Section 1250.20 Standards

Section 1250

Section 1250.20  Standards

Depending upon an examination of

the factual circumstances, applicable law and financial situation of the

company involved, the following standards, either singly or a combination of

two or more, may be considered by the Director to determine whether the

continued operation of any insurer transacting an insurance business in this

State might be deemed to be hazardous to the policyholders, creditors or the general

public which could warrant the Director issuing a corrective order:

a)         adverse findings reported in financial and market conduct

examination reports, audit reports, and actuarial opinions, reports or

summaries;

b)         information from the NAIC Insurance Regulatory Information

System and NAIC's other financial analysis solvency tools and reports;

c)         whether the insurer has made adequate provision, according to Actuarial

Standards of Practice, for the anticipated cash flows required by the

contractual obligations and related expenses of the insurer, when considered in

light of the assets held by the insurer with respect to reserves and related

actuarial items, including, but not limited to, the investment earnings on

assets and the considerations anticipated to be received and retained under the

insurer's policies and contracts;

d)         the ability of an assuming reinsurer to perform and whether

the insurer's reinsurance program provides sufficient protection for the

insurer's remaining 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;

e)         whether the insurer's operating loss in the last 12 month

period or any shorter period of time, including, but not limited to, net

capital gain or loss, change in non-admitted assets, and cash dividends paid to

shareholders, is greater than 50% of the insurer's remaining surplus as regards

policyholders in excess of the minimum required;

f)         whether the insurer operat

nsurer;

e)         whether the insurer's operating loss in the last 12 month

period or any shorter period of time, including, but not limited to, net

capital gain or loss, change in non-admitted assets, and cash dividends paid to

shareholders, is greater than 50% of the insurer's remaining surplus as regards

policyholders in excess of the minimum required;

f)         whether the insurer operating loss in the last 12 month period

or any shorter period of time, excluding net capital gains, is greater than 20%

of the insurer's remaining surplus as regards to policyholders in excess of the

minimum required;

g)         whether a reinsurer, obligor or any entity within the

insurer's insurance holding company system is insolvent, threatened with

insolvency, or delinquent in the payment of its obligations, if, in the opinion

of the Director, that condition may affect the solvency of the insurer;

h)         whether contingent liabilities, pledges or guarantees that,

either individually or collectively, involve a total amount that, in the

opinion of the Director, may affect the solvency of the insurer;

i)          whether any "controlling person" of an insurer is

delinquent in the transmitting to, or payment of, net premiums to the insurer;

j)          the age and collectibility of its receivables;

k)         whether the management of an insurer, including officers,

directors, or any other 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;

l)          whether management of an insurer has failed to respond to

inquiries relative to the condition of the insurer or has furnished false and

misleading information concerning an inquiry;

m)        whether the insurer has failed to meet financial and holding

company filing requirements in the absence of a reason satisfactory to the

Director;

n)         whether management of an insurer either has filed a false or

m

nt of an insurer has failed to respond to

inquiries relative to the condition of the insurer or has furnished false and

misleading information concerning an inquiry;

m)        whether the insurer has failed to meet financial and holding

company filing requirements in the absence of a reason satisfactory to the

Director;

n)         whether management of an insurer either has filed a false or

misleading sworn financial statement, or has released a false or misleading

financial statement to lending institutions or to the general public, or has

made a false or misleading entry, or has omitted an entry of material amount in

the books of the insurer;

o)         whether the insurer has grown so rapidly and to such an extent

that it lacks adequate financial and administrative capacity to meet its

obligations in a timely manner;

p)         whether the insurer has experienced or will experience in the

foreseeable future cash flow and/or liquidity problems;

q)         whether management has established reserves that do not comply

with minimum standards established by State insurance laws, regulations,

statutory accounting standards, sound actuarial principles and Actuarial Standards

of Practice

;

r)          whether management persistently engages in material under

reserving that results in adverse development;

s)         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;

t)          any other finding determined by the Director to be hazardous

to the insurer's policyholders, creditors or general public, including those of

a nonfinancial nature.