SB170

By Senator Blackwell

ENROLLED, An Act,

Relating to the State Insurance Department and the regulation of insurance; to add Chapter 29A to Title 27, Code of Alabama 1975; to provide requirements for maintaining a risk management framework and completing an Own Risk and Solvency Assessment (ORSA), with instructions for filing an ORSA Summary Report with the Commissioner of Insurance; and to provide that documents and other information from an insurer in an assessment would be confidential and privileged except as otherwise provided in this act.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. Chapter 29A is added to Title 27, Code of Alabama 1975, to read as follows:

Chapter 29A. Risk Management and Own Risk and Solvency Assessment.

§27-29A-1. Purpose and Scope.

(a) The purpose of this chapter is to provide the requirements for maintaining a risk management framework and completing an Own Risk and Solvency Assessment (ORSA) and provide guidance and instructions for filing an ORSA Summary Report with the Commissioner of Insurance.

(b) The requirements of this chapter shall apply to all insurers domiciled in this state unless exempt pursuant to Section 27-29A-6.

(c) The Legislature finds and declares that the ORSA Summary Report will contain confidential and sensitive information related to an insurer or insurance group's identification of risks material and relevant to the insurer or insurance group filing the report. This information will include proprietary and trade secret information that has the potential for harm and competitive disadvantage to the insurer or insurance group if the information is made public. It is the intent of this Legislature that the ORSA Summary Report shall be a confidential document filed with the commissioner, that the ORSA Summary Report will be shared only as stated herein and to assist the commissioner in the performance of his or her duties, and that in no event shall the ORSA Summary Report be subject to public disclosure.

§27-29A-2. Definitions.

For purposes of this chapter, the following definitions shall apply:

(1) INSURANCE GROUP. Those insurers and affiliates included within an insurance holding company system as defined in Chapter 29.

(2) INSURER. As set forth in Section 27-1-2, except that it shall not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.

(3) NAIC. The National Association of Insurance Commissioners and its affiliates and subsidiaries.

(4) OWN RISK AND SOLVENCY ASSESSMENT or ORSA. A confidential internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer or insurance group's current business plan, and the sufficiency of capital resources to support those risks.

(5) ORSA GUIDANCE MANUAL. The current version of the Own Risk and Solvency Assessment Guidance Manual developed and adopted by the NAIC and as amended from time to time. A change in the ORSA Guidance Manual shall be effective on the January 1 following the calendar year in which the changes have been adopted by the NAIC.

(6) ORSA SUMMARY REPORT. A confidential high level summary of an insurer or insurance group's ORSA.

§27-29A-3. Risk Management Framework.

An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer.

§27-29A-4. ORSA Requirement.

Subject to Section 27-29A-6, an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an ORSA consistent with a process comparable to the ORSA Guidance Manual. The ORSA shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member, or both.

§27-29A-5. ORSA Summary Report.

(a) Upon the commissioner's request, and no more than once each year, an insurer shall submit to the commissioner an ORSA Summary Report or any combination of reports that together contain the information described in the ORSA Guidance Manual, applicable to the insurer or the insurance group of which it is a member, or both. Notwithstanding any request from the commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report or reports required by this subsection if the commissioner is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC.

(b) The report or reports shall include a signature of the insurer or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process attesting to the best of his or her belief and knowledge that the insurer applies the enterprise risk management process described in the ORSA Summary Report and that a copy of the report has been provided to the insurer's board of directors or the appropriate committee thereof.

(c) An insurer may comply with subsection (a) by providing the most recent and substantially similar report or reports provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction, if that report provides information that is comparable to the information described in the ORSA Guidance Manual. A report in a language other than English must be accompanied by a translation of that report into the English language.

§27-29A-6. Exemption.

(a) An insurer shall be exempt from the requirements of this chapter, if it meets both of the following:

(1) The insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than five hundred million dollars ($500,000,000).

(2) The insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than one billion dollars ($1,000,000,000).

(b) If an insurer qualifies for exemption pursuant to subdivision (1) of subsection (a), but the insurance group of which the insurer is a member does not qualify for exemption pursuant to subdivision (2) of subsection (a), then the ORSA Summary Report that may be required pursuant to Section 27-29A-5 shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one ORSA Summary Report for any combination of insurers provided any combination of reports includes every insurer within the insurance group.

(c) If an insurer does not qualify for exemption pursuant to subdivision (1) of subsection (a), but the insurance group of which it is a member qualifies for exemption pursuant to subdivision (2) of subsection (a), then the only ORSA Summary Report that may be required pursuant to Section 27-29A-5 shall be the report applicable to that insurer.

(d) An insurer that does not qualify for exemption pursuant to subsection (a) may apply to the commissioner for a waiver from the requirements of this chapter based upon unique circumstances. In deciding whether to grant the insurer's request for waiver, the commissioner may consider the type and volume of business written, ownership, and organizational structure, and any other factor the commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the commissioner shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer's request for a waiver.

(e) Notwithstanding the exemptions stated in this section, the commissioner may require of an insurer to do both of the following:

(1) To maintain a risk management framework, conduct an ORSA, and file an ORSA Summary Report based on unique circumstances including, but not limited to, the type and volume of business written, ownership, and organizational structure, federal agency requests, and international supervisor requests.

(2) To maintain a risk management framework, conduct an ORSA, and file an ORSA Summary Report if the insurer has Risk-Based Capital for company action level event as set forth in Section 27-2B-4, meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined by regulation of the commissioner, or otherwise exhibits qualities of a troubled insurer as determined by the commissioner.

(f) If an insurer that qualifies for an exemption pursuant to subsection (a) subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one year following the year the threshold is exceeded to comply with the requirements of this chapter.

§27-29A-7. Contents of ORSA Summary Report.

(a) The ORSA Summary Report shall be prepared consistent with the ORSA Guidance Manual, subject to the requirements of subsection (b). Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner.

(b) The review of the ORSA Summary Report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multi-state or global insurers and insurance groups.

§27-29A-8. Confidentiality.

(a) Documents, materials, or other information, including the ORSA Summary Report, in the possession of or control of the Department of Insurance that are obtained by, created by, or disclosed to the commissioner or any other person under this chapter, are recognized by this state as being proprietary and to contain trade secrets. All such documents, materials, or other information shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer.

(b) Neither the commissioner nor any person who received documents, materials, or other ORSA-related information, through examination or otherwise, while acting under the authority of the commissioner or with whom such documents, materials, or other information are shared pursuant to this chapter shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).

(c) In order to assist in the performance of the commissioner's regulatory duties, the commissioner:

(1) Upon request, may share documents, materials, or other ORSA-related information, including the confidential and privileged documents, materials, or information subject to subsection (a), including proprietary and trade secret documents and materials with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in Section 27-29-6.1, with the NAIC and with any third-party consultants designated by the commissioner, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality.

(2) May receive documents, materials, or other ORSA-related information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college as defined in Section 27-29-6.1, and from the NAIC, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the documents, materials, or information.

(3) Shall enter into a written agreement with the NAIC or a third-party consultant governing sharing and use of information provided pursuant to this chapter, consistent with this subsection that shall satisfy all of the following:

a. Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant pursuant to this chapter, including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality.

b. Specify that ownership of information shared with the NAIC or a third-party consultant pursuant to this chapter remains with the commissioner and the NAIC's or a third-party consultant's use of the information is subject to the direction of the commissioner.

c. Prohibit the NAIC or third-party consultant from storing the information shared pursuant to this chapter in a permanent database after the underlying analysis is completed.

d. Require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant pursuant to this chapter is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production.

e. Require the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to this chapter.

f. In the case of an agreement involving a third-party consultant, provide for the insurer's written consent.

(d) The sharing of information and documents by the commissioner pursuant to this chapter shall not constitute a delegation of regulatory authority or rulemaking and the commissioner is solely responsible for the administration, execution, and enforcement of this chapter.

(e) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary, and trade secret materials or other ORSA-related information shall occur as a result of disclosure of such ORSA-related information or documents to the commissioner under this section or as a result of sharing as authorized in this chapter.

(f) Documents, materials, or other information in the possession or control of the NAIC or third-party consultants pursuant to this chapter shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, and shall not be subject to subpoena.

§27-29A-9. Sanctions.

(a) Any insurer failing, without just cause as determined by the commissioner, to timely file the ORSA Summary Report as required in this chapter shall be required, after notice and hearing as provided in Chapter 2, to pay a penalty of one hundred dollars ($100) for each day's delay, not to exceed ten thousand dollars ($10,000).

(b) The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.

(c) Any penalty collected under this section shall be deposited in the State Treasury to the credit of the Insurance Department Fund.

§27-29A-10. Operative Date.

The first filing of the ORSA Summary Report shall be in the year commencing on the effective date of this act pursuant to Section 27-29A-5.

Section 2. All laws or parts of laws which conflict with this act are repealed.

Section 3. This act shall become effective on the first day of January following its passage and approval by the Governor or its otherwise becoming law.

Insurance

Insurance Department

Civil Procedure

Records

Open Records

Code Added