SENATE JUDICIARY COMMITTEE SUBSTITUTE FOR
SENATE BILL 105
53rd legislature - STATE OF NEW MEXICO - first session, 2017
AN ACT
RELATING TO INSURANCE; ENACTING THE OWN RISK AND SOLVENCY ASSESSMENT ACT; ESTABLISHING A RISK MANAGEMENT FRAMEWORK; REQUIRING INSURERS TO CONDUCT OWN RISK AND SOLVENCY ASSESSMENTS AND MAKE ANNUAL SUMMARY REPORTS; PROVIDING FOR CONFIDENTIALITY OF INFORMATION; ESTABLISHING PENALTIES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. A new section of the New Mexico Insurance Code, Section 59A-5B-1 NMSA 1978, is enacted to read:
"59A-5B-1. [NEW MATERIAL] SHORT TITLE.--Chapter 59A, Article 5B NMSA 1978 may be cited as the "Own Risk and Solvency Assessment Act"."
SECTION 2. A new section of the New Mexico Insurance Code, Section 59A-5B-2 NMSA 1978, is enacted to read:
"59A-5B-2. [NEW MATERIAL] DEFINITIONS.--As used in the Own Risk and Solvency Assessment Act:
A. "guidance manual" means the current version of the own risk and solvency assessment guidance manual developed and adopted by the national association of insurance commissioners and as amended from time to time; provided that a change in the guidance manual shall be effective on the January 1 following the calendar year in which the changes have been adopted by the national association of insurance commissioners;
B. "insurance group" means two or more affiliated persons, at least one of which is an insurer;
C. "insurer" means any person engaged as principal and as indemnitor, surety or contractor entering into contracts of insurance, except:
(1) any agency, authority or instrumentality of the United States, its possessions and territories, the Commonwealth of Puerto Rico or the District of Columbia; or
(2) any state or political subdivision of a state;
D. "own risk and solvency assessment" means a confidential internal assessment, appropriate to the nature, scale and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer's or insurance groups current business plan and the sufficiency of capital resources to support those risks; and
E. "summary report" means a confidential high-level summary of an insurer or insurance group's own risk and solvency assessment."
SECTION 3. A new section of the New Mexico Insurance Code, Section 59A-5B-3 NMSA 1978, is enacted to read:
"59A-5B-3. [NEW MATERIAL] RISK MANAGEMENT FRAMEWORK.--An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which an insurer is a member maintains a risk management framework applicable to the operations of the insurer."
SECTION 4. A new section of the New Mexico Insurance Code, Section 59A-5B-4 NMSA 1978, is enacted to read:
"59A-5B-4. [NEW MATERIAL] OWN RISK AND SOLVENCY ASSESSMENT--REQUIREMENT.--Except as provided pursuant to Section 59A-5B-6 NMSA 1978, an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an own risk and solvency assessment consistent with a process comparable to the guidance manual. The own risk and solvency assessment shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member."
SECTION 5. A new section of the New Mexico Insurance Code, Section 59A-5B-5 NMSA 1978, is enacted to read:
"59A-5B-5. [NEW MATERIAL] OWN RISK AND SOLVENCY ASSESSMENT SUMMARY REPORT.--
A. Upon the superintendent's request, an insurer shall submit to the superintendent an own risk and solvency assessment summary report or any combination of reports that together contain the information described in the guidance manual applicable to the insurer and the insurance group, if any, of which it is a member. The summary report, if requested, shall be due thirty days after the completion of the insurer's most recent own risk and solvency assessment that has been performed in accordance with the insurer's or the insurance group's internal strategic planning process. Upon the superintendent's request, the insurer shall advise the superintendent of the date, annual or otherwise, that the insurer or the insurance group conducts its internal strategic planning process. Notwithstanding any request from the superintendent, if the insurer is a member of an insurance group, the insurer shall submit the summary report or summary reports required by this subsection if the superintendent is the lead state commissioner of the insurance group as determined by the procedures within the financial analysis handbook adopted by the national association of insurance commissioners.
B. Each summary report shall include a signature of the insurer or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process attesting to the best of the signator's belief and knowledge that the insurer applies the enterprise risk management process described in the summary report and that a copy of the summary report has been provided to the insurer's board of directors or the appropriate committee thereof.
C. An insurer may comply with the provisions of Subsection A of this section by providing the most recent and substantially similar summary report or summary reports provided by the insurer or another member of the insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction, if that report provides information that is comparable to the information described in the guidance manual. Any such report in a language other than English shall be accompanied by a translation of that report into the English language."
SECTION 6. A new section of the New Mexico Insurance Code, Section 59A-5B-6 NMSA 1978, is enacted to read:
"59A-5B-6. [NEW MATERIAL] EXEMPTION.--
A. An insurer shall be exempt from the provisions of the Own Risk and Solvency Assessment Act if:
(1) the insurer has an annual direct written and unaffiliated assumed premium, including international direct and assumed premiums but excluding premiums reinsured with the federal crop insurance corporation and federal flood program, of less than five hundred million dollars ($500,000,000); and
(2) the insurance group of which the insurer is a member has an annual direct written and unaffiliated assumed premium, including international direct and assumed premiums but excluding premiums reinsured with the federal crop insurance corporation and federal flood program, of less than one billion dollars ($1,000,000,000).
B. If an insurer qualifies for exemption pursuant to Paragraph (1) of Subsection A of this section, but the insurance group of which it is a member does not qualify for exemption pursuant to Paragraph (2) of Subsection A of this section, the summary report that may be required pursuant to Section 59A-5B-5 NMSA 1978 shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one summary report for any combination of insurers; provided that any combination of reports includes every insurer within the insurance group.
C. If an insurer does not qualify for exemption pursuant to the provisions of Paragraph (1) of Subsection A of this section, but the insurance group of which it is a member qualifies for exemption pursuant to Paragraph (2) of Subsection A of this section, the only summary report that may be required pursuant to Section 59A-5B-5 NMSA 1978 shall be the report applicable to that insurer.
D. An insurer that does not qualify for exemption pursuant to Subsection A of this section may apply to the superintendent for a waiver from the requirements of the Own Risk and Solvency Assessment Act based upon unique circumstances. In deciding whether to grant the insurer's request for waiver, the superintendent may consider the type and volume of business written, ownership and organizational structure and any other factor the superintendent considers relevant to the insurer or insurance group of which it is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the superintendent shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer's request for a waiver.
E. Notwithstanding the exemptions stated in this section:
(1) the superintendent may require that an insurer maintain a risk management framework, conduct an own risk and solvency assessment and file a summary report based on unique circumstances, including the type and volume of business written, ownership and organizational structure, federal agency requests and international supervisor requests; and
(2) the superintendent may require that an insurer maintain a risk management framework, conduct an own risk and solvency assessment and file a summary report if the insurer has risk-based capital for a company action level event pursuant to the Risk-Based Capital Act or otherwise exhibits qualities of a troubled insurer as determined by the superintendent.
F. If an insurer that qualifies for an exemption pursuant to Subsection A of this section subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which it is a member, the insurer shall have one year following the year the threshold is exceeded to comply with the requirements of the Own Risk and Solvency Assessment Act."
SECTION 7. A new section of the New Mexico Insurance Code, Section 59A-5B-7 NMSA 1978, is enacted to read:
"59A-5B-7. [NEW MATERIAL] OWN RISK AND SOLVENCY ASSESSMENT SUMMARY REPORTS--CONTENTS.--
A. A summary report shall be prepared consistent with the guidance manual, subject to the requirements of Subsection B of this section. Documentation and supporting information shall be maintained and made available upon examination or upon request of the superintendent.
B. The review of the summary report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multistate or global insurers and insurance groups."
SECTION 8. A new section of the New Mexico Insurance Code, Section 59A-5B-8 NMSA 1978, is enacted to read:
"59A-5B-8. [NEW MATERIAL] CONFIDENTIALITY.--
A. Documents, materials or other information, including the summary report, in the possession or control of the office of superintendent of insurance that are obtained by, created by or disclosed to the superintendent or any other person pursuant to the Own Risk and Solvency Assessment Act shall constitute trade secrets. The superintendent is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the superintendent's official duties. The superintendent may not otherwise make the documents, materials or other information public without prior written notice to the insurer.
B. In order to assist in the performance of the superintendent's regulatory duties, the superintendent:
(1) may, upon request, share documents, materials or other information related to an own risk and solvency assessment, including the confidential documents, materials or information subject to Subsection A of this section and including proprietary and trade-secret documents and materials, with other state, federal and international financial regulatory agencies, with the national association of insurance commissioners and with any third-party consultants designated by the superintendent; provided that the recipient agrees in writing to maintain the confidential status of the documents, materials or other information related to an own risk and solvency assessment and has verified in writing the legal authority to maintain confidentiality;
(2) may receive documents, materials or other information related to an own risk and solvency assessment, including confidential documents, materials or information and including proprietary and trade-secret information or documents, from regulatory officials of other foreign or domestic jurisdictions and from the national association of insurance commissioners, and shall maintain as confidential any documents, materials or information received with notice or the understanding that it is confidential under the laws of the jurisdiction that is the source of the document, material or information; and
(3) shall enter into a written agreement with the national association of insurance commissioners or a third-party consultant governing sharing and use of information provided pursuant to the Own Risk and Solvency Assessment Act consistent with this subsection that shall:
(a) specify procedures and protocols regarding the confidentiality and security of information shared with the national association of insurance commissioners or a third-party consultant pursuant to the Own Risk and Solvency Assessment Act, including procedures and protocols for sharing by the national association of insurance commissioners with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidential status of the documents, materials or other information related to an own risk and solvency assessment and has verified in writing the legal authority to maintain confidentiality;
(b) specify that ownership of information shared with the national association of insurance commissioners or a third-party consultant pursuant to the Own Risk and Solvency Assessment Act remains with the superintendent and that the national association of insurance commissioners' or a third-party consultant's use of the information is subject to the direction of the superintendent;
(c) prohibit the national association of insurance commissioners or third-party consultant from storing the information shared pursuant to the Own Risk and Solvency Assessment Act in a permanent database after the underlying analysis is completed;
(d) require prompt notice to be given to an insurer whose confidential information in the possession of the national association of insurance commissioners or a third-party consultant pursuant to the Own Risk and Solvency Assessment Act when subject to a request or subpoena;
(e) require the national association of insurance commissioners or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the national association of insurance commissioners or a third-party consultant may be required to disclose confidential information about the insurer that has been shared with the national association of insurance commissioners or a third-party consultant pursuant to the Own Risk and Solvency Assessment Act; and
(f) in the case of an agreement involving a third-party consultant, provide for the insurer's written consent.
C. The sharing of information and documents by the superintendent pursuant to the Own Risk and Solvency Assessment Act shall not constitute a delegation of regulatory authority or rulemaking, and the superintendent is solely responsible for the administration, execution and enforcement of the provisions of the Own Risk and Solvency Assessment Act.
D. No waiver of any applicable privilege or claim of confidentiality of documents, proprietary and trade-secret materials or other information related to an own risk and solvency assessment shall occur as a result of disclosure of that related information, materials or documents to the superintendent under this section or as a result of sharing as authorized in the Own Risk and Solvency Assessment Act."
SECTION 9. A new section of the New Mexico Insurance Code, Section 59A-5B-9 NMSA 1978, is enacted to read:
"59A-5B-9. [NEW MATERIAL] SANCTIONS.--Any insurer failing, without just cause, to timely file the summary report as required in the Own Risk and Solvency Assessment Act shall be required, after notice and hearing, to pay a penalty of one thousand dollars ($1,000) for each day's delay to be recovered by the superintendent, and the penalty so recovered shall be paid into the general fund. The maximum penalty under this section is one hundred thousand dollars ($100,000). The superintendent may reduce the penalty if the insurer demonstrates to the superintendent that the imposition of the penalty would constitute a financial hardship to the insurer."
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