Section 3.21.510. Standards.

	(a)  To determine whether an insurer is impaired or in imminent danger of becoming impaired, the director may consider one or more of the following:  
		(1) findings in financial condition and market conduct examination reports prepared by the division or another licensing jurisdiction, audit reports, and actuarial opinions, reports, or summaries;  
		(2) National Association of Insurance Commissioners' Insurance Regulatory Information System reports or other financial analysis reports;  
		(3) whether the insurer has made adequate provision, according to accepted 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 for reserves and related actuarial items including the investment earnings on those assets and the considerations anticipated to be received and retained under the contracts;  
		(4) the financial condition and ability of an assuming reinsurer to perform and, after taking into account the insurer's cash flow and the classes of business written, whether the insurer's reinsurance program provides sufficient protection for the insurer's remaining surplus;  
		(5) whether the insurer's operating results in the last 12 months or a shorter period of time, including any net capital gain or loss, a change in nonadmitted assets, and cash dividends paid to shareholders, would reduce by more than 50 percent the insurer's remaining policyholder surplus held in excess of the minimum policyholder surplus required under AS 21;  
		(6) whether the insurer's operating loss in the last 12 months or a shorter period of time, excluding net capital gains, is greater than 20 percent of the insurer's remaining policyholder surplus held in excess of the minimum policyholder surplus required under AS 21;  
		(7) 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 a monetary obligation, any of which in the opinion of the director may affect the solvency of the insurer;  
		(8) contingent liabilities, pledges, or guaranties that, individually or collectively, involve a total amount that the director determines may affect the solvency of the insurer;  
		(9) whether a controlling person of an insurer is delinquent in the transmission or payment of net premiums to the insurer;  
		(10) the age and collectability of receivables;  
		(11) whether the management of an insurer or any other person who directly or indirectly controls the operation of the insurer fails to possess and demonstrate the competence, fitness, and reputation considered necessary to serve the insurer in the position held;  
		(12) whether the management of an insurer fails to respond to an inquiry of the director relative to the condition of the insurer or gives the director false or misleading information concerning an inquiry;  
		(13) whether the insurer has failed to meet financial and holding company filing requirements in the absence of a reason satisfactory to the director;  
		(14) whether the management of an insurer files a false or misleading financial statement, releases a false or misleading financial statement to a lending institution or the public, makes a false or misleading entry, or omits an entry in the books of the insurer in a material amount or an amount that would place the insurer in a condition that might constitute impairment as defined in AS 21.97.900;  
		(15) 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;  
		(16) whether the insurer has experienced, or will experience in the next 60 months, negative cash flow or liquidity problems;  
		(17) 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 standards of practice;  
		(18) whether management persistently engages in material under reserving that results in adverse development;  
		(19) whether transactions among affiliates, subsidiaries, or controlling persons for which the insurer receives assets, 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;  
		(20) any other condition that might constitute impairment as defined in AS 21.97.900.  
	(b)  In determining an insurer's financial condition under 3 AAC 21.500 - 3 AAC 21.520, the director may take one or more of the following actions:  
		(1) disregard a credit or account receivable resulting from a transaction with a reinsurer that is insolvent, impaired, or otherwise subject to a delinquency proceeding;  
		(2) make appropriate adjustments, including disallowance, to asset values attributable to investments in or transactions with a parent, subsidiary, or affiliate that violates a provision of AS 21  or 3 AAC 21 - 3 AAC 31;  
		(3) refuse to recognize the stated value of an account receivable if the ability to collect the account receivable is highly speculative in view of the age of the account or the financial condition of the debtor;  
		(4) increase the insurer's liability in an amount equal to a contingent liability, a pledge, or a guarantee not otherwise included if a substantial risk exists that the insurer will be called upon to meet that obligation within the next 12 months;  
		(5) take whatever other action is necessary to accurately determine an insurer's actual financial condition.  

Authorities

21.06.090;21.09.175;01.05.031;21.90.900;21.97.900;44.62.125

Notes

Reference

3 AAC 21.770
3 AAC 21.775

Authority

AS 21.06.090 AS 21.09.175 Editor's note: In 2010 the revisor of statutes, acting under AS 01.05.031, renumbered former AS 21.90.900 as AS 21.97.900. As of Register 196 (January 2011), the regulations attorney made conforming technical revisions under AS 44.62.125(b)(6), to 3 AAC 21.510(a), so that cross-references to former AS 21.90.900 now refer to the renumbered statute, AS 21.97.900.

History

Eff. 10/24/92, Register 124; am 7/9/93, Register 127; am 1/1/2010, Register 192

References

3.21.510