Section 160.3. Standards

The following standards, either singly or a combination of two or more, may be considered by the Commissioner to determine whether the continued operation of an insurer transacting an insurance business in this Commonwealth might be deemed to be financially hazardous to the general public, holders of policies or certificates of insurance, or creditors. The Commissioner may consider one or more of the following:

(1) A failure by the insurer to maintain working capital, as required by law or regulation, based on the nature, type and volume of insurance being transacted by the insurer.

(2) Material adverse findings relating to an insurer’s financial condition reported in financial condition or market conduct examination reports; audit reports and other communications required under Chapter 147 (relating to annual financial reporting requirements); or actuarial opinions, reports, work papers or summaries.

(3) Financial analysis ratios, analyst team reports and other financial analytical results produced by the NAIC.

(4) Whether the insurer’s net loss from operations in the last 12-month period or shorter period of time, excluding net realized capital gains, is greater than 20% of the insurer’s surplus in excess of the statutorily required minimum capital and surplus.

(5) Whether the insurer’s asset portfolio when viewed in light of current economic conditions with respect to value, liquidity or diversity is sufficient to assure the company’s ability to meet its outstanding obligations as they mature.

(6) The ability of an assuming reinsurer to perform and whether the insurer’s reinsurance program provides sufficient protection for the insurer’s surplus after taking into account the insurer’s cash flow and the classes of business written as well as the financial condition of the assuming reinsurer.

(7) Whether the insurer’s net loss in the last 12-month period or a shorter period of time, including change in nonadmitted assets, net realized and unrealized capital gain or loss, cash dividends paid to shareholders, and other direct charges against surplus is greater than 50% of the insurer’s surplus in excess of the statutorily required minimum capital and surplus.

(8) Whether a reinsurer, obligor or any entity within the insurer’s insurance holding company system is insolvent, threatened with insolvency or delinquent in payment of monetary or other obligations.

(9) Contingent liabilities, pledges or guaranties in relationship to the insurer’s surplus.

(10) Whether a controlling person, under the laws relating to insurance holding companies, of an insurer is delinquent in the transmitting to, or payment of, net premiums to the insurer.

(11) The age and collectibility of receivables.

(12) Whether the management of an insurer, including officers, directors or another person who directly or indirectly controls the operation of the insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in that position.

(13) Whether management of an insurer has failed to respond to inquiries by the Commissioner or members of the Commissioner’s staff relative to the condition of the insurer or has furnished false or misleading information concerning the inquiries.

(14) Whether management of an insurer has done one of the following:

(i) Filed a false or misleading sworn financial statement, or released a false or misleading financial statement to lending institutions or to the general public.

(ii) Made a false or misleading entry, or omitted an entry of material amount in the books of the insurer.

(iii) Established reserves that do not comply with minimum standards as required by law, regulation, statutory accounting practices and accepted actuarial standards and principles.

(iv) Engaged in material under-reserving that resulted in continued adverse development reported in financial statements filed with the Department.

(15) Whether the insurer reports significant increases in premium writing either before or after reinsurance ceded to an extent that it lacks adequate financial and administrative capacity to meet its obligations as they fall due.

(16) Whether the insurer has experienced or will experience in the foreseeable future cash flow or liquidity problems, or both.

(17) Whether transactions among affiliates, subsidiaries or controlling persons for which the insurer receives assets or capital gains, or both, do not provide sufficient value, liquidity or diversity to assure the insurer’s ability to meet its outstanding obligations as they mature.

(18) Whether the insurer has made adequate provision, in accordance with accepted actuarial standards and principles, for the anticipated cash flows required to meet its contractual obligations and related expenses, considering the value, liquidity, diversity and investment earnings of assets held as reserves to meet those obligations and expenses, and other actuarial items, including considerations anticipated to be received and retained under policies and contracts.

(19) The insurer has failed to file financial statements as required by law or regulation or to make filings required under Article XIV of The Insurance Company Law (40 P. S. § § 991.1401—991.1413) within the time allowed by law and, after written demand by the Commissioner, has failed to provide a satisfactory explanation for that failure.

The provisions of this § 160.3 amended November 19, 2010, effective November 20, 2010, 40 Pa.B. 6661. Immediately preceding text appears at serial pages (249807) to (249809).

Notation

Authority

The provisions of this § 160.3 amended under sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. § § 66, 186, 411 and 412); sections 5.1 and 10 of the Health Maintenance Organization Act (40 P. S. § § 1555.1 and 1560); and sections 2456 and 2457 of The Insurance Company Law of 1921 (40 P. S. § § 991.2456 and 991.2457).