section 7.  The act is amended by adding sections to read:

Section 1406.1.  Supervisory Colleges.--(a)  A supervisory

college may be convened as a temporary or permanent forum for

communication and cooperation between the regulators charged

with the supervision of the insurer or its affiliates.

(b)  The department may participate in a supervisory college

with other regulators charged with supervision of the insurer or

its affiliates, including international, Federal and other state

regulatory agencies, for any of the following reasons:

(1)  To assess the enterprise risk, business strategy, legal,

regulatory and financial position, risk exposure, risk

management and governance processes of the insurer or its

affiliates.

(2)  As part of the examination of individual insurers in

accordance with section 1406.

(c)  The department shall have the power to participate in a

supervisory college for a domestic insurer, registered under

section 1404, that is part of an insurance holding company

system with international operations in order to determine

compliance by the insurer with this article.

(d)  The powers of the department regarding supervisory

colleges include, but are not limited to, the following:

(1)  Initiating the establishment of a supervisory college.

(2)  Clarifying the membership and participation of other

supervisors in the supervisory college.

(3)  Clarifying the functions of the supervisory college and

the role of other regulators, including the establishment of a  

group supervisor.

(4)  Coordinating the ongoing activities of the supervisory

college, including planning meetings, supervisory activities and

processes for information sharing.

(5)  Establishing a crisis management plan.

(e)  The department may enter into agreements in accordance

with sections 1406.2, 1407 and Article II-A of the act of May

17, 1921 (P.L.789, No.285), known as "The Insurance Department

Act of 1921," to provide the basis for sharing information

between the department and other regulatory agencies. The

department may also enter into agreements to share information

and further coordinate the activities of the supervisory college

pursuant to this section. Nothing in this section shall delegate

to the supervisory college the authority of the department to

regulate or supervise the insurer or its affiliates within its

jurisdiction.

(f)  A registered insurer subject to this section shall be

liable for and shall pay the reasonable expenses of the

department's participation in a supervisory college, including

reasonable travel expenses.

Section 1406.2.  Group-wide Supervision for International

Insurance Groups.--(a)  (Reserved).

(b)  The department is authorized to act as the group-wide

supervisor for any international insurance group where the

international insurance group's ultimate controlling person is

domiciled in Pennsylvania. However, the department may otherwise

acknowledge another jurisdiction as the group-wide supervisor

where the international insurance group:

(1)  Does not have substantial insurance operations in the

United States.

(2)  Has substantial insurance operations in the United

States, but not in Pennsylvania.

(3)  Has substantial insurance operations in the United

States and Pennsylvania, but the department has determined

pursuant to the factors set forth in subsections (c)(1), (2),

(3), (4), (5), (6) and (7) and (f) that the other jurisdiction

is the appropriate group supervisor.

(c)  In cooperation with other supervisors, the department

may determine that it is the appropriate group-wide supervisor

for an international insurance group with substantial operations

concentrated in Pennsylvania or in insurance operations

conducted by subsidiary insurance companies domiciled in

Pennsylvania, where the ultimate controlling person is domiciled

outside Pennsylvania, or it may acknowledge that another chief

insurance regulatory official is the appropriate group-wide

supervisor for the international insurance group. The department

shall consider the following factors and the relative scale of

each when making a determination or acknowledgment under this

subsection:

(1)  The location where the international insurance group is

based or the place of domicile of the ultimate controlling

person of the international insurance group.

(2)  The locations of the international insurance group's

executive offices.

(3)  The locations of origin of the insurance business of the

international insurance group.

(4)  The locations of the assets and liabilities of the

international insurance group.

(5)  The locations of the business operations and activities

of the international insurance group.

(6)  Whether another chief insurance regulatory official is

acting or seeking to act as the lead group-wide supervisor under

a regulatory system that the department determines to be:

(i)  substantially similar to that provided under the laws of

this Commonwealth; or 

(ii)  otherwise sufficient in terms of provision of group-

wide supervision, enterprise risk analysis and cooperation with

other chief regulatory officials.

(7)  Whether a chief insurance regulatory official acting or

seeking to act as the lead group-wide supervisor provides the

department with reasonably reciprocal recognition and

cooperation.

(d)  Pursuant to section 1406, the department is authorized

to collect from any insurer registered pursuant to section 1404

all information necessary to determine whether the department

may act as the group-wide supervisor or if the department may

acknowledge another insurance regulatory official to act as the

group-wide supervisor. Prior to issuing a determination that an

international insurance group is subject to group-wide

supervision by the department, the department shall notify the

insurer registered pursuant to section 1404 and the ultimate

controlling person within the international insurance group. The

international insurance group shall have not less than thirty

(30) days to provide the department with additional information

pertinent to the pending determination. The department shall

publish in the Pennsylvania Bulletin and on its Internet website

the identity of international insurance groups that it has

determined are subject to its group-wide supervision.

(e)  If the department is the group-wide supervisor for an

international insurance group, the department is authorized to

engage in conducting and coordinating any of the following

group-wide supervision activities:

(1)  Assess the enterprise risks within the international

insurance group, pursuant to section 1406, to ensure that:

(i)  The material financial condition and liquidity risks to

the members of the international insurance group which are

engaged in the business of insurance are identified by

management.

(ii)  Reasonable and effective mitigation measures are in

place.

(2)  Request, from any member of an international insurance

group subject to the department's supervision, information

necessary and appropriate to assess enterprise risk, including,

but not limited to, information about the members of the

international insurance group regarding:

(i)  Governance, risk assessment and management.

(ii)  Capital adequacy.

(iii)  Material intercompany transactions.

(3)  Compel development and implementation of reasonable

measures designed to assure that the international insurance

group is able to timely recognize and mitigate material risks to

members that are engaged in the business of insurance.

(4)  Communicate with other insurance regulatory officials

for members within the international insurance group and share

relevant information subject to the confidentiality provisions

of section 1407, through supervisory colleges as set forth in

section 1406.1 or otherwise.

(5)  Enter into agreements with or obtain documentation from

any insurer registered under section 1404, any member of the

international insurance group and any other chief insurance

regulatory officials for members, providing the basis for or

otherwise clarifying the department's role as group supervisor,

including provisions for resolving disputes with other relevant

supervisory authorities. Such agreements or documentation shall

not serve as evidence in any proceeding that any insurer or

person within an insurance holding company system not

incorporated in this Commonwealth is doing business in this

Commonwealth or is otherwise subject to jurisdiction in this

Commonwealth.

(6)  Other group-wide supervisory activities as considered

appropriate by the department.

(f)  If the department acknowledges that a regulatory

official from a jurisdiction which is not accredited by the NAIC

is the group-wide supervisor, the department is authorized to

reasonably cooperate, through supervisory colleges or otherwise,

with group supervision undertaken by the group-wide supervisor,

provided that:

(1)  The department's cooperation is in compliance with the

laws of this Commonwealth.

(2)  The regulator also recognizes and cooperates with the

department's activities as a group-wide supervisor for other

international insurance groups where applicable. Where such

recognition and cooperation is not reasonably reciprocal, the

department is authorized to refuse recognition and cooperation.

(g)  The department is authorized to enter into agreements

with or obtain documentation from any insurer registered under

section 1404, any affiliate of the insurer and other regulatory

officials for members of the insurance group, which provide the

basis for or otherwise clarify a regulatory official's role as

group supervisor.

(h)  The department may promulgate regulations necessary for

the administration of this section. In determining whether a

regulation should be promulgated, the department shall give due

consideration to model laws, model regulations and definitions

or guidelines pertaining to group-wide supervision, if any,

promulgated by the NAIC or other recognized insurance regulatory

bodies or associations.

(i)  A registered insurer subject to this section shall be

liable for and shall pay the reasonable expenses of the

department's participation in the administration of this

section, including the engagement of attorneys, actuaries and

any other professionals and all reasonable travel expenses.

(j)  As used in this section, the following words and phrases

shall have the meanings given to them in this subsection unless

the context clearly indicates otherwise:

"Group-wide supervisor."  The chief insurance regulatory

official authorized to engage in conducting and coordinating

group-wide supervision activities who is from the jurisdiction

determined or acknowledged by the department under subsection

(c) to have sufficient significant contacts with the

international insurance group.

"International insurance group."  An insurance group

operating internationally that includes an insurer registered

under section 1404.

Section 8.  Sections 1407, 1408 and 1409(a), (b) and (c) of

the act, added December 18, 1992 (P.L.1519, No.178), are amended

to read:

Section 1407.  Confidential Treatment.--(a)  All information,

documents, materials and copies thereof in the possession or

control of the department that are produced by, obtained by or

disclosed to the department or any other person in the course of

an examination or investigation made pursuant to section 1406 or

investigation made pursuant to section 1406.1 or 1406.2 and all

information reported pursuant to sections 1402(b)(11.1) and

(11.2), 1404 and 1405 shall be privileged and given confidential

treatment and shall not be:

(1)  Subject to discovery or admissible in evidence in a

private civil action.

(2)  [subject] Subject to subpoena [and shall not be].

(3)  Subject to the act of February 14, 2008 (P.L.6, No.3),

known as the "Right-to-Know Law."

(4)  [made] Made public by the department or any other

person, except to [insurance departments of other states,] 

regulatory or law enforcement officials of other jurisdictions

or group supervisors or members of a supervisory college in

accordance with subsection (c), without the prior written

consent of the insurer to which it pertains unless the

department, after giving the insurer and its affiliates who

would be affected thereby notice and opportunity to be heard,

determines that the interest of policyholders, shareholders or

the public will be served by the publication thereof, in which

event it may publish all or any part thereof in such manner as

[he] it may deem appropriate.

(b)  The commissioner, department or any individual or person

who receives documents, materials or other information while

acting under the authority of the commissioner or department or

with whom such documents, materials or other information are

shared under this article shall not be permitted or required to

testify in any private civil action concerning any confidential

documents, materials or information covered under this section.

(c)  In order to assist in the performance of its duties, the

department may do any of the following:                                                                  

(1)  Share confidential and privileged documents, materials

or other information covered under this section with regulatory

or law enforcement officials of this Commonwealth or other

jurisdictions, the IAIS, the NAIC and its affiliates and

subsidiaries, group supervisors and members of any supervisory

college under section 1406.1, provided that prior to receiving

the documents, materials or other information, the recipient

demonstrates by written statement the necessary authority and

intent to provide the same confidential treatment to the

information as required by this article. The department may only

share confidential and privileged documents, materials or

information reported under section 1404(k.1) with state

insurance regulators having statutes or regulations

substantially similar to subsection (a) and who have agreed in

writing not to disclose such information.

(2)  Receive and maintain as confidential any documents,

materials or other information from the IAIS or the NAIC and its

affiliates and subsidiaries or from regulatory and law

enforcement officials of this Commonwealth or other

jurisdictions in which the documents, materials or other

information are confidential by law in those jurisdictions.

Documents, materials or other information obtained under this

section shall be given confidential treatment, may not be

subject to subpoena and may not be made public by the

department, commissioner or any other person.

(d)  The department shall enter into written agreements with

the IAIS or the NAIC governing the sharing and use of

information provided under this article, that include all of the

following:

(1)  Specific procedures and protocols regarding the

confidentiality and security of information shared with the IAIS

or the NAIC and its affiliates and subsidiaries under this

article, including procedures and protocols for sharing by the

IAIS or the NAIC with other Federal, state, or international

regulators.

(2)  Provisions specifying that ownership of information

shared with the IAIS or the NAIC and its affiliates and

subsidiaries under this article remains with the department and

that the use of the information by the IAIS or the NAIC is

subject to the approval of the department.

(3)  A provision providing that the IAIS or the NAIC and its

affiliates and subsidiaries will, where permitted by law, give

prompt notice to the department and the insurer regarding any

subpoena, request for disclosure or request for production of

the insurer's confidential information in the possession of the

IAIS or the NAIC under this article.

(4)  A requirement that the IAIS or the NAIC and its

affiliates and subsidiaries will consent to intervention by an

insurer in any judicial or administrative action in which the

IAIS or the NAIC and its affiliates and subsidiaries may be

required to disclose confidential information about the insurer

that was shared with the IAIS or the NAIC and its affiliates and

subsidiaries under this article.

(e)  The sharing of information by the department under this

article shall not constitute a delegation of regulatory

authority or rulemaking.

(f)  The department is solely responsible for the

administration, execution and enforcement of the provisions of

this article.

(g)  The sharing of information by the department as

authorized by subsection (c) shall not constitute a waiver of

any applicable privilege or claim of confidentiality in the

documents, materials or information.

(h)  Documents, materials or other information in the

possession or control of the IAIS or the NAIC as provided under

this article shall:

(1)  Be confidential and privileged.

(2)  Not be subject to the act of February 14, 2008 (P.L.6,

No.3), known as the "Right-to-Know Law."

(3)  Not be subject to subpoena.

(4)  Not be subject to discovery or admissible in evidence in

any private civil action.

Section 1408.  [Rules and] Regulations.--The department may,

in the manner provided by law, promulgate the [rules and] 

regulations, and may issue such orders as are necessary to carry

out this article.

Section 1409.  Injunctions and Certain Prohibitions.--(a)

Whenever it appears to the department that any insurer or any

director, officer, employe or agent thereof has committed or is

about to commit a violation of this article or of any [rule,] 

regulation or order issued by the department hereunder, the

department may apply to the Commonwealth Court for an order

enjoining such insurer or such director, officer, employe or

agent thereof from violating or continuing to violate this

article or any such [rule,] regulation or order, and for such

other equitable relief as the nature of the case and the

interest of the insurer's policyholders, creditors and

shareholders or the public may require.

(b)  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 article or

of any [rule,] regulation or order issued by the department

hereunder may be voted at any shareholder's 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

Commonwealth have so ordered. If an insurer or the department

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 article or of any [rule,] regulation or order issued by the

department hereunder, the insurer or the department may apply to

the Commonwealth Court to enjoin any offer, request, invitation,

agreement or acquisition made in contravention of section 1402,

or any [rule,] regulation or order issued by the department

thereunder to enjoin the voting of any security so acquired, to

void any vote of such security already cast at any meeting of

shareholders and for such other equitable relief as the nature

of the case and the interest of the insurer's policyholders,

creditors and shareholders or the public may require.

(c)  In any case where a person has acquired or is proposing

to acquire any voting securities in violation of this article or

any [rule,] regulation or order issued by the department

hereunder, the Commonwealth Court may, on such notice as the

court deems appropriate, upon the application of the insurer or

the department seize or sequester any voting securities of the

insurer owned directly or indirectly by such person and issue

such order with respect thereto as may be appropriate to

effectuate the provisions of this article.

* * *

Section 9.  Section 1410(a) of the act, added December 18,

1992 (P.L.1519, No.178), is amended and the section is amended

by adding a subsection to read:

Section 1410.  Sanctions.--(a)  [Any insurer failing, without

just cause,] A person failing to file any registration statement

or any summary of the registration statement or enterprise risk

report as required [in] by this article or by regulation shall

be required[, after notice and hearing,] to pay a penalty not to

exceed [five hundred ($500)] two hundred ($200) dollars for each

day's delay. The maximum penalty under this section is twenty-

five thousand ($25,000) dollars. [The department may reduce the

penalty if the insurer demonstrates to the department that the

imposition of the penalty would constitute a financial hardship

to the insurer.]

* * *

(f)  Whenever it appears to the department that a person has

committed a violation of this article that prevents the full

understanding of the enterprise risk to the insurer by

affiliates or by the insurance holding company system, the

violation may serve as an independent basis for disapproving

dividends or distributions and for placing the insurer under an

order of supervision in accordance with section 511 of the act

of act of May 17, 1921 (P.L.789, No.285), known as "The

Insurance Department Act of 1921."

Section 10.  This act shall take effect as follows:

(1)  The addition of section 1404(k.1) of the act shall

take effect on January 1, 2013.

(2)  This section shall take effect immediately.

(3)  The remainder of this act shall take effect in 60

days.