PRIOR PRINTER'S NO. 2058

PRINTER'S NO.  2205

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

SENATE BILL

 

No.

1464

Session of

2012

  

  

INTRODUCED BY D. WHITE AND STACK, MARCH 29, 2012

  

  

SENATOR CORMAN, APPROPRIATIONS, RE-REPORTED AS AMENDED, MAY 22, 2012   

  

  

  

AN ACT

  

1

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

2

act relating to insurance; amending, revising, and

3

consolidating the law providing for the incorporation of

4

insurance companies, and the regulation, supervision, and

5

protection of home and foreign insurance companies, Lloyds

6

associations, reciprocal and inter-insurance exchanges, and

7

fire insurance rating bureaus, and the regulation and

8

supervision of insurance carried by such companies,

9

associations, and exchanges, including insurance carried by

10

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

11

repealing existing laws," further providing for definitions,

12

for acquisition of control of or merger or consolidation with

13

domestic insurer, for acquisitions involving insurers not

14

otherwise covered, for registration of insurers, for

15

standards and management of an insurer within a holding

16

company system and for examination; providing for supervisory

17

colleges and for group-wide supervision for internationally

<--

18

active international insurance groups; and further providing

<--

19

for confidential treatment, for rules and regulations, for

20

injunctions and certain prohibitions and for sanctions.

21

The General Assembly of the Commonwealth of Pennsylvania

22

hereby enacts as follows:

23

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

24

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

25

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

26

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

27

adding definitions to read:

 


1

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

2

the purposes of this article only, the following words and

3

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

4

* * *

5

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

6

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

7

"The Insurance Department Act of 1921."

8

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

9

control with."  The possession, direct or indirect, of the power

10

to direct or cause the direction of the management and policies

11

of a person, whether through the ownership of voting securities,

12

by contract other than a commercial contract for goods or

13

nonmanagement services or otherwise, unless the power is the

14

result of an official position with or corporate office held by

15

the person. Control shall be presumed to exist if any person,

16

directly or indirectly, owns, controls, holds with the power to

17

vote or holds proxies representing ten per centum (10%) or more

18

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

19

shareholders would be entitled to cast in the election of

20

directors. This presumption may be rebutted by a showing that

21

control does not exist in fact. The Insurance Department may

22

determine, after furnishing all persons in interest notice and

23

opportunity to be heard and making specific findings of fact to

24

support such determination, that control exists in fact,

25

notwithstanding the absence of a presumption to that effect or

26

that another person has control.

27

* * *

28

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

29

series of events involving one or more affiliates of an insurer

30

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

- 2 -

 


1

adverse effect on the financial condition or liquidity of an

2

insurer or its insurance holding company system, including, but

3

not limited to, anything that would:

4

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

5

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

6

financial condition under:

7

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

8

known as "The Insurance Department Act of 1921."

9

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

10

insurers deemed to be in hazardous financial condition).

11

"IAIS."  The International Association of Insurance

12

Supervisors or successor organization.

13

* * *

14

"NAIC."  The National Association of Insurance Commissioners

15

or successor organization

16

* * *

17

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

18

States.

19

* * *

20

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

21

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

22

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

23

paragraphs to read:

24

Section 1402.  Acquisition of Control of or Merger or

25

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

26

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

27

shall include any person controlling a domestic insurer unless

28

such person as determined by the department is either directly

29

or through its affiliates primarily engaged in business other

30

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

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1

a preacquisition notification with the department containing the

2

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

3

prior to the proposed effective date of the acquisition. Failure

4

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

5

section, "person" shall not include any securities broker

6

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

7

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

8

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

9

of this section:

10

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

11

domestic insurer unless the department determines that the

12

person is primarily engaged in business other than the business

13

of insurance either directly or through its affiliates.

14

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

15

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

16

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

17

person that controls an insurer.

18

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

19

divest its controlling interest in the insurer in any manner

20

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

21

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

22

prior to the cessation of control except that notice under this

23

paragraph is not required if a statement is filed under

24

paragraph (1). The notice must contain information sufficient

25

for the department to determine if the proposed divestiture

26

requires filing and approval under paragraph (1). Information

27

obtained by or disclosed to the department under this paragraph

28

shall be given confidential treatment as provided under section

29

1407.

30

(4)  The acquiring person for transactions subject to this

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1

section must file a preacquisition notification as required

2

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

3

under section 1403(e)(3).

4

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

5

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

6

to the insurer, a rebuttal filing containing information

7

sufficient for the department to determine whether control

8

exists in fact. The filing is not effective unless the

9

department finds that control does not exist or accepts a

10

disclaimer of control. Information obtained by or disclosed to

11

the department under this subsection must be given confidential

12

treatment as provided under section 1407.

13

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

14

section shall be made under oath or affirmation and shall

15

contain the following information:

16

* * *

17

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

18

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

19

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

20

long as control exists.

21

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

22

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

23

subsidiaries within its control in the insurance holding company

24

system will provide information to the commissioner upon request

25

as necessary to evaluate enterprise risk to the insurer.

26

(12)  Such additional information as the department may by

27

[rule or] regulation prescribe as necessary or appropriate for

28

the protection of policyholders of the insurer or in the public

29

interest.

30

* * *

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1

(f)  * * *

2

(2.1)  If the proposed acquisition of control requires the

3

approval of more than one commissioner chief insurance

<--

4

regulatory official, the public hearing under paragraph (2) may

5

be held on a consolidated basis upon request of the person

6

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

7

statement under subsection (a) with the NAIC within five (5)

8

days of making the request for a public hearing. A commissioner 

<--

9

chief insurance regulatory official may opt out of a

<--

10

consolidated hearing, and shall provide notice to the applicant

11

of the decision to opt out within ten (10) days of the receipt

12

of the statement under subsection (a). A hearing conducted on a

13

consolidated basis must be public and held in the United States

14

before the commissioners chief insurance regulatory officials of

<--

15

the states in which the insurers are domiciled. The

16

commissioners chief insurance regulatory officials shall hear

<--

17

and receive evidence. A commissioner chief insurance regulatory

<--

18

official may attend the hearing in person or participate using

19

telecommunication.

20

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

21

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

22

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

23

reasonably necessary to assist the department in reviewing the

24

proposed acquisition of control.

25

* * *

26

(h)  The following shall constitute a violation of this

27

section:

28

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

29

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

30

(2)  the effectuation or any attempt to effectuate an

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1

acquisition of control of or divestiture of or merger or

2

consolidation with a domestic insurer unless the department has

3

given its approval thereto; or

4

(3)  a violation of section 819-A.

5

* * *

6

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

7

shall mean the annual report of the financial condition required

8

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

9

examinations)] (Reserved)

10

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

11

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

12

Section 1403.  Acquisitions Involving Insurers not Otherwise

13

Covered.--* * *

14

(b)  * * *

15

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

16

* * *

17

(ii)  A purchase of securities solely for investment purposes

18

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

19

to cause or attempt to cause the substantial lessening of

20

competition in any insurance market in this Commonwealth. If a

21

purchase of securities results in a presumption of control as

22

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

23

not solely for investment purposes unless the [insurance

24

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

25

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

26

disclaimer of control or affirmatively finds that control does

27

not exist and such disclaimer action or affirmative finding is

28

communicated by the domiciliary insurance [department to the

29

Insurance Department of the Commonwealth] regulator to the

30

department.

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1

* * *

2

(vii)  An acquisition of an insurer whose domiciliary

3

insurance [department] regulator affirmatively finds that such

4

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

5

alternative to improving such condition; the public benefits of

6

improving such insurer's condition through the acquisition

7

exceed the public benefits that would arise from not lessening

8

competition; and such findings are communicated by the

9

domiciliary insurance [department to the Insurance Department of

10

the Commonwealth] regulator to the department.

11

* * *

12

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

13

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

14

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

15

adding paragraphs and the section is amended by adding a

16

subsection to read:

17

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

18

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

19

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

20

subject to registration, and annually thereafter by the thirty-

21

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

22

unless the department for good cause shown extends the time for

23

registration, and then within such extended time. The department

24

may require any insurer authorized to do business in this

25

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

26

company system and which is not subject to registration under

27

this section to furnish a copy of the registration statement,

28

the summary specified in subsection (c) or other information

29

filed by such insurance company with the insurance regulatory

30

authority of its domiciliary jurisdiction.

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1

(b)  Every insurer subject to registration shall file the

2

registration statement with the department on a form and in a

3

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

4

following current information:

5

* * *

6

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

7

include financial statements of an insurance holding company

8

system, including its affiliates. Financial statements may

9

include, but are not limited to:

10

(i)  annual audited financial statements filed with the SEC

11

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

12

U.S.C. § 77a et seq.); or

13

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

14

U.S.C. § 78a et seq.).

15

An insurer required to file financial statements under this

16

paragraph may satisfy the request by providing the department

17

with the most recent parent corporation financial statements

18

filed with the SEC.

19

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

20

oversees corporate governance and internal controls and that the

21

insurer's officers or senior management have approved,

22

implemented and continue to maintain and monitor corporate

23

governance and internal control procedures.

24

* * *

25

(6)  Other necessary or appropriate information as required

26

by the department by regulation.

27

* * *

28

(d)  No information need be disclosed on the registration

29

statement filed pursuant to subsection (b) if such information

30

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

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1

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

2

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

3

investments or guarantees involving one-half of one per centum

4

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

5

first day of December next preceding shall not be deemed

6

material for purposes of this section.

7

* * *

8

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

9

insurer, information or transaction if and to the extent that

10

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

11

same from the provisions of this section.

12

(k)  Any person may file with the department a disclaimer of

13

affiliation with any authorized insurer or such a disclaimer may

14

be filed by such insurer or any member of an insurance holding

15

company system. The disclaimer shall fully disclose all material

16

relationships and bases for affiliation between such person and

17

such insurer as well as the basis for disclaiming such

18

affiliation. [After a disclaimer has been filed, the insurer

19

shall be relieved of any duty to register or report under this

20

section which may arise out of the insurer's relationship with

21

such person unless and until the department disallows such a

22

disclaimer. The department shall disallow such a disclaimer only

23

after furnishing all parties in interest with notice and

24

opportunity to be heard and after making specific findings of

25

fact to support such disallowance] A disclaimer of affiliation

26

is deemed granted unless the department notifies the filing

27

party the disclaimer is disallowed within thirty (30) days

28

following receipt of a complete disclaimer. In the event of

29

disallowance, the disclaiming party may request an

30

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

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1

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

2

granted. If the commissioner approves the disclaimer or if the

3

disclaimer is deemed approved, the disclaiming party is relieved

4

of the duty to register under this section.

5

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

6

subject to registration shall also file an annual enterprise

7

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

8

controlling person's knowledge and belief, identify the material

9

risks within the insurance holding company system that could

10

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

11

with the lead state regulator of the insurance holding company

12

system as determined by the procedures within the Financial

13

Analysis Handbook adopted by the NAIC. Beginning in 2014 and

<--

14

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

15

the previous calendar year.

16

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

17

summary of the registration statement [thereto] or enterprise

18

risk report required by this section within the time specified

19

for such filing shall be a violation of this section.

20

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

21

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

22

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

23

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

24

paragraph to read:

25

Section 1405.  Standards and Management of an Insurer within

26

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

27

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

28

insurer subject to registration is a party shall be subject to

29

all of the following standards:

30

(i)  The terms shall be fair and reasonable.

- 11 -

 


1

(ii)  Charges or fees for services performed shall be

2

reasonable.

3

(iii)  Expenses incurred and payment received shall be

4

allocated to the insurer in conformity with customary insurance

5

accounting practices consistently applied and all cost-sharing

6

or expense allocation arrangements must be formalized in writing

7

and authorized by the board of directors of the domestic

8

insurer.

9

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

10

such transactions shall be so maintained as to clearly and

11

accurately disclose the nature and details of the transactions,

12

including such accounting information as is necessary to support

13

the reasonableness of the charges or fees to the respective

14

parties.

15

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

16

material transaction with an affiliate and after any dividends

17

or distributions to shareholder affiliates shall be reasonable

18

in relation to the insurer's outstanding liabilities and

19

adequate to its financial needs.

20

(2)  The following transactions involving a domestic insurer

21

and any person in its insurance holding company system,

22

including an amendment or modification of affiliate agreements

23

previously filed under this section that are subject to

24

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

25

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

26

has notified the department in writing of its intention to enter

27

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

28

such shorter period as the department may permit and the

29

department has not disapproved it within such period:

30

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

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1

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

2

be received by the domestic insurer as contributions to its

3

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

4

next preceding, such transactions are equal to or exceed the

5

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

6

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

7

surplus as regards policyholders. 

8

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

9

an affiliate, where the insurer makes such loans or extensions

10

of credit with the agreement or understanding that the proceeds

11

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

12

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

13

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

14

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

15

the thirty-first day of December next preceding, such

16

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

17

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

18

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

19

policyholders.

20

(iii)  Reinsurance agreements or modifications thereto [where

21

either], including:

22

(A)  [the reinsurance premium] agreements where the

23

reinsurance premium or the projected reinsurance premium in any

24

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

25

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

26

policyholders as of the thirty-first day of December next

27

preceding; [or]

28

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

29

or any transfer of assets required to fund the transaction in

30

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

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1

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

2

policyholders as of the thirty-first day of December next

3

preceding, including those agreements which may require as

4

consideration the transfer of assets from an insurer to a

5

nonaffiliate, if an agreement or understanding exists between

6

the insurer and nonaffiliate that any portion of such assets

7

will be transferred to one or more affiliates of the insurer.

8

Nothing in this paragraph shall affect or limit the requirements

9

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

10

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

11

the Insurance Commissioner by domestic insurance companies,

12

associations, or exchanges, of certain conveyances of interests

13

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

14

or

15

(C)  reinsurance pooling agreements.

16

(iv)  Any material transactions, specified by regulation,

17

which the department determines may adversely affect the

18

interests of the insurer's policyholders.

19

(v)  Management agreements, service contracts, tax allocation

20

agreements, guarantees and cost-sharing arrangements.

21

The notice for amendments or modifications must include the

22

reasons for the change and the financial impact on the domestic

23

insurer.

24

Nothing in this paragraph shall be deemed to authorize or permit

25

any transactions which, in the case of an insurer not a member

26

of the same holding company system, would be otherwise contrary

27

to law. 

28

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

29

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

30

domestic insurer shall provide notice of the termination to the

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1

department.

2

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

3

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

4

within the insurance holding company system if the purpose of

5

those separate transactions is to avoid the statutory threshold

6

amount and thus avoid the review that would occur otherwise. If

7

the department determines that such separate transactions were

8

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

9

may exercise its authority under section 1410.

10

* * *

11

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

12

dividend to its [stockholders] shareholders until:

13

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

14

written notice from the insurer of the declaration of the

15

dividend and has not within such period disapproved the payment;

16

or

17

(ii)  the commissioner shall have approved the payment within

18

such thirty-day period.

19

* * *

20

(c)  * * *

21

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

22

not apply to a domestic insurer if the person controlling such

23

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

24

in fact for a reciprocal exchange, a mutual insurance holding

25

company or a publicly held corporation having a board of

26

directors and committees thereof which already meet the

27

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

28

* * *

29

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

30

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

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1

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

2

contained in this section and in addition to the powers which

3

the department has under law relating to the examination of

4

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

5

insurer registered under section 1404 to produce such records,

6

books or other information papers in the possession of the

7

insurer or its affiliates as are reasonably necessary to

8

ascertain the financial condition of such insurer or to

9

determine compliance with this article. In the event an insurer

10

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

11

power to examine affiliates to obtain this information.] examine

12

an insurer registered under section 1404 and its affiliates to

13

ascertain the financial condition of the insurer, including the

14

enterprise risk to the insurer by:

15

(1)  the ultimate controlling person;

16

(2)  an entity or combination of entities within the

17

insurance holding company system; or

18

(3)  the insurance holding company system on a consolidated

19

basis.

20

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

21

section 1404 to produce records, books or other information

22

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

23

reasonably necessary to ascertain the financial condition of the

24

insurer or to determine compliance with this article.

25

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

<--

26

including the enterprise risk to the insurer by:

27

(1)  the ultimate controlling person;

28

(2)  an entity or combination of entities within the

29

insurance holding company system; or

30

(3)  the insurance holding company system on a consolidated

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1

basis,

2

the department may order an insurer registered under section

3

1404 to produce information not in the possession of the insurer

4

if the insurer can obtain access to the information under a

5

contractual relationship, a statutory obligation or other

6

method. If the insurer may not obtain the information requested

7

by the department, the insurer shall provide the department a

8

detailed explanation of the reason the insurer may not obtain

9

the information and the identity of the holder of information.

10

If the insurer fails to comply with this subsection or the

11

department determines that the detailed explanation is without

12

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

13

license or require the insurer to pay an administrative penalty

14

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

15

is produced. The proceeding for suspension, revocation or

16

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

17

(relating to administrative law and procedure).

18

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

19

expense such attorneys, actuaries, accountants and other experts

20

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

21

reasonably necessary to assist in the conduct of the examination

22

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

23

persons so retained shall be under the direction and control of

24

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

25

capacity.

26

(c)  Each registered insurer producing for examination

27

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

28

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

29

pay the expense of such examination as provided for in Article

30

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

- 17 -

 


1

Insurance Department Act of one thousand nine hundred and

2

twenty-one."

3

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

4

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

5

insurer's affiliates to obtain the information necessary to

6

determine an insurer's compliance with this section. The

7

department also has the power to:

8

(1)  issue subpoenas;

9

(2)  administer oaths; and

10

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

11

to determining compliance with this section.

12

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

13

department may petition a court of competent jurisdiction and,

14

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

15

witness to appear and testify or produce documentary evidence.

16

Failure to obey the court order shall be punishable as contempt

17

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

18

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

19

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

20

this Commonwealth. Fees, mileage and expense necessarily

21

incurred in securing the attendance and testimony of witnesses

22

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

23

examined.

24

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

25

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

26

college may be convened as a temporary or permanent forum for

27

communication and cooperation between the regulators charged

28

with the supervision of the insurer or its affiliates.

29

(b)  The department may participate in a supervisory college

30

with other regulators charged with supervision of the insurer or

- 18 -

 


1

its affiliates, including international, Federal and other state

2

regulatory agencies, for any of the following reasons:

3

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

4

regulatory and financial position, risk exposure, risk

5

management and governance processes of the insurer or its

6

affiliates.

7

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

8

accordance with section 1406.

9

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

10

supervisory college for a domestic insurer, registered under

11

section 1404, that is part of an insurance holding company

12

system with international operations in order to determine

13

compliance by the insurer with this article.

14

(d)  The powers of the department regarding supervisory

15

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

16

(1)  Initiating the establishment of a supervisory college.

17

(2)  Clarifying the membership and participation of other

18

supervisors in the supervisory college.

19

(3)  Clarifying the functions of the supervisory college and

20

the role of other regulators, including the establishment of a

21

group-wide group supervisor.

<--

22

(4)  Coordinating the ongoing activities of the supervisory

23

college, including planning meetings, supervisory activities and

24

processes for information sharing.

25

(5)  Establishing a crisis management plan.

26

(e)  The department may enter into agreements in accordance

27

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

28

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

29

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

30

between the department and other regulatory agencies. The

- 19 -

 


1

department may also enter into agreements to share information

2

and further coordinate the activities of the supervisory college

3

pursuant to this section. Nothing in this section shall delegate

4

to the supervisory college the authority of the department to

5

regulate or supervise the insurer or its affiliates within its

6

jurisdiction.

7

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

8

liable for and shall pay the reasonable expenses of the

9

department's participation in a supervisory college, including

10

reasonable travel expenses.

11

Section 1406.2.  Group-wide Supervision for Internationally

<--

12

Active Insurance Groups.--(a)  (Reserved).

13

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

14

supervisor for any internationally active insurance group.

15

(c)  The department may determine that it is an appropriate

16

group-wide supervisor for an internationally active insurance

17

group or it may acknowledge that another chief insurance

18

regulatory official is an appropriate group-wide supervisor for

19

the internationally active insurance group. The relevant factors

20

to be considered by the department when making a determination

21

or acknowledgment under this subsection include:

22

(1)  The place of legal residence of the ultimate controlling

23

person of the internationally active insurance group.

24

(2)  The place of origin of the insurance business of the

25

members within the internationally active insurance group.

26

(3)  The location of the capital supporting the operations of

27

the internationally active insurance group.

28

(4)  The location of the insurance business operations

29

supporting the internationally active insurance group.

30

(5)  The location of employees of the insurance business

- 20 -

 


1

operations within the internationally active insurance group.

2

(6)  Whether another chief insurance regulatory official is

3

acting or seeking to act as lead group supervisor under a

4

regulatory system that the commissioner determines to be:

5

(i)  substantially equivalent to that provided under the laws

6

of this Commonwealth; or 

7

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

8

wide supervision, enterprise risk analysis and cooperation with

9

other chief regulatory officials.

10

(7)  Whether a chief insurance regulatory official acting or

11

seeking to act as lead group supervisor provides the department

12

with mutual equivalency or sufficiency recognition.

13

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

14

to collect from any insurer registered pursuant to section 1404

15

all information necessary to determine whether the department

16

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

17

acknowledge another insurance regulatory official to act as the

18

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

19

internationally active insurance group is subject to group-wide

20

supervision by the department, the department shall notify the

21

insurer registered pursuant to section 1404 and the ultimate

22

controlling person within the internationally active insurance

23

group. The internationally active insurance group shall have not

24

less than thirty (30) days to provide the department with

25

additional information pertinent to the pending determination.

26

The department shall publish in the Pennsylvania Bulletin and on

27

its Internet website the identity of internationally active

28

insurance groups that it has determined are subject to its

29

group-wide supervision.

30

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

- 21 -

 


1

internationally active insurance group, the department is

2

authorized to engage in conducting and coordinating any of the

3

following group-wide supervision activities:

4

(1)  Assess the enterprise risks within the internationally

5

active insurance group, pursuant to section 1406, to ensure

6

that:

7

(i)  The material financial condition and liquidity risks to

8

the members of the internationally active insurance group which

9

are engaged in the business of insurance are identified by

10

management.

11

(ii)  Reasonable and effective mitigation measures are in

12

place.

13

(2)  Request, from any member of an internationally active

14

insurance group subject to the department's supervision,

15

information necessary and appropriate to assess enterprise risk,

16

including, but not limited to, information about the members of

17

the internationally active insurance group regarding:

18

(i)  Governance, risk assessment and management.

19

(ii)  Capital adequacy.

20

(iii)  Material intercompany transactions.

21

(3)  Compel development and implementation of reasonable

22

measures designed to assure that the internationally active

23

insurance group is able to timely recognize and mitigate

24

material risks to members that are engaged in the business of

25

insurance.

26

(4)  Communicate with other insurance regulatory officials

27

for members within the internationally active insurance group,

28

and share relevant information subject to the confidentiality

29

provisions of section 1407, through supervisory colleges as set

30

forth in section 1406.1 or otherwise.

- 22 -

 


1

(5)  Enter into agreements with or obtain documentation from

2

any insurer registered under section 1404, any member of the

3

internationally active insurance group, and any other chief

4

insurance regulatory officials for members, providing the basis

5

for or otherwise clarifying the department's role as group

6

supervisor, including provisions for resolving disputes with

7

other relevant supervisory authorities. Such agreements or

8

documentation shall not serve as evidence in any proceeding that

9

any insurer or person within an insurance holding company system

10

not incorporated in this Commonwealth is doing business in this

11

Commonwealth or is otherwise subject to jurisdiction in this

12

Commonwealth.

13

(6)  Other group-wide supervisory activities as considered

14

appropriate by the department.

15

(f)  If the department acknowledges that a regulatory

16

official from a jurisdiction which is not accredited by the NAIC

17

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

18

reasonably cooperate, through supervisory colleges or otherwise,

19

with group supervision undertaken by the group-wide supervisor,

20

provided that:

21

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

22

laws of this Commonwealth.

23

(2)  The regulator also recognizes and cooperates with the

24

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

25

internationally active insurance groups where applicable. Where

26

such recognition and cooperation is not reasonably reciprocal,

27

the department is authorized to refuse recognition and

28

cooperation.

29

(g)  The department is authorized to enter into agreements

30

with or obtain documentation from any insurer registered under

- 23 -

 


1

section 1404, any affiliate of the insurer and other regulatory

2

officials for members of the insurance group, which provide the

3

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

4

group supervisor.

5

(h)  The department may promulgate regulations necessary for

6

the administration of this section. In determining whether a

7

regulation should be promulgated, the department shall give due

8

consideration to model laws, model regulations and definitions

9

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

10

promulgated by the NAIC or other recognized insurance regulatory

11

bodies or associations.

12

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

13

liable for and shall pay the reasonable expenses of the

14

department's participation in the administration of this

15

section, including the engagement of attorneys, actuaries and

16

any other professionals and all reasonable travel expenses.

17

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

18

shall have the meanings given to them in this subsection unless

19

the context clearly indicates otherwise:

20

"Group-wide supervisor."  The chief insurance regulatory

21

official authorized to engage in conducting and coordinating

22

group-wide supervision activities who is from the jurisdiction

23

determined or acknowledged by the department under subsection

24

(c) to have sufficient significant contacts with the

25

internationally active insurance group.

26

"Internationally active insurance group."  An insurance

27

holding company system that includes an insurer registered under

28

section 1404 and one or more affiliates engaged in the business

29

of insurance that are domiciled or operating outside of a

30

jurisdiction accredited by NAIC.

- 24 -

 


1

Section 1406.2.  Group-wide Supervision for International

<--

2

Insurance Groups.--(a)  (Reserved).

3

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

4

supervisor for any international insurance group where the

5

international insurance group's ultimate controlling person is

6

domiciled in Pennsylvania. However, the department may otherwise

7

acknowledge another jurisdiction as the group-wide supervisor

8

where the international insurance group:

9

(1)  Does not have substantial insurance operations in the

10

United States.

11

(2)  Has substantial insurance operations in the United

12

States, but not in Pennsylvania.

13

(3)  Has substantial insurance operations in the United

14

States and Pennsylvania, but the department has determined

15

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

16

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

17

is the appropriate group supervisor.

18

(c)  In cooperation with other supervisors, the department

19

may determine that it is the appropriate group-wide supervisor

20

for an international insurance group with substantial operations

21

concentrated in Pennsylvania or in insurance operations

22

conducted by subsidiary insurance companies domiciled in

23

Pennsylvania, where the ultimate controlling person is domiciled

24

outside Pennsylvania, or it may acknowledge that another chief

25

insurance regulatory official is the appropriate group-wide

26

supervisor for the international insurance group. The department

27

shall consider the following factors and the relative scale of

28

each when making a determination or acknowledgment under this

29

subsection:

30

(1)  The location where the international insurance group is

- 25 -

 


1

based or the place of domicile of the ultimate controlling

2

person of the international insurance group.

3

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

4

executive offices.

5

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

6

international insurance group.

7

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

8

international insurance group.

9

(5)  The locations of the business operations and activities

10

of the international insurance group.

11

(6)  Whether another chief insurance regulatory official is

12

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

13

a regulatory system that the department determines to be:

14

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

15

this Commonwealth; or 

16

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

17

wide supervision, enterprise risk analysis and cooperation with

18

other chief regulatory officials.

19

(7)  Whether a chief insurance regulatory official acting or

20

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

21

department with reasonably reciprocal recognition and

22

cooperation.

23

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

24

to collect from any insurer registered pursuant to section 1404

25

all information necessary to determine whether the department

26

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

27

acknowledge another insurance regulatory official to act as the

28

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

29

international insurance group is subject to group-wide

30

supervision by the department, the department shall notify the

- 26 -

 


1

insurer registered pursuant to section 1404 and the ultimate

2

controlling person within the international insurance group. The

3

international insurance group shall have not less than thirty

4

(30) days to provide the department with additional information

5

pertinent to the pending determination. The department shall

6

publish in the Pennsylvania Bulletin and on its Internet website

7

the identity of international insurance groups that it has

8

determined are subject to its group-wide supervision.

9

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

10

international insurance group, the department is authorized to

11

engage in conducting and coordinating any of the following

12

group-wide supervision activities:

13

(1)  Assess the enterprise risks within the international

14

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

15

(i)  The material financial condition and liquidity risks to

16

the members of the international insurance group which are

17

engaged in the business of insurance are identified by

18

management.

19

(ii)  Reasonable and effective mitigation measures are in

20

place.

21

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

22

group subject to the department's supervision, information

23

necessary and appropriate to assess enterprise risk, including,

24

but not limited to, information about the members of the

25

international insurance group regarding:

26

(i)  Governance, risk assessment and management.

27

(ii)  Capital adequacy.

28

(iii)  Material intercompany transactions.

29

(3)  Compel development and implementation of reasonable

30

measures designed to assure that the international insurance

- 27 -

 


1

group is able to timely recognize and mitigate material risks to

2

members that are engaged in the business of insurance.

3

(4)  Communicate with other insurance regulatory officials

4

for members within the international insurance group and share

5

relevant information subject to the confidentiality provisions

6

of section 1407, through supervisory colleges as set forth in

7

section 1406.1 or otherwise.

8

(5)  Enter into agreements with or obtain documentation from

9

any insurer registered under section 1404, any member of the

10

international insurance group and any other chief insurance

11

regulatory officials for members, providing the basis for or

12

otherwise clarifying the department's role as group supervisor,

13

including provisions for resolving disputes with other relevant

14

supervisory authorities. Such agreements or documentation shall

15

not serve as evidence in any proceeding that any insurer or

16

person within an insurance holding company system not

17

incorporated in this Commonwealth is doing business in this

18

Commonwealth or is otherwise subject to jurisdiction in this

19

Commonwealth.

20

(6)  Other group-wide supervisory activities as considered

21

appropriate by the department.

22

(f)  If the department acknowledges that a regulatory

23

official from a jurisdiction which is not accredited by the NAIC

24

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

25

reasonably cooperate, through supervisory colleges or otherwise,

26

with group supervision undertaken by the group-wide supervisor,

27

provided that:

28

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

29

laws of this Commonwealth.

30

(2)  The regulator also recognizes and cooperates with the

- 28 -

 


1

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

2

international insurance groups where applicable. Where such

3

recognition and cooperation is not reasonably reciprocal, the

4

department is authorized to refuse recognition and cooperation.

5

(g)  The department is authorized to enter into agreements

6

with or obtain documentation from any insurer registered under

7

section 1404, any affiliate of the insurer and other regulatory

8

officials for members of the insurance group, which provide the

9

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

10

group supervisor.

11

(h)  The department may promulgate regulations necessary for

12

the administration of this section. In determining whether a

13

regulation should be promulgated, the department shall give due

14

consideration to model laws, model regulations and definitions

15

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

16

promulgated by the NAIC or other recognized insurance regulatory

17

bodies or associations.

18

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

19

liable for and shall pay the reasonable expenses of the

20

department's participation in the administration of this

21

section, including the engagement of attorneys, actuaries and

22

any other professionals and all reasonable travel expenses.

23

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

24

shall have the meanings given to them in this subsection unless

25

the context clearly indicates otherwise:

26

"Group-wide supervisor."  The chief insurance regulatory

27

official authorized to engage in conducting and coordinating

28

group-wide supervision activities who is from the jurisdiction

29

determined or acknowledged by the department under subsection

30

(c) to have sufficient significant contacts with the

- 29 -

 


1

international insurance group.

2

"International insurance group."  An insurance group

3

operating internationally that includes an insurer registered

4

under section 1404.

5

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

6

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

7

to read:

8

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

9

documents, materials and copies thereof in the possession or

10

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

11

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

12

an examination or investigation made pursuant to section 1406 or

13

investigation made pursuant to section 1406.1 or 1406.2 and all

14

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

15

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

16

treatment and shall not be:

17

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

18

private civil action.

19

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

20

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

21

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

22

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

23

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

24

regulatory or law enforcement officials of other jurisdictions

25

or group supervisors or members of a supervisory college in

26

accordance with subsection (c), without the prior written

27

consent of the insurer to which it pertains unless the

28

department, after giving the insurer and its affiliates who

29

would be affected thereby notice and opportunity to be heard,

30

determines that the interest of policyholders, shareholders or

- 30 -

 


1

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

2

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

3

[he] it may deem appropriate.

4

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

5

who receives documents, materials or other information while

6

acting under the authority of the commissioner or department or

7

with whom such documents, materials or other information are

8

shared under this article shall not be permitted or required to

9

testify in any private civil action concerning any confidential

10

documents, materials or information covered under this section.

11

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

12

department may do any of the following:                                                                  

13

(1)  Share confidential and privileged documents, materials

14

or other information covered under this section with regulatory

15

or law enforcement officials of this Commonwealth or other

16

jurisdictions, the IAIS, the NAIC and its affiliates and

17

subsidiaries, group supervisors and members of any supervisory

18

college under section 1406.1, provided that prior to receiving

19

the documents, materials or other information, the recipient

20

demonstrates by written statement the necessary authority and

21

intent to provide the same confidential treatment to the

22

information as required by this article. The department may only

23

share confidential and privileged documents, materials or

24

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

25

insurance regulators having statutes or regulations

26

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

27

writing not to disclose such information.

28

(2)  Receive and maintain as confidential any documents,

29

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

30

affiliates and subsidiaries or from regulatory and law

- 31 -

 


1

enforcement officials of this Commonwealth or other

2

jurisdictions in which the documents, materials or other

3

information are confidential by law in those jurisdictions.

4

Documents, materials or other information obtained under this

5

section shall be given confidential treatment, may not be

6

subject to subpoena and may not be made public by the

7

department, commissioner or any other person.

8

(d)  The department shall enter into written agreements with

9

the IAIS or the NAIC governing the sharing and use of

10

information provided under this article, that include all of the

11

following:

12

(1)  Specific procedures and protocols regarding the

13

confidentiality and security of information shared with the IAIS

14

or the NAIC and its affiliates and subsidiaries under this

15

article, including procedures and protocols for sharing by the

16

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

17

regulators.

18

(2)  Provisions specifying that ownership of information

19

shared with the IAIS or the NAIC and its affiliates and

20

subsidiaries under this article remains with the department and

21

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

22

subject to the approval of the department.

23

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

24

affiliates and subsidiaries will, where permitted by law, give

25

prompt notice to the department and the insurer regarding any

26

subpoena, request for disclosure or request for production of

27

the insurer's confidential information in the possession of the

28

IAIS or the NAIC under this article.

29

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

30

affiliates and subsidiaries will consent to intervention by an

- 32 -

 


1

insurer in any judicial or administrative action in which the

2

IAIS or the NAIC and its affiliates and subsidiaries may be

3

required to disclose confidential information about the insurer

4

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

5

subsidiaries under this article.

6

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

7

article shall not constitute a delegation of regulatory

8

authority or rulemaking.

9

(f)  The department is solely responsible for the

10

administration, execution and enforcement of the provisions of

11

this article.

12

(g)  The sharing of information by the department as

13

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

14

any applicable privilege or claim of confidentiality in the

15

documents, materials or information.

16

(h)  Documents, materials or other information in the

17

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

18

this article shall:

19

(1)  Be confidential and privileged.

20

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

21

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

22

(3)  Not be subject to subpoena.

23

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

24

any private civil action.

25

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

26

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

27

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

28

out this article.

29

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

30

Whenever it appears to the department that any insurer or any

- 33 -

 


1

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

2

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

3

regulation or order issued by the department hereunder, the

4

department may apply to the Commonwealth Court for an order

5

enjoining such insurer or such director, officer, employe or

6

agent thereof from violating or continuing to violate this

7

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

8

other equitable relief as the nature of the case and the

9

interest of the insurer's policyholders, creditors and

10

shareholders or the public may require.

11

(b)  No security which is the subject of any agreement or

12

arrangement regarding acquisition, or which is acquired or to be

13

acquired, in contravention of the provisions of this article or

14

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

15

hereunder may be voted at any shareholder's meeting, or may be

16

counted for quorum purposes, and any action of shareholders

17

requiring the affirmative vote of a percentage of shares may be

18

taken as though such securities were not issued and outstanding,

19

but no action taken at any such meeting shall be invalidated by

20

the voting of such securities unless the action would materially

21

affect control of the insurer or unless the courts of this

22

Commonwealth have so ordered. If an insurer or the department

23

has reason to believe that any security of the insurer has been

24

or is about to be acquired in contravention of the provisions of

25

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

26

department hereunder, the insurer or the department may apply to

27

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

28

agreement or acquisition made in contravention of section 1402,

29

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

30

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

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1

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

2

shareholders and for such other equitable relief as the nature

3

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

4

creditors and shareholders or the public may require.

5

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

6

to acquire any voting securities in violation of this article or

7

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

8

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

9

court deems appropriate, upon the application of the insurer or

10

the department seize or sequester any voting securities of the

11

insurer owned directly or indirectly by such person and issue

12

such order with respect thereto as may be appropriate to

13

effectuate the provisions of this article.

14

* * *

15

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

16

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

17

by adding a subsection to read:

18

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

19

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

20

or any summary of the registration statement or enterprise risk

21

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

22

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

23

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

24

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

25

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

26

penalty if the insurer demonstrates to the department that the

27

imposition of the penalty would constitute a financial hardship

28

to the insurer.]

29

* * *

30

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

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1

committed a violation of this article that prevents the full

2

understanding of the enterprise risk to the insurer by

3

affiliates or by the insurance holding company system, the

4

violation may serve as an independent basis for disapproving

5

dividends or distributions and for placing the insurer under an

6

order of supervision in accordance with section 511 of the act

7

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

8

Insurance Department Act of 1921."

9

Section 10.  This act shall take effect as follows:

10

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

11

take effect on January 1, 2013.

12

(2)  This section shall take effect immediately.

13

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

14

days.

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