March 4, 2015, Introduced by Senator HUNE and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 1301, 1311, 1312, 1315, 1325, 1333, 1341,
1343, 1351, 1355, and 1371 (MCL 500.1301, 500.1311, 500.1312,
500.1315, 500.1325, 500.1333, 500.1341, 500.1343, 500.1351,
500.1355, and 500.1371), sections 1301, 1312, 1315, 1351, and 1371
as amended by 1992 PA 182, section 1311 as amended by 2010 PA 61,
section 1325 as amended by 1994 PA 227, section 1341 as amended by
1994 PA 443, and section 1343 as amended by 1995 PA 219, and by
adding sections 1325a and 1357.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1301. As used in this chapter:
(a) "Enterprise risk" means an activity, circumstance, event,
or series of events involving 1 or more affiliates of an insurer
that, if not remedied promptly, is likely to have a material
adverse effect upon the financial condition or liquidity of the
insurer or its insurance holding company system as a whole,
including, but not limited to, anything that would cause the
insurer to be hazardous to policyholders, creditors, and the
public.
(b) (a)
"Insurer" means that term
as defined in section 106,
except that it does 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, fraternal
benefit societies, or nonprofit health care corporations.
(c) "NAIC" means the national association of insurance
commissioners.
(d) (b)
"Person" means that term
as defined in section 114,
except
that it does not include any a
securities broker performing
no more than the usual and customary broker's function, so long as
the securities broker holds less than 10% of the voting securities
of an insurer or of any person that controls an insurer.
Sec. 1311. (1) A person other than the issuer shall not make a
tender offer for or a request or invitation for tenders of, or
enter
into any an agreement to exchange securities for, seek to
acquire, or
acquire, in the open market or otherwise, any a voting
security of a domestic insurer if, after the consummation thereof,
the person directly or indirectly, or by conversion or by exercise
of
any a right to acquire, would be in control of the
insurer. A
person shall not enter into an agreement to merge with or otherwise
to acquire control of a domestic insurer or any person controlling
a domestic insurer unless, at the time an offer, request, or
invitation
is made or an agreement is entered into, or prior to
before the acquisition of the securities if no offer or agreement
is
involved, the person has filed with the commissioner director
and has sent to the insurer, which has sent to its shareholders, a
statement containing the information required by this chapter and
the offer, request, invitation, agreement, or acquisition has been
approved
by the commissioner director
in the manner prescribed in
this chapter.
(2)
Until May 1, 2012, if a domestic property and casualty
insurer
has 200 employees or fewer, directly or indirectly through
an
affiliate transacting the insurer's business, any proposal to
enter
into an agreement to merge with or otherwise acquire control
of
the domestic insurer or any person controlling the domestic
insurer,
or, for the purpose of obtaining control, that seeks the
election
of 2 or more members of the board of directors of the
domestic
insurer or any person controlling the domestic insurer,
shall,
in addition to the requirements of subsection (1), require
the
approval of 66.67% of the outstanding voting securities if the
proposal
is not supported by a majority of the domestic insurer's
board
of directors. This subsection only applies to a domestic
insurer
that, on the effective date of the amendatory act that
added
this sentence, generates 100% of its premiums from sales in
this
state.
(2) If a person has not filed a statement under subsection
(1), a controlling person of a domestic insurer seeking to divest
its controlling interest in the domestic insurer, in any manner,
shall file with the director, with a copy to the insurer, a
confidential notice of its proposed divestiture at least 30 days
before the cessation of control. The director shall determine those
instances in which the person or persons seeking to divest or to
acquire a controlling interest in an insurer are required to file
to obtain approval of the transaction. The information must remain
confidential until the conclusion of the transaction unless the
director determines that confidential treatment will interfere with
enforcement of this section.
(3) The person who proposes to enter into an agreement to
merge with or otherwise acquire control of a domestic insurer shall
file
a notification notice with the commissioner, director, in such
a form and containing the information prescribed by applicable rule
promulgated
or order issued by the commissioner.director.
(4)
For purposes of this section through section and sections
1312
to 1319, a domestic insurer shall
include any includes a
person controlling a domestic insurer and any foreign insurer whose
written insurance premium in this state for each of the most recent
3 years exceeds the premiums written in its state of domicile and
whose written premium in this state was 20% or more of its total
written premium in each of the most recent 3 years.
Sec. 1312. (1)
The statement to be filed with
the commissioner
director under section 1311(1) shall be made under oath or
affirmation
and shall must contain all
of the following
information:
(a) The name and address of each person by whom or on whose
behalf
the merger or other acquisition of control referred to
described
in section 1311 is to will be
effected, hereinafter
called
referred to in this section
and section 1315 as the
acquiring party. If the person is an individual, his or her
principal occupation, all offices and positions held during the
past 5 years, any civil judgments against the person for $25,000.00
or more in civil fines or penalties or injunctive or other
equitable relief, and any conviction of crimes other than minor
traffic violations during the past 10 years. If the person is not
an individual, a report of the nature of its business operations
during
the past 5 years or for such a
lesser period as in which the
person and any predecessors of the person have been in existence,
an informative description of the business intended to be done by
the person and the person's subsidiaries, and a list of all
individuals who are or who have been selected to become directors
or executive officers of the person or who perform or will perform
functions
appropriate to those positions. The list shall must
include for each individual the individual's principal occupation,
all offices and positions held during the past 5 years, any civil
judgments against the person for $25,000.00 or more in civil fines
or penalties or injunctive or other equitable relief, and any
conviction of crimes other than minor traffic violations during the
past 10 years.
(b) The source, nature, and amount of the consideration used
or to be used in effecting the merger or other acquisition of
control,
a description of any transaction where in which funds were
or
are to be obtained for such purpose, the merger or other
acquisition, including any pledge of the insurer's stock, or the
stock of any of its subsidiaries or controlling affiliates, and the
identity of persons furnishing the consideration. If a source of
the consideration is a loan made in the lender's ordinary course of
business,
the identity of the lender shall must be disclosed but
remain confidential if the person filing the statement so requests.
(c) Fully audited financial information as to the earnings and
financial condition of each acquiring party for the preceding 5
fiscal
years or for such a lesser period as in which the
acquiring
party and any predecessors of the acquiring party have been in
existence and similar unaudited information as of a date not
earlier
than 90 days prior to before
the filing of the statement.
(d) Any plans or proposals that each acquiring party may have
under consideration concerning the insurer's business operations,
including, but not limited to, plans or proposals to liquidate the
insurer, to sell its assets, to merge or consolidate it with any
person, or to make any other material change in its business or
corporate structure or management.
(e)
The number of shares of any security referred to described
in section 1311 that each acquiring party proposes to acquire, the
terms of the offer, request, invitation, agreement, or acquisition
referred
to described in section 1311, and a statement as to how
the proposal's fairness was arrived at.
(f)
The amount of each class of any a
security referred to
described in section 1311 that is beneficially owned or concerning
which there is a right to acquire beneficial ownership by each
acquiring party.
(g)
A full description of any contracts, arrangements, a
contract,
arrangement, or understanding
concerning any a security
referred
to described in section 1311 in which any an acquiring
party is involved, including but not limited to transfer of any of
the securities, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss or
guarantees of profits, division of losses or profits, or the giving
or
withholding of proxies. The description shall must identify
the
persons
with whom the contracts, arrangements, or understanding
understandings have been entered into.
(h)
A description of the purchase of any a security referred
to
described in section 1311 during the 12 calendar months
preceding
the filing of the statement, by any an acquiring party,
including the dates of purchase, names of the purchasers, and
consideration paid or agreed to be paid for the security.
(i)
A description of any recommendations a recommendation to
purchase
any a security referred to described in section 1311 made
during the 12 calendar months preceding the filing of the
statement,
by any an acquiring party or by anyone another person
based upon interviews or at the suggestion of the acquiring party.
(j) Copies of all tender offers for, requests or invitations
for tenders of, exchange offers for, and agreements to acquire or
exchange
any securities referred to a
security described in section
1311 and additional related distributed soliciting material.
(k)
The terms of any an agreement, contract, or understanding
made
with or proposed to be made with any a broker-dealer as to
solicitation
of securities referred to described
in section 1311
for
tender, and the amount of any fees, commissions, a fee,
commission,
or other compensation to be paid to broker-dealers.a
broker-dealer.
(l) Such additional information as the commissioner
prescribes
by
order or rule as necessary or appropriate for the protection of
the
insurer's policyholders and securityholders or in the public
interest.Additional information that the director
prescribes by
order or rule as necessary or appropriate for the protection of the
insurer's policyholders and securityholders or in the public
interest.
(2) A person required to file the statement described in
section 1311 shall do all of the following:
(a) File the annual enterprise risk report under section
1325a, for as long as control exists.
(b) Provide, and ensure that all subsidiaries within its
control in the insurance holding company system will provide,
information to the director upon request as necessary to evaluate
enterprise risk to the insurer.
Sec.
1315. (1) The commissioner director
shall approve any a
merger
or other acquisition of control referred to described in
section
1311 of a domestic insurer unless the commissioner director
determines
on the basis of from information furnished to the
commissioner
director on the merger or other acquisition of control
1 or more of the following:
(a)
After the change of control, the domestic insurer referred
to
described in section 1311 would not be able to satisfy the
requirements for the issuance of a certificate of authority to
write the types of insurance for which it is presently authorized.
(b)
The effect of the merger or other acquisition of control
would
be substantially to lessen competition in insurance in this
state or tend to create a monopoly in this state.
(c)
The financial condition of any an
acquiring party is such
as
might jeopardize the financial
stability of the insurer, or
prejudice
the interest of its policyholders or the interests of any
a
remaining securityholders securityholder who are is unaffiliated
with the acquiring party.
(d) The terms of the offer, request, invitation, agreement, or
acquisition
referred to described in section 1311 are unfair and
unreasonable to the insurer's policyholders or securityholders.
(e)
The plans or proposals that the acquiring party has
party's plan or proposal to liquidate the insurer, sell its assets,
consolidate
or merge it the insurer with any a person, or to make
any other material change in its business or corporate structure or
management,
are is unfair and unreasonable to the insurer's
policyholders, and not in the public interest.
(f)
The competence, experience, and integrity of those the
persons who would control the operation of the insurer are such
that it would not be in the interest of the insurer's policyholders
or the general public to permit the merger or other acquisition of
control.
(g) The acquisition is likely to be hazardous or prejudicial
to the insurance-buying public.
(2) The director may hold a public hearing to receive evidence
and to hear parties affected by the merger or acquisition. A
hearing under this subsection must be held within 30 days after the
filing of a statement under section 1311. The director shall
provide notice of the hearing to the person filing the statement at
least 20 days before the hearing. Not less than 7 days' notice of
the public hearing shall be given by the person filing the
statement to the insurer and to any other persons designated by the
director. If the proposed acquisition of control will require the
approval of more than 1 insurance commissioner, the public hearing
may be held on a consolidated basis upon request of the person
filing the statement or as determined by the director. The director
may opt out of a consolidated hearing and shall provide notice to
the person who filed the statement under section 1311 of the opt-
out within 10 days after the receipt of the statement required by
section 1311. A hearing conducted on a consolidated basis must be
held within the United States before the commissioners of the
states in which the insurers are domiciled.
(3) In connection with a change of control of a domestic
insurer, a determination by the director that the person acquiring
control of the insurer shall be required to maintain or restore the
capital of the insurer to the level required by this act shall be
made not later than 60 days after the date of notification of the
change of control submitted under section 1311.
(4) (2)
A person aggrieved by the commissioner's
director's
order
under this section shall be is
entitled to a contested case
hearing
before the commissioner pursuant to director under the
administrative
procedures act of 1969, Act No. 306 of the Public
Acts
of 1969, being sections 24.201 to 24.328 of the Michigan
Compiled
Laws. 1969 PA 306, MCL 24.201
to 24.328. The commissioner
director shall make a final decision within 30 days after the
conclusion of the hearing.
Sec. 1325. (1) An insurer subject to registration under
section 1324 shall file a registration statement on a form provided
by
the commissioner director containing the following current
information:
(a) The capital structure, comprehensive financial condition,
ownership,
and management of the insurer and any a person
controlling the insurer.
(b) The identity and relationship of every member of the
insurance holding company system.
(c) The following agreements in force, relationships
subsisting, and transactions currently outstanding or that have
occurred during the last calendar year between the insurer and its
affiliates:
(i) Loans, other investments or purchases, sales, or exchanges
of securities of the affiliates by the insurer or of the insurer by
its affiliates.
(ii) Purchases, sales, or exchanges of assets.
(iii) Transactions not in the ordinary course of business.
(iv) Guarantees or undertakings for the benefit of an affiliate
that result in an actual contingent exposure of the insurer's
assets to liability, other than insurance contracts entered into in
the ordinary course of the insurer's business.
(v) All management and service contracts and all cost sharing
arrangements.
(vi) Reinsurance agreements.
(vii) Dividends and other distributions to shareholders.
(viii) Consolidated tax allocation agreements.
(d)
Any A pledge of the insurer's stock, including stock of
any
a subsidiary or controlling affiliate for a loan made
to any a
member of the insurance holding system.
(e) A summary outlining all items in the current registration
statement representing changes from the prior registration
statement.
(f) Other matters concerning transactions between registered
insurers
and any affiliates as may be included from time to time in
any registration forms adopted or approved by the
commissioner.director.
(g) Statements that the insurer's board of directors oversees
corporate governance and internal controls and that the insurer's
officers and senior management have approved, implemented, and
continue to maintain and monitor corporate governance and internal
control procedures.
(2) If a person ultimately controlling the insurer or
intermediately controlling the insurer is registered on a national
stock exchange or is otherwise required to make periodic reports to
the United States securities and exchange commission or other
instrumentality of a state or the government of the United States
or
of any a foreign nation or jurisdiction regulating the
financial
conduct
of that person, the insurer shall file such the reports
with
the commissioner director in addition to other information
required
by the commissioner.director.
If requested by the
director, the insurer must include financial statements of or
within an insurance holding company system, including all
affiliates. The insurer may satisfy the request by providing the
director the most recently filed parent corporation financial
statements that have been filed with the United States securities
and exchange commission.
(3)
If the person or persons ultimately controlling the
insurer
is an individual or group of individuals or is a person not
required
to make reports described in subsection (2), that person
shall
be required to file under oath with the commissioner on a
form
provided by the commissioner information disclosing the
financial
position of that person. A person who knowingly
misrepresents
the financial information provided to the
commissioner
shall be guilty of a felony and, upon conviction,
shall
be punished by a fine not to exceed $5,000.00 or by
imprisonment
for a term not to exceed 5 years, or by both such fine
and
imprisonment in the discretion of the court. The ultimate
controlling
person or persons shall not be required to file a
financial
position form if either:
(a)
There has not been a change of control of the insurer for
a
minimum of 5 years and the insurer maintains a minimum surplus
amount
of $25,000,000.00 if the insurer has achieved at least an
"A"
rating by the A.M. Best company or maintains a minimum surplus
of
$75,000,000.00 if the insurer has achieved at least an "A-"
rating
by the A.M. Best company.
(b)
The commissioner accepts the filing made by the ultimate
controlling
person of the periodic reports that are filed by a
person
who is an intermediary member within the insurance holding
company
system between the insurer and the individual or group of
individuals
controlling the insurer, with the United States
securities
and exchange commission or other instrumentality of a
state
or the government of the United States or any foreign nation
or
jurisdiction regulating the financial conduct of that person.
Sec. 1325a. (1) Except as otherwise provided in subsection
(2), the ultimate controlling person of an insurer subject to
registration under section 1324 shall file an annual enterprise
risk report with the director or a jurisdiction designated by the
director. The report must be appropriate to the nature, scale, and
complexity of the operations of the insurance holding company
system and must, to the best of the ultimate controlling person's
knowledge and belief, identify the material risks within the
insurance holding company system that could pose enterprise risk to
the insurer. The report is not subject to subpoena or discovery, is
not admissible in evidence in a private civil or administrative
action, and is not subject to the freedom of information act, 1976
PA 442, MCL 15.231 to 15.246. The ultimate controlling person of an
insurer subject to registration under section 1324 may request an
exemption from this section. The ultimate controlling person of the
insurer shall file with the director a written statement discussing
the reasons why the ultimate controlling person of the insurer
should be exempt. The director may grant the exemption if after
review of the statement the director finds that compliance with
this section would create an undue financial or organizational
hardship on the ultimate controlling person.
(2) The ultimate controlling person of an insurance holding
company system subject to registration under section 1324 is not
required to file an annual enterprise risk report under subsection
(1) if all of the following requirements are met:
(a) The ultimate controlling person meets all of the following
requirements:
(i) The ultimate controlling person has owned a controlling
interest in the voting securities of an insurer since January 1,
2000.
(ii) The ultimate controlling person meets any of the following
requirements:
(A) The ultimate controlling person is exempt from taxation
under section 501(c)(3), 501(c)(5), or 501(c)(8) of the internal
revenue code of 1986, 26 USC 501.
(B) The ultimate controlling person is organized as a
charitable purpose corporation under the nonprofit corporation act,
1982 PA 162, MCL 450.2101 to 450.3192.
(C) The ultimate controlling person is a charitable trust
registered under the supervision of trustees for charitable
purposes act, 1961 PA 101, MCL 14.251 to 14.266.
(iii) The director has not approved the controlling person's
petition for disclaimer of affiliation or has disallowed a
disclaimer of affiliation under section 1332.
(b) The insurer in which the ultimate controlling person owns
a controlling interest meets both of the following requirements:
(i) Is registered under section 1324.
(ii) Is a wholly domestic insurer with no more than 10% of its
written premium covering risks outside of this state.
Sec.
1333. The failure to file a registration statement, or
any
an amendment thereto to or summary of the registration
statement, or an enterprise risk report required by sections 1324
to
1333 1332 within the time specified for such the filing
is a
violation of this chapter.
Sec. 1341. (1) Transactions within a holding company system to
which
an insurer domiciled in this state or any a foreign insurer
whose written insurance premium in this state for each of the most
recent 3 years exceeds the premiums written in its state of
domicile and whose written premium in this state was 20% or more of
its total written premium in each of the most recent 3 years is a
party or with respect to which the assets or liabilities of these
insurers are affected are subject to all of the following
standards:
(a)
The terms shall must be fair and reasonable.
(b)
The charges or fees for services performed shall must be
reasonable.
(c)
The expenses incurred and payment received shall must be
allocated to the insurer in conformity with customary insurance
accounting practices consistently applied.
(d)
The books, accounts, and records of each party shall must
be
so maintained as to clearly and accurately disclose the precise
nature
and details of the transactions including such necessary
accounting
information as is necessary to support the
reasonableness of the charges or fees to the respective parties.
(e) The insurer's surplus as regards policyholders following
any
dividends or distributions to shareholder affiliates shall must
be reasonable in relation to the insurer's outstanding liabilities
and adequate to its financial needs so that the insurer continues
to comply with section 403.
(2)
The commissioner's director's
prior approval shall be is
required for sales, purchases, exchanges, loans, extensions of
credit, or investments, involving 5% or more of the insurer's
assets at the immediately preceding year's end, between a domestic
controlled
insurer and any a person in its holding company system.
(3)
A domestic insurer and any a
person in its holding company
system shall not enter into the following transactions with each
other, or modify an existing transaction, unless the insurer has
notified
notifies the commissioner director in
writing of its
intention to enter into the transaction, or its reason to modify an
existing transaction and the modification's financial impact on the
insurer, at least 30 days, or a shorter period as the commissioner
director
allows, prior to before entering
into or modifying the
transaction
and the commissioner director
has not disapproved it
within that period:
(a)
Sales, purchases, exchanges, loans, extensions of credit,
or
investments, provided the A
sale, purchase, exchange, loan,
extension of credit, or investment, if the transaction is equal to
or greater than the lesser of 3% of the insurer's assets or 25% of
capital and surplus as of December 31 of the immediately preceding
year.
(b)
Loans or extensions A loan
or extension of credit to any a
person
who is not an affiliate, where if
the insurer makes loans
the
loan or extensions of extends the credit with the agreement or
understanding
that the proceeds of the transactions, transaction,
in
whole or in substantial part, are to will be used to make loans
a
loan or extensions of extend credit
to, to purchase assets an
asset
of, or to make investments invest in,
any an affiliate of the
insurer
making the loans loan or extensions of extending credit
provided
if the transaction is equal to or greater than the
lesser
of 3% of the insurer's assets or 25% of capital and surplus as of
December 31 of the immediately preceding year.
(c) A guarantee that is quantifiable and exceeds the lesser of
0.5% of the insurer's admitted assets or 10% of surplus as of
December 31 of the immediately preceding year. A guarantee that is
not quantifiable under this subdivision is subject to prior
approval of the director.
(d) A direct or indirect acquisition of, or investment in, a
person that controls the insurer or that controls an affiliate of
the insurer, if the amount of the transaction plus the insurer's
present holdings in investment exceeds 2.5% of surplus. This
subdivision does not apply to a direct or indirect acquisition of,
or investments in, a subsidiary acquired under section 1305 or any
other section of this chapter, or a nonsubsidiary insurance
affiliate that is subject to this act.
(e) (c)
Reinsurance treaties A
reinsurance treaty or
agreements.agreement.
(f) (d)
Rendering of services on a regular
systematic basis.
(g) A tax allocation agreement.
(h) A cost-sharing agreement.
(i) (e)
Any A material transactions, transaction, specified by
regulation,
that the commissioner director
determines may adversely
affect the interests of the insurer's policyholders.
(4) An insurer shall informally notify the director of a
termination of transaction under subsection (3) no later than 30
days after the transaction terminates.
(5) (4)
Nothing contained in subsection Subsection
(3) shall
be
considered to does not authorize or permit any transactions a
transaction
that, in the case of for an
insurer that is not a
member of the same holding company system, would be otherwise
contrary to law.
(6) (5)
A domestic insurer shall not enter
into transactions
that are part of a plan or series of like transactions with persons
within the holding company system if the purpose of those separate
transactions
is to avoid the statutory threshold amount under this
chapter and thus avoid the review that would otherwise occur. If
the
commissioner director determines that the separate transactions
were entered into over any relevant period for that purpose, he or
she may exercise his or her authority under section 1371.
(7) (6)
In reviewing a transaction pursuant
to under
subsection
(2), the commissioner director
shall consider whether
the
transaction complies with the standards set forth described in
subsection (1) and whether it may otherwise adversely affect the
interests of policyholders, creditors, or the public.
(8) (7)
The commissioner A domestic
insurer shall be notified
notify
the director within 30 days of any
investment of the
domestic
insurer insurer's
investment in any 1 corporation if the
insurance holding company system's total investment in the
corporation
by the insurance holding company system exceeds 10% of
the corporation's voting securities.
Sec.
1343. (1) Each year the commissioner director shall
review the ordinary shareholder dividends paid by domestic insurers
to determine whether each insurer's surplus following those
dividends is reasonable in relation to the insurer's outstanding
liabilities and adequate to its needs so that it continues to
comply with section 403. In conducting the review and making the
determination,
the commissioner director shall consider all of the
following
factors in addition to the provisions of factors listed
in section 436a:
(a) The adequacy of the level of surplus as regards
policyholders remaining after the dividend payment or payments.
(b) The quality of the insurer's earnings and the extent to
which the reported earnings include extraordinary items, such as
surplus relief reinsurance transactions and reserve
destrengthening.
(c) The quality and liquidity of investments in subsidiaries.
The
commissioner director may discount any of those investments or
refuse to consider the investment as an asset for purposes of
determining the adequacy of surplus as regards policyholders if the
investment so warrants.
(2)
If the commissioner director
determines that an insurer's
surplus as regards policyholders is not reasonable in relation to
the insurer's outstanding liabilities and is not adequate to its
financial needs so that the insurer will not continue to comply
with
section 403, the commissioner director
shall limit or disallow
the payment of shareholder dividends.
(3) Shareholder dividends shall be declared or paid only from
earned
surplus, unless the commissioner director approves the
dividend
prior to before payment. The commissioner director shall
consider whether the dividend will be paid from the insurer's net
gain from operations if the insurer is a life insurer, or the
insurer's net income if the insurer is not a life insurer, for the
12-month period ending December 31 of the immediately preceding
year. For purposes of this subsection, earned surplus excludes
surplus arising from unrealized capital gains or a revaluation of
assets.
(4)
Any A domestic insurer that is a member of an insurance
holding company system and declares a shareholder dividend shall
report
the dividend to the commissioner director within 5 business
days
after declaring the dividend. and at least 10 business days
beginning
from the date of receipt by the commissioner before the
payment.The insurer shall not pay the dividend until
10 days after
the director receives a report under this subsection.
(5) An insurer subject to registration under section 1324
shall not pay any extraordinary dividend or make any other
extraordinary distribution to its shareholders until 30 days after
the
commissioner director has received notice of the declaration
and has not disapproved or has approved the payment within that
period.
If the commissioner, director,
applying the criteria in
subsection (1), determines that the insurer's surplus as regards
policyholders is not reasonable in relation to the insurer's
outstanding liabilities and is not adequate to its financial needs
so that the insurer will not continue to comply with section 403,
the
commissioner director may, prior to before the expiration of
the 30-day period described in this subsection, enter an order
prohibiting the payment of the dividend.
(6)
An extraordinary dividend or distribution includes any a
dividend or distribution of cash or other property, whose fair
market
value together with that plus
the fair market value of other
dividends or distributions made within the preceding 12 months
exceeds the greater of 10% of the insurer's surplus as regards
policyholders as of December 31 of the immediately preceding year,
or the net gain from operations of the insurer, if the insurer is a
life insurer, or the net income, if the insurer is not a life
insurer, not including realized capital gains, for the 12-month
period ending December 31 of the immediately preceding year, but
shall not include pro rata distributions of any class of the
insurer's own securities.
(7) Notwithstanding any other provision of law, an insurer may
declare an extraordinary dividend or distribution that is
conditional
upon the commissioner's director's
approval. The
declaration
shall does not confer no rights upon shareholders until
the
commissioner director has approved or has not disapproved the
payment of the dividend or distribution within the 30-day period
described in subsection (5).
(8) Notwithstanding subsections (5) through (7), a dividend
shall not be declared and paid by an insurer to an affiliate if
after
the payment the insurer could not satisfy the standards set
forth
described in section 403.
(9)
An insurer aggrieved by the commissioner's director's
determination or order under this section is entitled to a
contested
case hearing pursuant to under
the administrative
procedures
act of 1969, Act No. 306 of the Public Acts of 1969,
being
sections 24.201 to 24.328 of the Michigan Compiled Laws, to
1969 PA 306, MCL 24.201 to 24.328. A hearing under this subsection
must be held no later than 10 days after receipt of the insurer's
request.
The commissioner's director's
determination or order shall
remain
in effect except as modified by the commissioner director
during the pendency of the hearing and until a final decision by
the
commissioner. director. The commissioner director shall
render
a final decision within 30 days after the conclusion of the
hearing.
Sec.
1351. (1) Subject to the limitation contained in this
section
and in addition to the powers that the commissioner
director has under chapters 2 and 4 relating to the examination of
insurers,
the commissioner director may order any an insurer
registered under section 1324 to produce records, books, or other
information papers in the possession of the insurer or its
affiliates
as are necessary to ascertain determine
the insurer's
financial condition, including enterprise risk to the insurer by
the ultimate controlling party, or by combination of entities
within the insurance holding company system, or by the insurance
holding company system on a consolidated basis, or legality of
conduct. If the insurer fails to comply with the order, the
commissioner
director may examine the affiliates to obtain the
information. The director may order an insurer registered under
section 1324 to produce information not in the possession of the
insurer if the insurer can obtain access to the information under a
contractual relationship, statutory obligation, or other method. If
the insurer cannot obtain the information requested by the
director, the insurer shall provide the director with a detailed
explanation of the reason that the insurer cannot obtain the
information and the identity of the holder of information. If the
director determines the detailed explanation is without merit, the
director may require, after notice and hearing, the insurer to pay
a civil fine of $1,000.00 for each day's delay or may suspend or
revoke the insurer's license.
(2)
The commissioner director may retain at the registered
insurer's expense attorneys, actuaries, accountants, and other
experts
not otherwise a part of the commissioner's director's staff
as are reasonably necessary to assist in the conduct of the
examination under subsection (1). The expense of the attorneys,
actuaries, accountants, and other experts shall be certified by the
commissioner
director and paid as prescribed provided in
sections
216
and 224. The person retained shall be is under the direction
and
control of the commissioner director
and shall act in a purely
advisory capacity.
(3) Each registered insurer producing for examination records,
books,
and papers pursuant to under
subsection (1) shall be is
liable
for and shall pay the expense of the examination in
accordance
with under sections 216 and 224.
Sec.
1355. (1) All Except
as otherwise provided in this
subsection,
the information, documents, and
copies thereof of
documents
obtained by or disclosed to the commissioner
director or
any other person in the course of an examination or investigation
made
pursuant to section under
sections 1351 and 1357 and
all the
information
reported pursuant to under
sections 1324 to 1333 shall
be
given is confidential, treatment, is not subject to the freedom
of information act, 1976 PA 442, MCL 15.231 to 15.246, is not
subject to subpoena, is not subject to discovery or admissible in
evidence in a private civil or administrative action, and shall not
be
made public by the commissioner director
or any other person,
except
to insurance departments of other states, without the prior
written
consent of the insurer to which it pertains. , unless the
commissioner,
The director may, after giving the insurer and its
affiliates
who would be affected thereby, by
the disclosure notice
and opportunity to be heard, disclose the information if the
director determines that the interests of policyholders,
shareholders, or the public will be served by the publication
thereof,
in which event he may publish all or any part thereof in
such
manner as he deems appropriate.of
the information. The
director or a person who received documents, materials, or other
information while acting under the authority of the director or
with whom the documents, materials, or other information is shared
under this act shall not testify in a private civil or
administrative action concerning confidential documents, materials,
or information obtained under sections 1351 and 1357 and
information reported under sections 1324 to 1333.
(2) The director may share documents, materials, or other
information, including the confidential and privileged documents,
materials, or information obtained under sections 1351 and 1357 and
information reported under sections 1324 to 1333 with other state,
federal, and international regulatory agencies; the NAIC; and
state, federal, and international law enforcement authorities,
including members of a supervisory college under section 1357, if
the regulator, the NAIC, or law enforcement authority agrees in
writing to maintain the confidentiality and privileged status of
the document, material, or other information and has verified in
writing the legal authority to maintain confidentiality. The
director may only share confidential and privileged documents,
material, or information reported under section 1325a with
commissioners of states having statutes or regulations
substantially similar to subsection (1) and who have agreed in
writing to not disclose the information. The director may receive
documents, materials, or information, including otherwise
confidential and privileged documents, materials, or information
from the NAIC and from regulatory and law enforcement officials of
other foreign or domestic jurisdictions, and shall maintain as
confidential or privileged any document, material, 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 document, material, or information. The disclosure or
sharing of information, a document, or other material to the
director or other person under this section is not a waiver of an
applicable privilege or claim of confidentiality.
(3) Documents, materials, or other information in the
possession or control of the department or the NAIC under this
chapter are confidential and privileged, are not subject to the
freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, are
not subject to subpoena, and are not subject to discovery or
admissible as evidence in a private civil or administrative action.
The director shall enter into written agreements with the NAIC
governing sharing and use of information provided under this
chapter. The written agreement must specify procedures and
protocols regarding the confidentiality and security of information
shared with the NAIC and its affiliates and subsidiaries, including
procedures and protocols for sharing by the NAIC with other state,
federal, or international regulators. The agreement must provide
that the director owns the information shared with the NAIC and its
affiliates and subsidiaries and that the NAIC's use of the
information is subject to the direction of the director. The
agreement must provide for prompt notice to be given to an insurer
whose confidential information in possession of the NAIC under this
chapter is subject to a request or subpoena to the NAIC for
disclosure or production, and require the NAIC and its affiliates
and subsidiaries to consent to intervention by an insurer in a
judicial or administrative action.
(4) The sharing of information by the director under this
chapter is not a delegation of regulatory authority or rule-making,
and the director is solely responsible for the administration,
execution, and enforcement of the provisions of this chapter.
Sec. 1357. (1) The director may participate in a supervisory
college for a domestic insurer that is part of an insurance holding
company system with international operations to determine the
insurer's financial condition, business strategy, risk management,
risk exposures, governance processes, regulatory position, or
legality of conduct. The director may participate in a supervisory
college with other regulators including state, federal, and
international regulatory agencies, charged with the supervision of
the insurer or its affiliates. The authority of the director under
this section includes, but is not limited to, initiating a
supervisory college, clarifying membership and participation of
other supervisors in the supervisory college, clarifying the
functions of the supervisory college and roles of other regulators
including establishing a groupwide supervisor, coordinating ongoing
activities of the supervisory college, and establishing a crisis
management plan.
(2) The insurer is liable for and shall pay the reasonable
expenses for the director to participate in the supervisory
college, including reasonable travel expenses, if the director
considers it appropriate to require the insurer to pay these costs.
(3) The director may enter into agreements under section 1355
providing the basis for cooperation and sharing of confidential
information with state, federal, and international regulatory
agencies that regulate the domestic insurer or affiliates within
the insurance holding company system. This section does not
delegate to the supervisory college the authority of the director
to regulate or supervise the domestic insurer or its affiliates
within its jurisdiction.
Sec.
1371. (1) An insurer failing, that
does not, without just
cause,
to file a registration statement as required in under this
chapter
shall, be required, after notice and hearing, to
pay a
penalty
civil fine of $1,000.00 for each day's delay, up to a
maximum
of $50,000.00, to be recovered by the commissioner director
and
paid into the general fund. The commissioner director may
reduce
the penalty if the insurer demonstrates to the commissioner
director
that the imposition of the penalty civil fine would
constitute
a cause financial hardship to the insurer.
(2) Every director or officer of an insurance holding company
system who knowingly violates, knowingly participates in or assents
to, or with actual knowledge permits any of the officers or agents
of the insurer to engage in material acts, omissions, or
transactions or make investments that have not been properly
reported
or submitted pursuant to under
section 1324, 1341, or
1343, that, with respect to material transactions, violate this
chapter, or that result in material false or misleading statements
to
the commissioner director with respect to the financial
condition of the insurer or any of its affiliates shall pay, in
their individual capacity, a civil forfeiture of not more than
$10,000.00 per violation, after notice and hearing before the
commissioner.
director. In determining the amount of the civil
forfeiture,
the commissioner director shall take into account the
appropriateness of the forfeiture with respect to the gravity of
the violation, the history of previous violations, and other
matters as justice requires. In addition, a violation of this
subsection
shall constitute is grounds for removal of the a
director
or officer from any a position of trust or responsibility
in
any an insurer domiciled in this state in accordance with
the
procedures established in section 250.
(3)
If it appears to the commissioner director that an insurer
subject
to this chapter or any an insurer's director, officer,
employee,
or agent has engaged in any a
transaction or entered into
a contract that is subject to section 1341 or 1344 and that would
not have been approved had approval been requested, the
commissioner
director may order the insurer to cease and desist
immediately any further activity under that transaction or
contract.
After notice and hearing, the commissioner director may
also
order the insurer to void any such the contract, transaction,
or distribution, and restore the status quo if that action is in
the best interest of the policyholders, creditors, or the public.
(4)
If it appears to the commissioner director that an insurer
or an insurer's director, officer, employee, or agent has committed
a
willful violation of this chapter, the commissioner director may
cause
institute criminal proceedings to be instituted in the
circuit court for the county in which the principal office of the
insurer
is located or, if the insurer has no such does not have a
principal
office in the this state,
then in the Ingham county
circuit court against the insurer or the insurer's responsible
director, officer, employee, or agent. An insurer that willfully
violating
violates this chapter may be fined not more than
$50,000.00.
An individual who willfully violating violates this
chapter may be fined not more than $10,000.00 or, if the willful
violation involves the deliberate perpetration of a fraud upon the
commissioner,
director, imprisoned not more than 2 years, or both.
(5) An officer, director, or employee of an insurance holding
company system who willfully and knowingly subscribes to or makes
or
causes to be made any a false statement, false report, or false
filing
with the intent to deceive the commissioner director in
the
performance of his or her duties under this chapter, shall be
imprisoned for not more than 2 years, or fined $10,000.00, or both.
Any
fines imposed shall be paid by the The
officer, director, or
employee shall pay a fine in his or her individual capacity.
(6) If the director determines that a person violated section
1311 and the violation prevents the full understanding of the
enterprise risk of the insurer by affiliates or by the insurance
holding company system, the violation may serve as an independent
basis for disapproving dividends or distributions and for placing
the insurer under an order of supervision under chapter 81.