Title 31—INSURANCE INSURANCE DEPARTMENT [ 31 PA. CODE CH. 160 ] Standards to Define Insurers Deemed to be in Hazardous Financial Condition [40 Pa.B. 6661]
[Saturday, November 20, 2010]The Insurance Department (Department) amends Chapter 160 (relating to standards to define insurers deemed to be in hazardous financial condition).
Statutory Authority
The final-form rulemaking is adopted under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412) regarding the general rulemaking authority of the Department; Article V of The Insurance Department Act of 1921 (40 P. S. §§ 221.1—221.63) regarding the suspension of business; sections 5.1 and 10 of the Health Maintenance Organization Act (40 P. S. §§ 1555.1 and 1560) regarding authority and supervision; and sections 2456 and 2457 of The Insurance Company Law of 1921 (40 P. S. §§ 991.2456 and 991.2457) regarding notice of deficiencies and sanctions of fraternal benefit societies.
Purpose
The purpose of this final-form rulemaking is to amend Chapter 160, adopted in 1993, to update and clarify standards used to identify insurers in hazardous financial condition and specify corrective actions to be taken to minimize the number and impact of insurer insolvencies. It is based on a model regulation developed by the National Association of Insurance Commissioners (NAIC) entitled ''Model Regulation to Define Standards and Commissioner's Authority for Companies Deemed to be in Hazardous Financial Condition'' (Model Regulation 385) and included in the NAIC's Financial Regulation Standards and Accreditation Program.
This final-form rulemaking is based upon updates made in 2009 to the NAIC model, which was updated to provide timely and effective guidance for financial regulation. Because of the regulation's significance in efforts to prevent insolvencies, the Department expects that the amendments to the NAIC model will be incorporated into the financial regulation standards the Department will meet to maintain its accreditation by the NAIC.
Comments and Response
Notice of proposed rulemaking was published at 40 Pa.B. 2976 (June 5, 2010) with a 30-day comment period. Comments supporting the rulemaking and recommending prompt promulgation were received from The Insurance Federation of Pennsylvania, Inc. during the 30-day comment period. The Independent Regulatory Review Commission (IRRC) reviewed the proposed rulemaking and did not have objections, comments or recommendations.
Affected Parties
Chapter 160 applies to all types of insurers doing or purporting to do business in this Commonwealth, as provided under the scope and definitions of the authorizing statutes.
Fiscal Impact
State government
The final-form rulemaking will strengthen, clarify and update existing regulatory requirements. There will not be material increase in cost to the Department as a result of the final-form rulemaking.
General public
The public will benefit to the extent the final-form rulemaking strengthens financial solvency regulatory requirements for insurers, thereby promoting the ability of the insurance industry to meet obligations under insurance policies and the Department's ability to minimize the number and impact of insurer insolvencies.
Political subdivisions
The final-form rulemaking will not impose additional costs on political subdivisions.
Private sector
The strengthened requirements in the final-form rulemaking should not impose additional costs on insurers currently subject to State financial reporting and solvency requirements.
Paperwork
The final-form rulemaking updates and strengthens existing standards and authority used by the Department in financial regulation of insurers and would not impose additional paperwork requirements.
Effectiveness/Sunset Date
The final-form rulemaking will become effective upon publication in the Pennsylvania Bulletin. The Department continues to monitor the effectiveness of regulations on a triennial basis; therefore, no sunset date has been assigned.
Contact Person
Questions regarding the final-form rulemaking should be directed to Peter J. Salvatore, Regulatory Coordinator, Insurance Department, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429, fax (717) 705-3873, psalvatore@state.pa.us.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on May 25, 2010, the Department submitted a copy of the notice of proposed rulemaking, published at 40 Pa.B. 2976, to IRRC and the Chairpersons of the Senate Banking and Insurance Committee and the House Insurance Committee for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the House and Senate Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Department has considered all comments from IRRC, the House and Senate Committees and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on October 20, 2010, the final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5(g) of the Regulatory Review Act, this final-form rulemaking was deemed approved by IRRC, effective October 21, 2010.
Findings
The Insurance Commissioner finds that:
(1) Public notice of intention to adopt this final-form rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The adoption of this final-form rulemaking in the manner provided in this order is necessary and appropriate for the administration and enforcement of the authorizing statutes.
Order
The Commissioner, acting under the authorizing statutes, orders that:
(a) The regulations of the Department, 31 Pa. Code Chapter 160, are amended by amending §§ 160.1—160.5 to read as set forth at 40 Pa.B. 2976.
(b) The Department shall submit this order and 40 Pa.B. 2976 to the Office of General Counsel and Office of Attorney General for approval as to form and legality as required by law.
(c) The Department shall certify this order and 40 Pa.B. 2976 and deposit them with the Legislative Reference Bureau as required by law.
(d) This final-form rulemaking takes effect immediately upon publication in the Pennsylvania Bulletin.
JOEL SCOTT ARIO,
Insurance Commissioner(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 40 Pa.B. 6487 (November 6, 2010).)
Fiscal Note: 11-243. No fiscal impact; (8) recommends adoption.
[Pa.B. Doc. No. 10-2192. Filed for public inspection November 19, 2010, 9:00 a.m.]
