The purpose of this article is to set forth the standards which the insurance commissioner may use for identifying insurers found to be in such condition as to render the continuance of their business hazardous to the public or to holders of their policies or certificates of insurance. This article shall not be interpreted to limit the powers granted the commissioner by any laws or parts of laws of this state, nor shall this article be interpreted to supersede any laws or parts of laws of this state.
The following standards, either singularly or a combination of two or more, may be considered by the commissioner 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. The commissioner may consider:
(a) Adverse findings reported in financial condition and market conduct examination reports;
(b) The national association of insurance commissioners insurance regulatory information system and its related reports;
(c) A company which is under suspension, revocation or rehabilitation in another state;
(d) The insurer's asset portfolio when viewed in light of current economic conditions is not of sufficient value, liquidity, or diversity to assure the company's ability to meet its outstanding obligations as they mature;
(e) The total of the noninvestment grade bonds equals twenty percent of the total bond portfolio;
(f) The ratios of commission expense, general insurance expense, policy benefits and reserve increases as to annual premium and net investment income which could lead to an impairment of capital and surplus;
(g) The ability of an assuming reinsurer to perform and whether the insurer's reinsurance program provides sufficient protection for the company'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;
(h) The insurer's operating loss in the last twelve-month period or any shorter period of time, including, but not limited to, net capital gain or loss, change in nonadmitted assets, and cash dividends paid to shareholders, is greater than fifty percent of such insurer's remaining surplus as regards policyholders in excess of the minimum required;
(i) Whether any affiliate, subsidiary or reinsurer is insolvent, threatened with insolvency, or delinquent in payment of its monetary or other obligation;
(j) Contingent liabilities, pledges or guaranties which either individually or collectively involve a total amount which in the opinion of the commissioner may affect the solvency of the insurer;
(k) Whether any "controlling person" of an insurer is delinquent in the transmitting to, or payment of, net premiums to such insurer;
(l) The age and collectibility of receivables;
(m) Whether the management of an insurer, including officers, directors, or any other person who directly or indirectly controls the operation of such insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in such position;
(n) 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;
(o) Whether management of an insurer either has filed any 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;
(p) A ratio of gross premiums written to surplus as to policyholders exceeds ten to one and net premium written to surplus as to policyholders exceeds four to one:
(1) Projected annual net or gross premiums shall be based on the actual writings to date for the insurer's current calendar year or the insurer's writings for the previous calendar year or both. Ratios shall be computed on an annualized basis;
(2) For the purposes of this subsection, "gross premiums written" means direct premiums written and reinsurance assumed, and "net premiums written" means direct premiums written and reinsurance assumed less reinsurance ceded;
(3) This ratio shall not apply to life insurance written by life or life and health insurers;
(q) A ratio of current assets to current liabilities which is below one;
(r) The total investments in parent, subsidiaries and affiliates exceeds one hundred percent of surplus as regards policyholders in excess of the minimum required by statute or order of the commissioner;
(s) 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; and
(t) Whether the company has experienced or will experience in the foreseeable future cash flow and/or liquidity problems.
(a) For the purposes of making a determination of an insurer's financial condition under this regulation, the commissioner may:
(1) Disregard any credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired or otherwise subject to a delinquency proceeding;
(2) Make appropriate adjustments to asset values attributable to investments in or transactions with parents, subsidiaries or affiliates;
(3) Refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor; or
(4) Increase the insurer's liability in an amount equal to any contingent liability, pledge or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next twelve-month period.
(b) If, after notice of hearing, the commissioner determines that the continued operation of the insurer licensed to transact business in this state may be hazardous to the policyholders or the general public, then the commissioner may, upon his determination, issue an order requiring the insurer to:
(1) Reduce the total amount of present and potential liability for policy benefits by reinsurance;
(2) Reduce, suspend or limit the volume of business being accepted or renewed;
(3) Reduce general insurance and commission expenses by specified methods;
(4) Increase the insurer's capital and surplus;
(5) Suspend or limit the declaration and payment of dividend by an insurer to its stockholders or to its policyholders;
(6) File reports in a form acceptable to the commissioner concerning the market value of an insurer's assets;
(7) Limit or withdraw from certain investments or discontinue certain investment practices to the extent the commissioner deems necessary;
(8) Document the adequacy of premium rates in relation to the risks insured; or
(9) File, in addition to regular annual statements, interim financial reports on the form adopted by the national association of insurance commissioners or on such format as promulgated by the commissioner. If the insurer is a foreign insurer the commissioner's order may be limited to the extent provided by statute.
(c) An order issued pursuant to the provisions of this article is subject to review pursuant to applicable state administrative proceedings under article two of this chapter: Provided, That all hearings pursuant to this section shall be held privately, unless the insurer requests a public hearing, in which case the hearing shall be public.
Nothing contained in this article shall preclude the commissioner from initiating judicial proceedings to place an insurer in rehabilitation or liquidation proceedings or other delinquency proceedings, however designated under the laws of this state, regardless of whether the commissioner has issued an order pursuant to the provisions of this article.
There shall be no liability on the part of, and no cause of action of any nature shall arise against, the insurance commissioner or the division or its employees or agents thereof for any action taken by them in the performance of their powers and duties under this article.
The commissioner may after notice and hearing promulgate reasonable rules in accordance with chapter twenty-nine-a of this code, as are necessary and proper to effectuate the purposes of this article.
In the event any part or provision of this article be held to be unconstitutional by any court of competent jurisdiction, such holding and decision of the court shall not affect the validity and constitutionality of the remaining parts and provisions of this article.
Note: WV Code updated with legislation passed through the 2012 1st Special Session