SB2877sam006 97TH GENERAL ASSEMBLY

Sen. William R. Haine

Filed: 3/22/2012

09700SB2877sam006 LRB097 16448 RPM 67739 a

AMENDMENT TO SENATE BILL 2877

AMENDMENT NO. ______. Amend Senate Bill 2877, AS AMENDED, as follows:

in Section 5, Sec. 131.20a, by replacing paragraph (1)(a) with the following:

"(1) (a) The following transactions involving between a domestic company and any person in its insurance holding company system, including amendments or modifications of affiliate agreements previously filed pursuant to this Section, which are subject to any materiality standards contained in this Section, may not be entered into unless the company has notified the Director in writing of its intention to enter into such transaction at least 30 days prior thereto, or such shorter period as the Director may permit, and the Director has not disapproved it within such period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic company. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Director for determination of the type of filing required, if any:

(i) Sales, purchases, exchanges of assets, loans or extensions of credit, guarantees, investments, or any other transaction, except dividends, (A) that involves the transfer of assets from or liabilities to a company (A) equal to or exceeding the lesser of 3% of the company's admitted assets or 25% of its surplus as regards policyholders as of the 31st day of December next preceding or (B) that is proposed when the domestic company is not eligible to declare and pay a dividend or other distribution pursuant to the provisions of Section 27.

(ii) Loans or extensions of credit to any person that is not an affiliate (A) that involve the lesser of 3% of the company's admitted assets or 25% of the company's surplus, each as of the 31st day of December next preceding, made with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the company making such loans or extensions of credit or (B) that are proposed when the domestic company is not eligible to declare and pay a dividend or other distribution pursuant to the provisions of Section 27.

(iii) Reinsurance agreements or modifications thereto, including all reinsurance pooling agreements, reinsurance agreements in which the reinsurance premium or a change in the company's liabilities, or the projected reinsurance premium or a change in the company's liabilities in any of the next 3 years, equals or exceeds 5% of the company's surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements that may require as consideration the transfer of assets from a company an insurer to a nonaffiliate, if an agreement or understanding exists between the company insurer and nonaffiliate that any portion of those assets will be transferred to one or more affiliates of the company insurer.

(iv) All management agreements, service contracts, other than agency contracts, tax allocation agreements, all reinsurance allocation agreements related to reinsurance agreements required to be filed under this Section, and all cost-sharing arrangements, and any other contracts providing for the rendering of services on a regular systematic basis.

(v) Direct or indirect acquisitions or investments in a person that controls the company, or in an affiliate of the company, in an amount which, together with its present holdings in such investments, exceeds 2.5% of the company's surplus as regards policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to Section 131.2 of this Article (or authorized under any other Section of this Code), or in non-subsidiary insurance affiliates that are subject to the provisions of this Article, are exempt from this requirement.

(vi) Any series of the previously described transactions that are substantially similar to each other, that take place within any 180 day period, and that in total are equal to or exceed the lesser of 3% of the domestic company's insurer's admitted assets or 25% of its policyholders surplus, as of the 31st day of the December next preceding.

(vii) (vi) Any other material transaction that the Director by rule determines might render the company's surplus as regards policyholders unreasonable in relation to the company's outstanding liabilities and inadequate to its financial needs or may otherwise adversely affect the interests of the company's policyholders or shareholders.

Nothing herein contained shall be deemed to authorize or permit any transactions that, in the case of a company an insurer not a member of the same holding company system, would be otherwise contrary to law.".