Chapter 3901-3 Acquisitions and Mergers; Insurance Holding Company Systems

3901-3-01 Requirement for approval of the proposed acquisition of control of or merger with a domestic insurer.

(A) Authority

This rule is issued by the superintendent of insurance pursuant to sections 3901.321 and 3901.041 of the Revised Code.

(B) Purpose

Section 3901.321 of the Revised Code requires any person who wishes to engage in any transaction described in division (B)(1) of that section to file with the superintendent an information statement (hereinafter called “Form A”). The purpose of this rule is to establish the content of and form to be used in the application for approval of the proposed transaction with an insurer domiciled in this state.

In addition to the information expressly required to be included in Form A, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The superintendent reserves the right to request other information or documentation that in the superintendent’s sole discretion is deemed necessary or appropriate for the protection of policyholders of the domestic insurer or in the public interest.

(D) Exhibits

Applicants may file supplemental exhibits as desired in addition to those expressly required by Form A. Exhibits shall clearly indicate the subject matter to which they refer.

(E) Amendments or modifications

Applicants shall promptly advise the superintendent of any changes in the information furnished on Form A arising subsequent to the date upon which the information was furnished.

(F) Definitions

Terms found in this regulation are used as defined in the Insurance Holding Company Systems Regulatory Act, section 3901.32 et seq. of the Revised Code, and rule 3901-3-02 of the Administrative Code.

(G) General requirements

Applicants must file the information statement in the exact form as set forth in paragraph (H) of this rule. The statement shall contain the numbers and captions of all items. If the answer to any item is in the negative, an appropriate statement to that effect shall be made. Two copies of the information statement, including exhibits and all other papers or documents filed as a part thereof, shall be filed with the superintendent. At least one copy of each statement shall be manually signed in the manner prescribed. The unsigned copy shall be conformed. The unsigned copy is to be submitted in electronic form prescribed by the Superintendent. Copies of Form A, exhibits and all other papers or documents filed as a part thereof shall be clear, easily readable and in the English language with monetary values stated in United States currency. If any exhibit, paper or document filed is in a foreign language it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency shall be converted into United States currency.

(H) Information to be included in Form A.

Form A

Statement regarding the acquisition of control of or merger with a domestic insurer

Name of domestic insurer by

Name and address of acquiring person

Filed with the insurance department of

(State of domicile of insurer being acquired)

Dated: ________________________________, 20_____

Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:

Item 1. Insurer and method of acquisition

State the name and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired.

Item 2. Identity and background of the applicant

(A) State the name and address of the applicant seeking to acquire control of the insurer.

(B) If the applicant is not an individual, state the nature of its business operations for the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicant’s subsidiaries.

(C) Furnish a chart or listing clearly presenting the identities of and inter-relationships among the applicant and all affiliates of the applicant. Indicate in such chart or listing the percentage of voting securities of each such person which is owned or controlled by the applicant or by any other such person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings and the date when commenced.

Item 3. Identity and background of individuals associated with the applicant

(1) Identify the applicant if (s)he is an individual or, if the applicant is not an individual, all persons who are directors, executive officers or owners of ten percent or more of the voting securities of the applicant.

(2) Each individual applicant or all persons who are directors, executive officers or owners of ten percent or more of the voting securities of the applicant shall complete a biographical affidavit and authority for release of information that is prescribed for such use by the Superintendent.

Item 4. Nature, source and amount of consideration

(A) Describe the nature, source and amount of funds or other consideration used or to be used in effecting the proposed transaction. If any part of the consideration is or is to be borrowed or otherwise obtained for the purpose of acquiring, holding or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any (whether direct or indirect), between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, understanding, promissory notes and security arrangements relating thereto. If the stock or any asset of the domestic insurer is to be pledged or hypothecated in any way, so describe and provide a copy of the agreement or arrangement.

(B) Explain the criteria used in determining the nature and amount of such consideration.

Item 5. Future plans of insurer

(1) Describe any contemplated or actual plans or proposals which the applicant may have to: cause the insurer to declare dividends, liquidate or dissolve the insurer, sell any asset of the insurer, enter into any rental, leasing, service or financial, or other arrangements with the insurer, or merge/reorganize the insurer with any person or persons. Provide terms and conditions of all applicable arrangements to the transaction.

(2) Provide a plan of operation for the domestic insurer for three years following consummation of the proposed transaction including: type of business to be written, amount of anticipated premiums, investment policy, marketing plans, relocation of home office or of corporate records and changes in reinsurance or reinsurers.

(3) Describe all changes planned to be made after consummation of the proposed transaction concerning the board of directors or executive officers of the domestic insurer and those of the organization which will succeed the latter as a result of the proposed transaction. Describe the nature, extent and amount of any commitments to or agreements or understandings with the present officers and directors of the domestic insurer. Attach copies of all contemplated or actual contracts, commitments, agreements or understandings for: employment, consultation, advice, management or services.

(4) Provide pro forma balance sheets and income statements of the insurer prepared in accordance with statutory accounting principles, for three years following consummation of the proposed transaction. If any part of the consideration for the proposed transaction involves borrowed funds, describe debt service in detail. If any part of the consideration is to be obtained from or financed by an affiliate of the applicant, identify the source of funds and describe the method of distribution.

(5) If the insurer will be a member of an insurance holding company system following consummation of the proposed transaction, provide the following:

(a) A pro forma balance sheet and income statement showing the effect of the proposed transaction, prepared on a consolidated and applicant-only basis.

(b) If the applicant is an insurer actively engaged in the business of insurance, the statements shall be prepared in accordance with statutory accounting principles.

(c) If the applicant is not an insurer actively engaged in the business of insurance, the statements shall be prepared in accordance with generally accepted accounting principles.

(6) State the amount of premiums written by the domestic insurer and all affiliates for each line of business transacted in Ohio, as of the thirty-first day of December next preceding. State the amount of premiums written by the applicant and all affiliates for each line of business transacted in Ohio, as of the thirty-first day of December next preceding.

Item 6. Voting securities to be acquired

State the number of shares of the insurer’s voting securities which the applicant, its affiliates and any person listed in Item 3, plans to acquire. Describe the terms of the offer, request, invitation, agreement or acquisition. State the method used to determine the fairness of the proposal.

Item 7. Ownership of voting securities

State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates or any person listed in Item 3.

Item 8. Contracts, arrangements, or understandings with respect to voting securities of the insurer

Fully describe any contracts, arrangements or understandings with respect to any voting security of the insurer in which the applicant, its affiliates or any person listed in Item 3 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. Identify the persons with whom such contracts, arrangements or understandings have been entered.

File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and, if distributed, of additional soliciting material relating thereto and annual reports to the stockholders of the insurer and applicant for the last two fiscal years.

Item 9. Recent purchases of voting securities

Describe any purchases of any voting securities of the insurer by the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement. Include in the description the dates of purchase, the names of the purchasers, and the consideration paid or agreed to be paid therefore. State whether any such shares are pledged or hypothecated.

Item 10. Recent recommendations to purchase

Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement.

Item 11. Agreements with broker-dealers

Describe the terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.

Item 12. Financial statements

(A) Financial statements shall be attached to this statement as exhibits. However, list under this item the financial statements so attached.

(B) The financial statements shall include: (1) the annual financial statements of the persons identified in Item 2(C) for the preceding five fiscal years or for such lesser period as such applicant and its affiliates and any of its predecessors shall have been in existence and (2) similar information covering the period from the end of such person’s last fiscal year, if such information is available. Such statements may be prepared on either an individual basis or, unless the superintendent otherwise requires, on a consolidated basis, if the consolidated statements are prepared in the usual course of business.

(C) The annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements must be based on the annual statement of such person filed with the insurance department of the person’s domiciliary state and be in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of such state.

Item 13. Corporate authority

If the applicant is not an individual, file a certified copy of:

(1) The resolution of the board of directors of the applicant approving the transaction and directing that the agreement underlying the transaction be submitted to a vote of the shareholders, members or policyholders entitled to vote on the matter.

(2) The resolution of the shareholders, members or policyholders of the applicant approving the transaction.

Item 14. Notice to domestic insurer

State whether the applicant has sent a copy of Form A to the domestic insurer.

Item 15. Signature and certification

Signature and certification required as follows:

Signature Pursuant to the requirements of section 3901.321 of the Revised Code ________________ has caused this application to be duly signed on its behalf in the city of ______________ and state of ______________ on the ___________ day of __________, 20______.

Name of applicant

By: _____________________________, its: _____________________________

(Name)

Attest: __________________________________, _________________________________

(Signature of officer) (Title)

Certification The undersigned deposes and says that (s)he has duly executed the attached application dated __________________, 20_____, for and on behalf of _________________________, and that (s)he is authorized (Name of applicant) to execute and file such instrument. Deponent further says that (s)he is the ________________________ of such company and that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his or her knowledge, information and belief.

(Signature)

(Type or print name)

State of _________________)

County of ________________)

The foregoing instrument was acknowledged before me this ___________ day of ______________, 20____.

Notary public

(I) Severability

If any section, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

Effective: 04/13/2006

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.321

Rule Amplifies: 3901.321

Prior Effective Dates: 10/20/1991

3901-3-02 Regulation and registration of insurers under the insurance holding company regulatory act.

(A) Purpose and authority

Sections 3901.32 to 3901.37, of the Revised Code, provide for the regulation and registration of insurance holding company systems. The purpose of this rule is to interpret certain terms, establish standards, and to promulgate forms to be adhered to in the regulation and registration of insurers authorized to do business in this state. This rule is issued pursuant to the authority vested in the superintendent under section 3901.041 of the Revised Code.

(B) Definitions

(1) “Executive officer” means any individual charged with active management and control, in an executive capacity, including a president, vice president, treasurer, secretary, controller,and any other individual performing for a person, whether incorporated or unincorporated, functions corresponding to those performed by the foregoing officers.

(2) “Ultimate controlling person” means that person within an insurance holding company system which is not controlled by any other person.

(3) “Insurer” as defined in division (D) of section 3901.32 of the Revised Code includes, but is not limited to, domestic, foreign, and alien stock or mutual insurance companies, mutual protective insurance associations, fraternal benefit societies, risk retention groups domiciled in this state as described in section 3960.02(A) of the Revised Code, reciprocals, title guarantee and trust companies, health insuring corporations and any other persons engaged either directly or indirectly in this state in the business of insurance which is subject to regulation by the superintendent of insurance.

(4) “Applicant” means a person or persons seeking to control an insurer.

(5) All other terms used herein shall have the same meanings prescribed in section 3901.32 of the Revised Code unless the context otherwise requires. Other nomenclature or terminology is according to the Revised Code, or insurance usage if not defined by the Revised Code.

An insurer required to file a registration statement or an amendment thereto pursuant to section 3901.33 of the Revised Code shall furnish the required information on Form B as outlined in paragraph (J) of this rule.

(D) Amendments

(1) An amendment to Form B shall be filed within fifteen days after the end of any month in which the following occurs:

(a) There is a change in the control of the registered insurer, in which case the entire Form B shall be made current;

(b) There is a material change in or addition to the information given in item 5 or item 6 of Form B.

(2) An amendment to Form B shall be filed at least annually by the registered insurer on or before June 1, each year after the initial registration. Such amendment shall make current all information in Form B.

(E) Alternative and consolidated registrations

(1) Any insurer authorized to do business in this state may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under section 3901.33 of the Revised Code. Such registration statement may include information regarding any insurer in the insurance holding company system even if such insurer is not authorized to do business in this state. In lieu of filing a registration statement on Form B, an insurer authorized to do business in this state may file a copy of the registration statement or similar report which it is required to file in its state of domicile, provided:

(a) The statement or report contains substantially similar information required to be furnished on Form B; and

(b) The filing insurer is the principal insurance company in the insurance holding company system.

(2) The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer shall set forth a simple statement of facts which will substantiate the filing insurer’s claim that it, in fact, is the principal insurer in the insurance holding company system.

(3) With the prior approval of the superintendent, an insurer not authorized to do business in this state may follow any of the procedures which could be done by an insurer authorized to do business in this state under paragraph (E)(1) of this rule.

(4) Two or more affiliated insurers subject to registration may file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements. The superintendent, however, reserves the right to require individual registration statements if he deems it necessary in the interest of clarity, ease of administration or the public good.

(F) Exemptions

(1) A foreign or alien insurer otherwise subject to section 3901.33 of the Revised Code shall not be required to register pursuant to section 3901.33 of the Revised Code if it is subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in section 3901.33 of the Revised Code.

(2) The state of entry of an alien insurer shall be deemed to be its domiciliary state for the purposes of section 3901.33 of the Revised Code.

(3) Any insurer not otherwise exempt from section 3901.33 may apply for an exemption from the requirements of section 3901.33 of the Revised Code by submitting a statement to the superintendent setting forth its reasons for being exempt. No exemption shall be granted except upon written order of the superintendent, stating his findings, made after a hearing held upon not less than ten days written notice to the insurer requesting the exemption.

(G) Disclaimers and termination of registration

(1) A disclaimer of affiliation pursuant to division (J) of section 3901.33 of the Revised Code or a request for termination of registration pursuant to division (F) of section 3901.33 of the Revised Code claiming that a person does not, or will not upon the taking of some proposed action, control any other person (hereinafter referred to as the “subject”) shall contain the following:

(a) The number of authorized, issued and outstanding voting securities of the subject:

(b) With respect to the person whose control is denied and all affiliates of such person:

(i) The number and percentage of shares of the subject’s voting securities which are held of record or know to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly;

(ii) Information as to all transactions in any voting securities of the subject which were effected during the past six months by such persons;

(c) All material relationships and bases for affiliations between the subject and the person whose control is denied and all affiliates of such person;

(d) A statement explaining why such person should not be considered to control the subject.

(2) A request for termination of registration shall be deemed to have been granted unless the superintendent, within thirty days after he received the request, notifies the registered insurer otherwise.

(H) Extraordinary dividends and other distributions

Request for approval of extraordinary dividends or any other extraordinary distribution shall include the following:

(1) The amount of extraordinary dividend or extraordinary distribution;

(2) The date established for payment of the dividend or distribution;

(3) A statement as to whether the dividend or distribution is to be in cash or other property and, if in property, a description thereof, its cost, and the fair market value of such property together with an explanation of the basis for valuation;

(4) The amounts and dates of all dividends or distributions paid within the period of twelve consecutive months ending on the date fixed for payment of the proposed dividend or distribution for which approval is sought and commencing on the day after the same day of the same month in the last preceding year;

(5) A balance sheet and statement of income for the period intervening from the last annual statement filed with the superintendent and the end of the month preceding the month in which the request for dividend or distribution approval is submitted;

(6) A brief statement as to the effect of the proposed dividend or distribution upon the insurer’s surplus and the reasonableness of surplus in relation to the insurer’s outstanding liabilities and the adequacy of surplus relative to the insurer’s financial needs.

(I) Form B: Instructions

(1) General requirements

(a) Form B is intended to be a guide in the preparation of the statement required by section 3901.33 of the Revised Code. It is not intended to be a blank form which is to be filled in. The statement filed shall contain the numbers and captions of all items, but the text of the items may be omitted provided the answers thereto are so prepared as to indicate to the reader the coverage of the items without the necessity of his referring to the text of the items or the instructions thereto. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is not applicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made;

(b) Two copies of each statement, including exhibits and all other papers and documents filed as part thereof, shall be filed with the superintendent. One of the copies is to be submitted in electronic form as prescribed by the Superintendent. If a consolidated report is made to amend the individual registration statement of more than one insurer, one complete copy of such report shall be filed. Each statement or report filed with the superintendent shall be manually signed in the manner prescribed in the form. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of such power of attorney or other authority shall also be filed with the statement or report;

(c) Statements or reports should be prepared on paper 8 1/2×11” or 8 1/2” x 13” in size and preferably bound at the top of the top left-hand corner. Exhibits and financial statements, unless specifically prepared for filing, may be submitted in their original size. All copies of any statement, report, financial statement, or exhibits shall be clear, easily readable and suitable for photocopying. Debits in credit categories shall be designed so as to be clearly distinguishable as such on photocopies. Statements or reports shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper document filed with the statement or report is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency shall be converted into United States currency.

(2) Incorporation by reference, summaries and omissions.

(a) Information required by an item of Form B may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of Form B provided such document or paper is filed as an exhibit to the statement or report. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents already on file with the superintendent need not be attached as exhibits. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that such material is to be incorporated by reference in answer to the item. Matter shall not be incorporated by reference in any case where such incorporation would render the statement or report incomplete, unclear or confusing;

(b) Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the most important provisions of the document. In addition to such statement, the summary or outline may incorporate by reference particular parts of any exhibit or document on file with the superintendent and may be qualified in its entirety by such reference. In any case where two or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of the documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which such omitted documents differ from the document of which a copy is filed. The superintendent may at any time in his discretion require the filing of copies of any omitted documents.

(3) Information unknown or unavailable and extension of time to furnish:

(a) Information required need be given only insofar as it is known or reasonably available to the registered insurer. If any required information is unknown and not reasonably available to the registered insurer, either because the obtaining thereof would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the registered insurer filing, the information may be omitted, subject to the following conditions:

(i) The registered insurer shall give such information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof; and

(ii) The registered insurer shall include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of any affiliation with the person within whose knowledge the information rests and stating the result of a request made to such person for the information.

(b) If it is impractical to furnish any required information, document or report at the time it is required to be filed, there may be filed with the superintendent as a separate document an application (i) identifying the information, document or report in question, (ii) stating why the filing thereof at the time required is impractical, and (iii) requesting an extension of time for filing the information, document or report to a specified date. The application shall be deemed granted unless the superintendent within thirty days after receipt thereof, shall enter an order denying the application.

(4) Additional information and exhibits.

In addition to the information expressly required to be included in Form B, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. Such exhibits shall be so marked as to indicate clearly the subject matters to which they refer.

(5) Amendments

Any amendment to Form B shall include on the top of the cover page the phrase: “amendment no. _____ to” and shall indicate the date of the amendment and the date of the original filing of the statement being amended.

(J) Form B: Information to be included in Form B

Insurance holding company system registration statement

Filed with the insurance department of the state of Ohio by

Name of registrant (or registrants if this is a consolidated registration statement)

“NAIC Group No.” ______________________________

On behalf of the following insurance companies:

Dated:________________, 20__

Name, title and address of offices to whom notices and correspondence concerning this statement should be addressed:

Item 1. Identity and control of registrant

Furnish the exact name of each insurer registering or being registered (hereinafter called “the registrant”), the home office address and principal executive officers of each, the date on which each registrant became part of the insurance holding company system, and the method(s) by which control of each registrant was acquired and is maintained.

Item 2. Organizational chart

Furnish a chart or listing clearly presenting the identities of and interrelationships amount all affiliated persons within the insurance holding company system. The chart or list should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing, indicate the type or organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile.

Item 3. The ultimate controlling person

As to the ultimate controlling person, furnish the following information:

(a) Name;

(b) Home office address;

(d) The organizational structure of the person, e.g., corporation, partnership, individual, trust, etc.;

(e) The principal business of the person;

(f) The name and address of any person who holds ten percent or more of any class of voting security of the ultimate controlling person, the class of such security, the name of shares held of record or known to be beneficially owned, and the percentage of class so held or owned.

Item 4. Biographical information

Furnish the following information on the directors or trustees, the members of a non- profit corporation, as well as the executive officers of the insurer and ultimate controlling person, beneficial or record owners of ten percent or more of any class of voting security of the ultimate controlling person:

(a) for new registrants, provide a biographical affidavit on a form prescribed by the superintendent for all persons described above.

(b) for registrants without any changes to the list of persons described above since the previous filing, provide each person’s name and address, his principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years.

(c) for registrants with changes to the list of persons described above since the previous filing, provide a biographical affidavit on a form prescribed by the superintendent for any person not previously required to submit biographical information; for all others provide the information described in paragraph (b).

Item 5. Transaction, relationships and agreements

Briefly describe the following agreements in force, relationships subsisting, and transactions currently outstanding between the registrant and its affiliates:

(a) Loans, other investments, or purchases, sales or exchanges of securities of the affiliated by the registrant or of the registrant by its affiliates;

(b) Purchases, sales or exchanges of assets;

(d) Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the registrant’s assets to liability, other than insurance contracts entered into in the ordinary course of the registrant’s business;

(e) All management and service contracts and all cost sharing arrangements;

(f) Reinsurance agreements;

(g) Dividends and other distributions to shareholders;

(h) Consolidated tax allocation agreements;

(i) Any pledge of the insurer’s stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system, and

(j) Other matters concerning transactions between registered insures and any affiliates as may be included from time to time in any registration forms adopted or approved by the superintendent.

No Information need be disclosed if such information is not material. Sales purchases, exchanges, loans or extensions of credit or investments involving one-half of one per cent or less of the registrant’s admitted assets as of the thirty-first day of December next preceding shall not be deemed material.

The description shall be in a manner as to permit the proper evaluation thereof by the superintendent, and shall include at least the following: the nature and purpose of the transaction; the nature and the amounts of any payments or transfers of assets between the parties; the identity of all parties to such transaction; the relationship of the affiliated parties to the registrant; and if applicable the date upon which the agreements, relationships, transactions and distributions described in this item 5 of division (J) of this rule were reported to the superintendent pursuant to section 3901.34 (C) or section 3901.341 of the Revised Code.

Item 6. Litigation or administrative proceedings

A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any directors or executive officers of the ultimate controlling person was a party or of which the property of any such person is or was the subject; give the names of the parties, the court or agency in which such litigation or proceeding is or was pending, and the date when commenced:

(a) Criminal prosecutions or administrative proceedings by any governmental agency or authority which may be relevant to the trustworthiness or any party thereto; and

(b) Proceedings which may have a material effect upon the solvency or capital structure of the ultimate controlling person including, but not necessarily limited to, bankruptcy, liquidation, receivership, or corporate reorganizations.

Item 7. Financial statements and exhibits

(a) Financial statements and exhibits for registrants shall be attached to this statement as an appendix unless incorporated herein by reference to such statements or exhibits already filed with the superintendent;

(b) The financial statements shall include the annual financial statements of the ultimate controlling person in the insurance holding company system as of the end of such person’s latest fiscal year.

If at the time of the initial registration, any annual financial statements required to be filed for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent such information is available. Financial statements may be prepared on either an individual basis, or unless the superintendent otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.

Unless the superintendent otherwise permits, the annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the annual statement of such insurer filed with the insurance department of the insurer’s domiciliary state and are in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of such state.

(c) Exhibits shall include copies of the latest annual reports to shareholders of the ultimate controlling person and proxy material used by the ultimate controlling person.

Signatures

Signatures and certification of the forms as follows:

Pursuant to the requirements of section 3901.33 of the Revised Code and rule 3901-3-02 of the Administrative Code, the registrant has caused this registration statement to be duly signed on its behalf in the city of __________ and state of __________ on the _____ day of __________, 20___.

_______________________ (Name) (Title)

(Seal)

_______________________ (Name of registrant)

Attest:

_______________________ (Signature of officer)

_______________________ (Title)

The undersigned deposes and says the he has duly executed the attached registration statement dated __________, 20___, for and on behalf of __________; that he is the __________ (Title of officer) of such company, and that he has the authority to execute and file such instrument. Deponent further says that he is familiar with such instrument and that the facts therein set forth are true to the best of his knowledge, information and belief.

(Signature)_______________________

(Type or print name beneath) __________________________

(K) Summary of registration statement

A Form C summary of registration statement, must be prepared and filed with each Form B filing in the following form:

Form C

Summary of registration statement

Filed with the insurance department of the state of __________

Name of Registrant

“NAIC Group No.” ______________________________

On behalf of following insurance companies

Name Address

Date: __________, 20___

Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:

Furnish a brief description of all items in the current annual registration statement which represent changes from the prior year’s annual registration statement. The description shall be in a manner as to permit the proper evaluation thereof by the superintendent, and shall include specific references to item numbers in the annual registration statement and to the terms contained therein.

Changes occurring under Item 2 Form B insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where such changes are ones which result in ownership or holdings of ten per cent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.

Changes occurring under Item 4 of Form B need only be included where an individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person.

If a transaction disclosed on the prior year’s annual registration statement has been changed, the nature of such change shall be included. If a transaction disclosed on the prior year’s annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.

The insurer shall furnish a statement that transactions entered into since the filing of the prior year’s annual registration statement are not part of a plan or series of like transactions whose purpose it is to avoid statutory threshold amounts and the review that might otherwise occur.

Signature and certification

Signature and certification required as follows:

Pursuant to the requirements of section 3901.33 of the Revised Code, Registrant has caused this registration statement summary be duly signed on its behalf of the city of __________ and state of __________ on the _____ day of __________, 20___.

(Seal) ________________________

Name of applicant

By ________________________

(Name) (Title)

Attest:

(Signature of officer)

(Title)

Certification

The undersigned deposes and says that (s)he has duly executed the attached annual registration statement dated __________, 20___, for and on behalf of __________ (name of applicant); that (s)he is the __________ (title of officer) of such company and that (sh)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.

(Signature) _______________________

(Type or print name beneath) _______________________

(L) Severability

If any section, term, or paragraph of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term, or paragraph of this rule, but the remaining section, terms, and paragraphs shall be and continue in full force and effect.

Effective: 04/13/2006

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.33

Rule Amplifies: 3901.33

Prior Effective Dates: 11/22/1971; 10/20/1991; 6/1/1996

3901-3-03 Transactions subject to prior notice - notice filing.

(A) Purpose

The purpose of this rule is to establish the form and content an insurer must use in order to give notice of a proposed transaction under section 3901.341 of the Revised Code.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent under section 3901.041 and section 3901.341 of the Revised Code.

Terms found in this regulation are used as defined in the Insurance Holding Company System Act, section 3901.32 et. seq. of the Revised Code, and rule 3901-3-02 of the Administrative Code.

(D) Written notice

In giving notice to the superintendent of a proposed transaction pursuant to section 3901.341 of the Revised Code, the insurer shall use the form set forth below.

Form D

Prior notice of a transaction

Filed with the insurance department of the state of Ohio

Name of registrant

On behalf of the following insurance companies

Name Address

Date: __________________, 20 __

Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:

Item 1. Identity of parties to transaction

Furnish the following information for each of the parties to the transaction:

(a) Name.

(b) Home office address.

(d) The organizational structure, e.g. corporation, partnership, individual, trust, etc.

(e) A description of the nature of the parties’ business operations.

(f) Relationship to the insurer of other parties to the transaction, if any, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer, or by the insurer in the affiliated parties.

(g) Where the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction.

Item 2. Description of the transaction

Furnish the following information in electronic form prescribed by the Superintendent for each transaction for which notice is being given:

(a) A statement as to whether notice is being given under 3901.341(A)(1), (2), (3), (4), or (5) of the Revised Code.

(b) A statement of the nature of the transaction and a complete copy of the agreement to include amendments if applicable.

Item 3. Sales, purchases, exchanges, loans, extensions of credit, guarantees or investments

If notice is being given under section 3901.341(A)(1) of the Revised Code, furnish a brief description of the amount and source of funds, securities, property or other consideration for the sale, purchase, exchange of assets, loan, extension of credit, guarantee, or investment. If any securities are involved in the transaction, provide a description of the terms of the securities.

If consideration for the transaction is other than cash describe the consideration, its cost, and fair market value, and explain the basis for evaluation.

If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under such loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest.

If the transaction involves an investment, guarantee or other arrangement, state the time period during which the investment, guarantee or other arrangement will remain in effect, together with any provisions for extensions or renewals of such investments, guarantees or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer’s surplus.

No notice need be given if the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the loan, extension of credit or guarantee is less than, (A) in the case of non-life insurers, the lesser of three percent of the insurer’s admitted assets or twenty-five percent of surplus as regards policyholders or, (B) in the case of life insurers, three percent of the insurer’s admitted assets, each as of the thirty-first day of December next preceding.

Item 4. Loans or extensions of credit to a non-affiliate

If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of or make investments in any affiliate. Describe the amount and source of funds, securities, property or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction upon the insurer’s surplus.

No notice need be given if the loan or extension of credit is one which equals less than, in the case of non-life insurers, the lesser of three percent of the insurer’s admitted assets or twenty-five percent of surplus as regards policyholders or, with respect to life insurers, three percent of the insurer’s admitted assets, each as of the thirty-first day of December next preceding.

Item 5. Reinsurance

If the transaction is a reinsurance agreement or modification thereto, as described by section 3901.341(A)(3) of the Revised Code, furnish a description of the known and/or estimated amount of liability to be ceded and/or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and non-affiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer’s affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer’s surplus.

No notice need be given for reinsurance agreements or modifications thereto if the reinsurance premium or a change in the insurer’s liabilities in connection with the reinsurance agreement or modification thereto is less than five percent of the insurer’s surplus as regards policyholders, as of the thirty-first day of December next preceding.

Item 6. Management agreements, service agreements, cost-sharing arrangements and tax allocation agreements.

For management and service agreements, furnish:

(a) A brief description of the managerial responsibilities, or services to be performed.

(b) A brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made.

For cost-sharing arrangements, furnish:

(a) A brief description of the purpose of the agreement.

(b) A description of the period of time during which the agreement is to be in effect.

(d) A brief description of the accounting basis to be used in calculating each party’s costs under the agreement.

Item 7. Signature and certification

Signature and certifications required as follows:

Signature

Pursuant to the requirements of section 3901.341 of the Revised Code, ___________ has caused this notice to be duly signed on its behalf in the city of _____________________ and state of ___________________ on the _______ day of ________, 20____.

(Seal)

Name of applicant

By __________________________________

(Name) (Title)

Attest:

(Signature of officer)

(Title)

Certification

The undersigned deposes and says that (s)he has duly executed the at- tached notice dated _______, 20____, for and on behalf of __________________; (Name of applicant) That (s)he is the _____________________ of such company and that (s)he is (Title of officer) authorized to execute and file such instrument. Deponent further says the (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.

(Signature) ________________________________

(Type or print name beneath)__________________________

(E) Severability

If any section, term or provision of this rule is adjudged invalid for any reason, the judgement shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

Effective: 04/13/2006

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.341

Rule Amplifies: 3901.341

Prior Effective Dates: 11/9/1991

3901-3-04 Hazardous financial condition standards.

(A) Purpose

The purpose of this rule is to facilitate the department of insurance’s surveillance of the financial condition of insurers by setting out standards which the superintendent may use for identifying insurers whose condition is such as to render the continuance of their business hazardous to the public or to holders of their policies or certificates of insurance. This rule shall not be interpreted to limit the powers granted the superintendent by any laws of this state.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent under sections 3901.041, 3903.09 and 3903.71 of the Revised Code.

(1) The following standards, either singly or a combination of two or more, may be considered by the superintendent to determine whether the continued operation of any insurer might be deemed to be hazardous to the policyholders, contract holders or the general public. The superintendent may consider:

(a) Adverse findings reported in financial condition or market conduct examination reports, statutory audit reports, and actuarial opinions/reports;

(b) The National Association of Insurance Commissioners Insurance Regulatory Information System and its related reports;

(c) 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;

(d) The insurer’s asset portfolio when viewed in light of current economic conditions not being of sufficient value, liquidity, or diversity to assure the company’s ability to meet its outstanding obligations as they mature;

(e) 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;

(f) 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 the payment of cash dividends to shareholders which are greater than fifty percent of such insurer’s remaining surplus as regards policyholders in excess of the minimum required;

(g) Whether any affiliate, subsidiary or reinsurer is insolvent, threatened with insolvency, or delinquent in payment of its monetary or other obligation;

(h) Contingent liabilities, pledges or guarantees which either individually or collectively involve a total amount which in the opinion of the superintendent may affect the solvency of the insurer;

(i) Whether any person, exercising control of an insurer as defined in division (C) of section 3905.61 of the Revised Code is delinquent in the transmitting to, or payment of, net premiums to such insurer;

(j) The age and collectibility of receivables;

(k) 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;

(l) 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;

(m) Whether management of an insurer has filed any false or misleading sworn financial statement, or has released false or misleading financial statements 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;

(n) 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;

(o) Whether the company has experienced or will experience in the foreseeable future cash flow and/or liquidity problems;

(p) Whether a company has failed to comply with paragraph (J) of rule 3901-1-50 of the Administrative Code;

(q) Whether the insurer meets measures of capital adequacy adopted by statute or rule;

(r) Whether management has established reserves that do not comply with state insurance laws, regulations, statutory accounting standards, sound actuarial principles, and standards of practice;

(s) Whether management engages in reporting inadequate reserve levels that result in material adverse development;

(t) Whether a material change during the year to the insurer’s financial condition, including, but not limited to, changes in assets, liabilities, surplus, premium growth, mix of business, reinsurance, or operating performance that may adversely impact the result of the next year-end risk based capital calculation to a level that would require regulatory action.

(2) For the purposes of making a determination of an insurer’s financial condition under this rule the superintendent may:

(a) Disregard any credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired or otherwise subject to a delinquency proceeding;

(b) Make appropriate adjustments to asset values attributable to investments in or transactions with parents, subsidiaries, or affiliates;

(c) 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;

(d) Refuse to recognize the stated value of assets pledged or in any way hypothecated to secure a liability to the extent that they are in excess of the specific recorded liability of the insurer;

(e) 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.

(D) Severability

Effective: 04/13/2006

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3903.09, 3903.71

Prior Effective Dates: 10/20/1991

3901-3-05 Valuation of investments.

(A) Purpose

The purpose of this rule is to facilitate the department’s analysis and examination of the financial condition of insurers by establishing procedures for the valuing of investments to be used by insurers in the preparation and filing of statutory financial statements and other financial information.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent of insurance under sections 3901.041, 3901.77, 3907.20 and 1751.47 of the Revised Code.

The “Valuation of Securities Manual”, “Purposes and Procedures Manual of the NAIC Securities Valuation Office”, and the “Accounting Practices and Procedures Manual” as published by the National Association of Insurance Commissioners (NAIC) have been adopted for use in Ohio by section 3901.77 of the Revised Code. The procedures outlined in these publications are to be used for valuing investments for which valuations are not otherwise defined by statute or rule. The superintendent shall disallow any accounting practice or procedure prescribed by the publications if he deems it necessary to ascertain the condition and affairs of any company. In making the disallowance determination, the superintendent shall consider such factors as the nature of the investment; the financial stability of the issuing company; the applicability of other standardized accounting procedures; and other factors affecting the accuracy of the valuation.

(D) Valuations of investments otherwise defined.

A company which has an investment which cannot be valued in accordance with paragraph (C) of this rule shall be a non-admitted investment and afforded a value of zero in any filing of statutory financial statements and other financial information.

(E) Severability

HISTORY: Eff 10-20-91; 12-31-00; 3-21-05

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.77, 3907.20, 1751.47

Rule Amplifies: 3901.77, 3907.20, 1751.47

R.C. 119.032 review dates: 12/22/2004 and 12/22/2009

3901-3-06 Admitted assets.

(A) Purpose

The purpose of this rule is to facilitate the department’s analysis and examination of the financial condition of insurers by defining what constitute admitted assets of an insurer for the purpose of preparing and filing statutory financial statements and other financial information.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent of insurance under sections 3901.041, 3901.77, 3907.19, 3909.06, 3929.30 and 1751.47 of the Revised Code.

For the purpose of preparing and filing statutory financial statements and other financial information required of an insurer pursuant to sections 1751.32, 3929.30, 3907.19 and 3909.06 of the Revised Code, “admitted assets” means only the following:

(1) Any investment authorized by sections 3907.14, 3925.08, 3925.20, 1751.26 and 1751.28 of the Revised Code, and valued in accordance with section 3907.20 of the Revised Code;

(2) An asset as defined in the “Accounting Practices and Procedures Manual” statement of statutory accounting principles No. 4, as published by the “National Association of Insurance Commissioners” to the extent an asset so defined is not inconsistent with Ohio Law.

(D) Severability

HISTORY: Eff 10-20-91; 12-31-00; 3-21-05

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.77, 3907.19, 3909.06, 3929.30, 1751.47

Rule Amplifies: 3901.77, 3907.19, 3909.06, 3929.30, 1751.47

R.C. 119.032 review dates: 12/22/2004 and 12/22/2009

3901-3-07 Credit for life reinsurance agreements.

(A) Scope

This rule shall apply to all domestic life insurers and to all other licensed life insurers which are not subject to a substantially similar regulation in their state of domicile. This rule shall also apply to all domestic property and casualty insurers with respect to their accident and health business and to all other licensed property and casualty insurers with respect to their accident and health business which are not subject to a substantially similar regulation in their state of domicile. This rule shall not apply to assumption reinsurance, yearly renewable term reinsurance or certain nonproportional reinsurance such as stop loss or catastrophe reinsurance.

(B) Purpose

The purpose of this rule is to facilitate the department’s surveillance of the financial condition of insurers by establishing accounting requirements for insurers to reduce any liability or establish any asset in any financial statement filed with the department based on reinsurance ceded by the insurer. These requirements are to ensure that financial statements accurately reflect the financial condition of a ceding insurer, and that a ceding insurer has not reduced liabilities or established assets through the improper use of reinsurance reserve credits.

This rule is issued under the authority vested in the superintendent under sections 3901.041, 3901.62 and 3901.77 of the Revised Code.

(D) Accounting requirements

(1) No insurer subject to this rule shall, for reinsurance ceded, reduce any liability or establish any asset in any financial statement filed with the department if, by the terms of the reinsurance agreement, in substance or effect, any of the following conditions exist:

(a) Renewal expense allowance provided or to be provided to the ceding insurer by the reinsurer in any accounting period, are not sufficient to cover anticipated allocable renewal expenses of the ceding insurer on the portion of the business reinsured, unless a liability is established for the present value of the shortfall (using assumptions equal to the applicable statutory reserve basis on the business reinsured). Those expenses include commissions, premium taxes and direct expenses including, but not limited to, billing, valuation, claims and maintenance expected by the company at the time the business is reinsured;

(b) The ceding insurer can be deprived of surplus or assets at the reinsurer’s option or automatically upon the occurrence of some event, such as the insolvency of the ceding insurer, except that termination of the reinsurance agreement by the reinsurer for nonpayment of reinsurance premiums or other amounts due, such as modified coinsurance reserve adjustments, interest and adjustments on funds withheld, and tax reimbursements, shall not be considered to be such a deprivation of surplus or assets;

(c) The ceding insurer is required to reimburse the reinsurer for negative experience under the reinsurance agreement, except that neither offsetting experience refunds against current and prior years’ losses under the agreement nor payment by the ceding insurer of an amount equal to the current and prior years’ losses under the agreement upon voluntary termination of in force reinsurance by the ceding insurer shall be considered such a reimbursement to the reinsurer for negative experience. Voluntary termination does not include situations where termination occurs because of unreasonable provisions which allow the reinsurer to reduce its risk under the agreement. An example of such a provision is the right of the reinsurer to increase reinsurance premiums or risk and expense charges to excessive levels forcing the ceding company to prematurely terminate the reinsurance treaty;

(d) The ceding insurer must, at specific points in time scheduled in the agreement, terminate or automatically recapture all or part of the reinsurance ceded;

(e) The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income realized from the reinsured policies. For example, it is improper for a ceding company to pay reinsurance premiums, or other fees or charges to a reinsurer which are greater than the direct premiums collected by the ceding company;

(f) The treaty does not transfer all of the significant risk inherent in the business being reinsured. The following table identifies for a representative sampling of products or type of business, the risks which are considered to be significant. For products not specifically included, the risks determined to be significant shall be consistent with this table.

Risk categories:

(i) Morbidity

(ii) Mortality

(iii) Lapse

This is the risk that a policy will voluntarily terminate prior to the recoupment of a statutory surplus strain experienced at issuance of the policy.

(iv) Credit quality (C1)

This is the risk that invested assets supporting the reinsured business will decrease in value. The main hazards are that assets will default or that there will be a decrease in earning power. It excludes market value declines due to changes in interest rate.

(v) Reinvestment (C3)

This is the risk that interest rates will fall and funds reinvested (coupon payments or monies received upon asset maturity or call) will therefore earn less than expected. If asset durations are less than liability durations, the mismatch will increase.

(vi) Disintermediation (C3)

This is the risk that interest rates rise and policy loans and surrenders increase or maturing contracts do not renew at anticipated rates of renewal. If asset durations are greater than the liability durations, the mismatch will increase. Policyholders will move their funds into new products offering higher rates. The company may have to sell assets at a loss to provide for these withdrawals.

+ – Significant 0 – Insignificant

RISK CATEGORY

a b c d e f

Health insurance – other than LTC/LTD* + 0 + 0 0 0

Health insurance – LTC/LTD* + 0 + + + 0

Immediate annuities 0 + 0 + + 0

Single premium deferred annuities 0 0 + + + +

Flexible premium deferred annuities 0 0 + + + +

Guaranteed interest contracts 0 0 0 + + +

Other annuity deposit business 0 0 + + + +

Single premium whole life 0 + + + + +

Traditional non-par permanent 0 + + + + +

Traditional non-par term 0 + + 0 0 0

Traditional par permanent 0 + + + + +

Traditional par term 0 + + 0 0 0

Adjustable premium permanent 0 + + + + +

Indeterminate premium permanent 0 + + + + +

Universal life flexible premium 0 + + + + +

Universal life fixed premium 0 + + + + +

Dump-in premiums allowed

*LTC = Long term care insurance

LTD = Long term disability insurance

(g) (i) The credit quality, reinvestment, or disintermediation risk is significant for the business reinsured and the ceding company does not (other than for the classes of business excepted in paragraph (d)(1)(g)(ii) of this rule either transfer the underlying assets to the reinsurer or legally segregate such assets in a trust or escrow account or otherwise establish a mechanism satisfactory to the superintendent which legally segregates, by contract or contract provision, the underlying assets.

(ii) Notwithstanding the requirements of paragraph (d)(1)(g)(i) of this rule, the assets supporting the reserves for the following classes of business and any classes of business which do not have a significant credit quality, reinvestment or disintermediation risk may be held by the ceding company without segregation of such assets:

(a) Health insurance – LTC/LTD

(b) Traditional non-par permanent

(d) Adjustable premium permanent

(e) Indeterminate premium permanent

(f) Universal life fixed premium (no dump-in premiums allowed)

The associated formula for determining the reserve interest rate adjustment must use a formula which reflects the ceding company’s investment earnings and incorporates all realized and unrealized gains and losses reflected in the statutory statement. The following is an acceptable formula:

Rate = 2 (I + CG)

X + Y – I – CG

Where: I is the net investment income

CG is capital gains less capital losses

X is the current year cash and invested assets plus investment income due and accrued less borrowed money

Y is the same as X but for the prior year

(h) Settlements are made less frequently than quarterly or payments due from the reinsurer are not made in cash within ninety days of the settlement date.

(i) The ceding insurer is required to make representations or warranties not reasonably related to the business being reinsured.

(j) The ceding insurer is required to make representations or warranties about future performance of the business being reinsured.

(k) The reinsurance agreement is entered into for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business reinsured and, in substance or effect, the expected potential liability to the ceding insurer remains basically unchanged.

(2) Notwithstanding paragraph (D)(1) of this rule, an insurer subject to this rule may, with the prior approval of the superintendent take such reserve credit as the superintendent may deem consistent with the insurance law, rules and regulations, including actuarial interpretations or standards adopted by the department.

(3) (a) Agreements entered into after the effective date of this regulation which involve the reinsurance of business issued prior to the effective date of the agreements, along with any subsequent amendments thereto, shall be filed by the ceding company with the commissioner within thirty days from its date of execution. Each filing shall include data detailing the financial impact of the transaction. The ceding insurer’s actuary who signs the financial statement actuarial opinion with respect to valuation of reserves shall consider this rule and any applicable actuarial standards of practice when determining the proper credit in financial statements filed with this department. The actuary should maintain adequate documentation and be prepared upon request to describe the actuarial work performed for inclusion in the financial statements and to demonstrate that such work conforms to this rule.

(b) Any increase in surplus net of federal income tax resulting from arrangements described in paragraph (d)(3)(a) of this rule shall be identified separately on the insurer’s statutory financial statement as a surplus item (aggregate write-ins for gains and losses in surplus in the capital and surplus account, page four of the Annual Statement) and recognition of the surplus increase as income shall be reflected on a net of tax basis in the “Reinsurance ceded” line, page four of the annual statement as earnings emerge from the business reinsured.

{For example, on the last day of calendar year N, company XYZ pays a $20 million initial commission and expense allowance to company ABC for reinsuring an existing block of business. Assuming a thirty-four per cent tax rate, the net increase in surplus at inception is $13.2 million ($20 million – $6.8 million) which is reported on the “Aggregate write-ins for gains and losses in surplus” line in the capital and surplus account. $6.8 million (thirty-four percent of $20 million) is reported as income on the “Commissions and expense allowances on reinsurance ceded” line of the summary of operations.

At the end of year N + 1 the business has earned $4 million. ABC has paid $.5 million in profit and risk charges in arrears for the year and has received a $1 million experience refund. Company ABC’s annual statement would report $1.65 million (sixty-six percent of ($4 million – $1 million – $.5 million) up to a maximum of $13.2 million) on the “Commissions and expense allowance on reinsurance ceded” line of the summary of operations, and -$1.65 million on the “Aggregate write-ins for gains and losses in surplus” line of the capital and surplus account. The experience refund would be reported separately as a miscellaneous income item in the summary of operations.}

(E) Written agreements

(1) No reinsurance agreement or amendment to any agreement may be used to reduce any liability or to establish any asset in any financial statement filed with the department, unless the agreement, amendment or a letter of intent has been duly executed by both parties no later than the “as of date” of the financial statement.

(2) In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance agreement must be executed within a reasonable period of time, not exceeding ninety days from the execution date of the letter of intent, in order for credit to be granted for the reinsurance ceded.

(F) Existing agreements

Insurers subject to this regulation shall reduce to zero by December 31, 1997 any reserve credits or assets established with respect to reinsurance agreements entered into prior to the effective date of this rule which, under the provisions of this regulation would not be entitled to recognition of the reserve credits or assets; provided, however, that the reinsurance agreements shall have been in compliance with laws or rules in existence immediately preceding the effective date of this rule.

(G) Severability

If any section, term, or paragraph of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or paragraph of this rule, but the remaining section, terms and paragraph shall be and continue in full force and effect.

Effective: 04/13/2006

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.62, 3901.77

Prior Effective Dates: 10/20/1991; 12/31/1995

3901-3-08 Definition of work papers.

(A) Purpose

Section 3901.07 of the Revised Code provides authority to the superintendent of insurance to review the financial affairs of all insurance companies. The purpose of this rule is to define the term “work papers” as employed in section 3901.48 of the Revised Code as it relates to the surveillance and examination of insurers pursuant to section 3901.07 of the Revised Code.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent of insurance under section 3901.041 of the Revised Code.

The term “work papers” means the records kept by the superintendent of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to his or her examination and surveillance of the financial affairs of an insurer. Work papers may include audit planning documentation, work programs, analyses, memoranda, notes, letters of confirmation and representation, copies of work papers of certified public accountants, abstracts or copies of company documents and schedules of commentaries prepared or obtained by the superintendent in the course of his or her examination and surveillance of the financial affairs of an insurer.

Information related to the financial affairs of insurers maintained by the “National Association of Insurance Commissioners” that is available to the superintendent in his surveillance of the financial affairs of insurers is also considered a “Work Paper”, and may include but is not limited to: formulae, ratios and data known as “Risk Based Capital”, “Financial Analysis Workbench, Examination Jumpstart”, “Financial Analysis and Solvency Tracking”, “Insurance Regulatory Information System”, Ratios used by the “Financial Analysis Working Group” or other financial information deemed to be confidential by the “National Association of Insurance Commissioners.”

The term “Work Paper” does not mean the annual and quarterly financial statements and exhibits, or the audited financial statements prepared by independent certified public accountants which an insurer is required to file with the department of insurance. The term also does not mean a financial examination report issued by the department of insurance pursuant to section 3901.07 of the Revised Code.

(D) Severability

If any paragraph, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other paragraph, term or provision of this rule, but the remaining paragraphs, terms and provisions shall be and continue in full force and effect.

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.48

Prior Effective Dates: 9/6/1994

3901-3-09 Requirements for domestic insurers employing the services of reinsurance intermediaries.

(A) Purpose

The purpose of this rule is to establish minimum contractual terms between domestic insurers, domestic reinsurers and reinsurance intermediaries. This rule also establishes standards for business assumed by domestic reinsurers through reinsurance intermediaries as reported in their annual statement.

The rule also sets out the information reinsurance intermediaries must maintain for the purpose of examination under section 3901.07 of the Revised Code as “documents … of other persons relevant to [an] examination.”

(B) Authority

This rule is issued pursuant to section 3901.041, section 3901.07, and division (B) of section 3901.77 of the Revised Code.

As used in this rule:

(1) “Insurer” means a person licensed to operate or to do business in this state under Chapter 1751. of the Revised Code or Title XXXIX of the Revised Code, who is domiciled in the state of Ohio.

(2) “Qualified United States Financial Institution” means an institution that meets all of the following conditions:

(a) The institution is organized or, in the case of a United States office of a foreign banking organization, licensed, under the laws of the United States or any state of the United States;

(b) The institution is regulated, supervised, and examined by authorities of the United States or any state of the United States having regulatory authority over banks and trust companies;

(c) The institution has been determined by either the superintendent of insurance, or the securities valuation office of the National Association of Insurance Commissioners, to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the superintendent.

(3) “Reinsurance intermediary” means a reinsurance intermediary-broker or a reinsurance intermediary-manager.

(4) “Reinsurance intermediary-broker” means a person, other than an officer or employee of the ceding insurer, that solicits, negotiates, or places reinsurance cessions or retrocessions on behalf of a ceding insurer without the authority or power to bind reinsurance on behalf of such insurer.

(5)(a) “Reinsurance intermediary-manager” means a person who has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer, including the management of a separate division, department, or underwriting office; and acts as an agent for the reinsurer whether known as a reinsurance intermediary-manager, manager or other similar term.

(b) “Reinsurance intermediary-manager” does not include any of the following:

(i) An employee of the reinsurer;

(ii) A United States manager of the United States branch of an alien reinsurer;

(iii) An underwriting manager that, pursuant to contract, manages all the reinsurance operations of the reinsurer, is under common control with the reinsurer, subject to sections 3901.32 to 3901.37 of the Revised Code, and whose compensation is not based on the volume of premiums written;

(iv) The manager of a group, association, pool or organization of insurers that engages in joint underwriting or joint reinsurance and that are subject to examination by the insurance regulatory authority of the state in which the manager’s principal business office is located.

(6) “Reinsurer” means a person licensed in this state pursuant to Title XXXIX of the Revised Code as an insurer with the authority to assume reinsurance, who is domiciled in the state of Ohio.

(D) Required contract provisions between an insurer and a Reinsurance Intermediary-Broker.

(1) Transactions between the reinsurance intermediary-broker and the insurer it represents may only be entered into pursuant to a written authorization which specifies the responsibilities of each party. The authorization, at a minimum, shall provide all of the following:

(a) The insurer may terminate the reinsurance intermediary-broker’s authority at any time.

(b) The reinsurance intermediary-broker shall render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing, to the reinsurance intermediary-broker, and remit all funds due to the insurer within thirty days after receipt.

(c) All funds collected for the insurer’s account shall be held by the reinsurance intermediary-broker in a fiduciary capacity in a bank which is a qualified United States financial institution.

(d) The reinsurance intermediary-broker shall comply with the written standards established by the insurer for the cession or retrocession of all risks.

(e) The reinsurance intermediary-broker shall disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.

(f) The reinsurance intermediary-broker shall agree to maintain for at least ten years after the expiration of each contract of reinsurance transacted a complete record of each transaction showing all of the following:

(i) The type of contract, limits, underwriting restrictions, classes or risks, and territory;

(ii) Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation;

(iii) Reporting and settlement requirements of balances;

(iv) Rate used to compute the reinsurance premium;

(v) Names and addresses of assuming reinsurers;

(vi) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-broker;

(vii) Related correspondence and memoranda;

(viii) Proof of placement;

(ix) Details regarding retrocessions handled by the reinsurance intermediary-broker including the identity of retrocessionaires and percentage of each contract assumed or ceded;

(x) Financial records, including premium and loss accounts;

(xi)( a) Written evidence that the assuming reinsurer has agreed to assume the risk, where the reinsurance intermediary-broker, on behalf of a domestic ceding insurer, procures a reinsurance contract directly from the assuming reinsurer; or

( b) Written evidence that the assuming reinsurer has delegated binding authority to the representative, where the reinsurance intermediary-broker, on behalf of a domestic ceding insurer, procures a reinsurance contract placed through a representative, other than an employee, of the assuming reinsurer.

(g) The reinsurance intermediary-broker shall agree to provide the ceding insurer with access, the right to copy, and the right to audit all accounts and records maintained by the reinsurance intermediary-broker related to the insurer’s business in a form usable by the insurer.

(h) The reinsurance intermediary-broker agrees to provide annually to the insurer copies of statements of the reinsurance intermediary-broker’s financial condition prepared by an independent certified public accountant.

(E) Prohibited acts – insurer

(1) No insurer shall employ a reinsurance intermediary-broker that is not licensed by an insurance regulatory authority of any state of the United States of America as a reinsurance intermediary-broker.

(2) No insurer shall jointly employ an individual who also is employed by a reinsurance intermediary-broker with which the insurer transacts business, unless the reinsurance intermediary-broker is under common control with the insurer and subject to sections 3901.32 to 3901.37 of the Revised Code.

(F) Required contract provisions between a reinsurer and a reinsurance intermediary-manager.

Transactions between a reinsurance intermediary-manager and the reinsurer it represents in the capacity of a reinsurance intermediary-manager shall be entered into only pursuant to a written contract, specifying the responsibilities of each party. The contract shall be approved by the reinsurer’s board of directors. At least thirty days before the reinsurer assumes or cedes business through the reinsurance intermediary-manager, a copy of the approved contract shall be filed by the reinsurer with the superintendent of insurance. The contract, at a minimum, shall provide all of the following:

(1) The reinsurer may terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may immediately suspend the authority of the reinsurance intermediary-manager to assume or cede business during the pendency of any dispute regarding the cause for termination.

(2) The reinsurance intermediary-manager shall render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to the reinsurance intermediary-manager, and shall remit all funds due under the contract to the reinsurer on at least a monthly basis.

(3) Any funds collected for the reinsurer’s account shall be held by the reinsurance intermediary-manager in a fiduciary capacity in a bank that is a qualified United States financial institution. The reinsurance intermediary-manager shall retain no more than three months’ estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer it represents.

(4) For at least ten years after the expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, the reinsurance intermediary-manager shall keep a complete record for each transaction showing all of the following:

(a) The type of contract, limits, underwriting restrictions, classes or risks, and territory;

(b) Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation, and disposition of outstanding reserves on covered risks;

(d) Rate used to compute the reinsurance premium;

(e) Names and addresses of reinsurers;

(f) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager;

(g) Related correspondence and memoranda;

(h) Proof of placement;

(i) Details regarding retrocessions handled by the reinsurance intermediary-manager pursuant to paragraph (F)(14) of this rule, including the identity of retrocessionaires and percentage of each contract assumed or ceded;

(j) Financial records, including premium and loss accounts;

(k)(i) Written evidence that the assuming reinsurer has agreed to assume the risk, where the reinsurance intermediary-manager, on behalf of a ceding insurer, places a reinsurance contract directly from the assuming reinsurer; or

(ii) Written evidence that the assuming reinsurer has delegated binding authority to the representative, where the reinsurance intermediary-manager, on behalf of a ceding insurer, places a reinsurance contract through a representative, other than an employee, of the assuming reinsurer.

(5) The reinsurer shall have access to and the right to copy all accounts and records maintained by the reinsurance intermediary-manager related to the reinsurer’s business in a form usable by the reinsurer.

(6) The contract cannot be assigned in whole or in part by the reinsurance intermediary-manager.

(7) The reinsurance intermediary-manager shall comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks.

(8) The contract shall set forth the rates, terms, and purposes of commissions, charges, and other fees that the reinsurance intermediary-manager may levy against the reinsurer.

(9) If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer;

(a) All claims shall be reported to the insurer in a timely manner;

(b) A copy of the claim file shall be sent to the reinsurer at its request or as soon as it becomes known that any of the following applies:

(i) The claim has the potential to exceed the limit set by the reinsurer;

(ii) The claim involves a coverage dispute;

(iii) The claim may exceed the reinsurance intermediary-manager’s claims settlement authority;

(iv) The claim is open for more than six months;

(v) The claim is closed by payment of an amount set by the reinsurer.

(c) All claim files shall be the joint property of the reinsurer and the reinsurance intermediary-manager. However, upon an order of rehabilitation or liquidation of the reinsurer such files shall become the sole property of the reinsurer or its estate, but the reinsurance intermediary-manager shall have reasonable access to and the right to copy the files on a timely basis.

(d) Any settlement authority granted to the reinsurance intermediary-manager may be terminated for cause upon the reinsurer’s written notice to the reinsurance intermediary-manager or upon the termination of the contract. The reinsurer may suspend the settlement authority during the pendency of the dispute regarding the cause of termination.

(10) If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, the interim profits shall not be paid until one year after the end of each underwriting period for property business, five years after the end of each underwriting period for casualty business, and not until the adequacy of reserves on remaining claims has been verified pursuant to paragraph (F)(15) of this rule.

(11) The reinsurance intermediary-manager shall annually provide the reinsurer with a statement of its financial condition prepared by an independent certified public accountant.

(12) The reinsurer shall periodically, but at least semi-annually, conduct an on-site review of the underwriting and claims processing operations of the reinsurance intermediary-manager.

(13) The reinsurance intermediary-manager shall disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with such insurer pursuant to the contract.

(14) Binding authority for all retrocessional contracts or participation in reinsurance syndicates shall rest with an officer of the reinsurer. The officer shall not be affiliated with the reinsurance intermediary-manager.

(15) If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the reinsurance intermediary-manager. This opinion shall be in addition to any other required loss reserve certification. As used in this paragraph, “actuary” means a person who is a member in good standing of the American Academy of Actuaries.

(16) Within the scope of its actual or apparent authority the acts of the reinsurance intermediary-manager are deemed to be the acts of the reinsurer on whose behalf it is acting.

(17) The reinsurance intermediary-manager shall file with the superintendent of insurance a bond for the protection of the reinsurer in an amount, and from an insurer, acceptable to the superintendent of insurance.

(18) The reinsurer shall require the reinsurance intermediary-manager to maintain an errors and omissions policy.

(G) Prohibited acts – reinsurer

(1) No reinsurer shall employ a reinsurance intermediary-manager that is not licensed by an insurance regulatory authority of any state of the United States of America as a reinsurance intermediary-manager.

(2) No reinsurer shall permit its reinsurance intermediary-manager to do any of the following:

(a) Cede retrocessions on behalf of the reinsurer. However, the reinsurance intermediary-manager may cede facultative retrocessions pursuant to obligatory facultative agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for such retrocessions. The guidelines shall include all of the following:

(i) A list of reinsurers with which automatic agreements are in effect;

(ii) For each such reinsurer, the coverages and amounts or percentages that may be reinsured;

(iii) Commission schedules.

(b) Commit the reinsurer to participate in reinsurance syndicates.

(c) Appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which he is appointed.

(d) Without prior approval of the reinsurer, pay or commit the reinsurer to pay a claim, net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer or one per cent of the reinsurer’s policyholder’s surplus as of the thirty-first day of December of the last complete calendar year.

(e) Collect any payment from a retrocessionaire or commit the reinsurer to any claim settlement with a retrocessionaire, without prior approval of the reinsurer.

(f) Jointly employ an individual who is employed by the reinsurer unless the reinsurance intermediary-manager is under common control with the reinsurer subject to sections 3901.32 to 3901.37 of the Revised Code.

(g) Appoint a sub-reinsurance intermediary-manager.

(3) A reinsurer shall not appoint to its board of directors, any officer, director, employee, controlling shareholder or subproducer of its reinsurance intermediary-manager.

(H) Severability

If any section, term or provision of this rule be adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

Effective: 04/13/2006

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.07, 3901.77

Rule Amplifies: 3901.07; 3901.77

Prior Effective Dates: 1/1/1993

3901-3-10 Licensing of managing general agents.

(A) Authority

This rule is issued by the superintendent of insurance pursuant to section 3901.041 and 3905.79 of the Revised Code.

(B) Purpose

Section 3905.72 of the Revised Code sets out the requirements for licensing of managing general agents. The purpose of this rule is to establish the procedures to be used in the licensing of managing general agents.

(1) Every person who seeks a license as a managing general agent under section 3905.71 to 3905.79 of the Revised Code shall make application in writing to the superintendent of insurance on a form provided by the superintendent.

(2) In addition to the information required by section 3905.72(B)(1) to (6) of the Revised Code the application form shall also contain:

(a) Questions to determine if the applicant has had any criminal or administrative action taken against the applicant;

(b) Questions to determine if the applicant has ever been involved with an entity which was placed in bankruptcy, conservatorship, or similar supervision;

(3) When the applicant applies for a license the applicant shall provide a list, including addresses, of all the applicant’s agents, producers, or subproducers, which shall be kept current by filing notice of any changes within thirty days of the end of each calendar quarter.

(4) The application fee of twenty dollars shall be submitted with the application.

(D) Effective date

The date on which an applicant is assigned a license number by the department is the effective date of that license. The license shall expire on the last day of February of each calendar year, except that if an insurer terminates the appointment of a managing general agent the license will expire on the date of the termination. An insurer shall immediately notify the superintendent of insurance when it terminates the appointment of a managing general agent and such termination shall be effective on the date it is received by the department.

(E) Change of address

Every licensed managing general agent shall notify the superintendent in writing of any change in their business or residence address within thirty days of the change. This change of address shall be made on a form provided by the superintendent of insurance, and merely placing the new address on correspondence or filings with the department without filing a change of address notice is not sufficient to comply with this requirement.

(F) Violation

Failure to comply with any requirements set out in this rule shall be grounds for the revocation or suspension of a managing general agent license.

(G) Severability

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3905.79

Rule Amplifies: 3905.72

Prior Effective Dates: 5/1/1993

3901-3-11 Actuarial opinion and memorandum.

(A) Purpose

The purpose of this rule is to prescribe:

(1) Guidelines and standards for statements of actuarial opinion which are to be submitted in accordance with division (B) of section 3903.72 of the Revised Code, and for memoranda in support thereof;

(2) Guidelines and standards for statements of actuarial opinion which are to be submitted when a company is exempt from division (B)(2) of section 3903.72 of the Revised Code;

(3) Rules applicable to the appointment of an appointed actuary.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent of insurance of the state of Ohio under sections 3901.041 and 3903.72 of the Revised Code. This rule will take effect for annual statements for the year 1996.

This rule shall apply to all life insurance companies and fraternal benefit societies doing business in this state and to all life insurance companies and fraternal benefit societies which are authorized to reinsure life insurance, annuities or accident and health insurance business in this state.

This rule shall be applicable to all annual statements filed with the office of the superintendent after the effective date of this rule. Except with respect to companies which are exempted pursuant to paragraph (F) of this rule, a statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with paragraph (H) of this rule, and a memorandum in support thereof in accordance with paragraph (I) of this rule, shall be required each year. Any company so exempted must file a statement of actuarial opinion pursuant to paragraph (G) of this rule.

Notwithstanding the foregoing, the superintendent may require any company otherwise exempt pursuant to this rule to submit a statement of actuarial opinion and to prepare a memorandum in support thereof in accordance with paragraphs (H) and (I) of this rule if, in the opinion of the superintendent an asset adequacy analysis is necessary with respect to the company.

(D) Definitions

(1) Actuarial opinion

Actuarial opinion means:

(a) With respect to paragraph (H), (I), or (J) of this rule, the opinion of an appointed actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy test in accordance with paragraph (H) of this rule and with presently accepted actuarial standards;

(b) With respect to paragraph (G) of this rule, the opinion of an appointed actuary regarding the calculation of reserves and related items, in accordance with paragraph (G) of this rule and with those presently accepted actuarial standards which specifically relate to this opinion.

(2) Actuarial standards board

“Actuarial Standards Board” is the board established by the “American Academy of Actuaries” to develop and promulgate standards of actuarial practice.

(3) Annual statement

“Annual Statement” means that statement required by section 3929.30 of the Revised Code to be filed by the company with the office of the superintendent annually.

(4) Appointed actuary

“Appointed Actuary” means any individual who is appointed or retained in accordance with the requirements set forth in paragraph (E)(3) of this rule to provide the actuarial opinion and supporting memorandum as required by division (B) of section 3903.72 of the Revised Code.

(5) Asset adequacy analysis

“Asset Adequacy Analysis” means an analysis that meets the standards and other requirements referred to in paragraph (E)(4) of this rule. It may take many forms, including, but not limited to, cash flow testing, sensitivity testing or applications of risk theory.

(6) Company

“Company” means a life insurance company, fraternal benefit society or reinsurer subject to the provisions of this rule.

(7) Non-investment Grade Bonds

“Non-investment Grade Bonds” are those designated as classes 3, 4, 5 or 6 by the “NAIC” securities valuation office.

(8) Qualified actuary

“Qualified Actuary” means any individual who meets the requirements set forth in paragraph (E)(2) of this rule.

(E) General requirements

(1) Submission of statement of actuarial opinion

(a) There is to be included on or attached to page one of the annual statement for each year beginning with the year in which this rule becomes effective the statement of an appointed actuary, entitled “Statement of Actuarial Opinion,” setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with paragraph (H) of this rule; provided, however, that any company exempted pursuant to paragraph (F) of this rule from submitting a statement of actuarial opinion in accordance with paragraph (H) of this rule shall include on or attach to page one of the annual statement a statement of actuarial opinion rendered by an appointed actuary in accordance with paragraph (G) of this rule.

(b) If in the previous year a company provided a statement of actuarial opinion in accordance with paragraph (G) of this rule, and in the current year fails the exemption criteria of paragraph (F)(3)(a), (F)(3)(b) or (F)(3)(e) of this rule to again provide an actuarial opinion in accordance with paragraph (G) of this rule, the statement of actuarial opinion in accordance with paragraph (H) of this rule shall not be required until August first following the date of the annual statement. In this instance, the company shall provide a statement of actuarial opinion in accordance with paragraph (G) of this rule with appropriate qualification noting the intent to subsequently provide a statement of actuarial opinion in accordance with paragraph (H) of this rule.

(c) In the case of a statement of actuarial opinion required to be submitted by a foreign or alien company, the superintendent may accept the statement of actuarial opinion filed by such company with the insurance supervisory regulator of another state if the superintendent determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

(d) Upon written request by the company, the superintendent may grant an extension of the date for submission of the statement of actuarial opinion.

(2) Qualified actuary

A “Qualified Actuary” is an individual who:

(a) Is a member in good standing of the “American Academy of Actuaries”; and

(b) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the “American Academy of Actuaries” qualification standards for actuaries signing such statements; and

(d) Has not been found by the superintendent, or if so found has subsequently been reinstated as a qualified actuary, following appropriate notice and hearing, to have:

(i) Violated any provision of, or any obligation imposed by, the insurance law or other law in the course of his or her dealings as a qualified actuary; or

(ii) Been found guilty of fraudulent or dishonest practices; or

(iii) Demonstrated his or her incompetency, lack of cooperation, or untrustworthiness to act as a qualified actuary; or

(iv) Submitted to the superintendent during the past five years, pursuant to this rule, an actuarial opinion or memorandum that the superintendent rejected because it did not meet the provisions of this rule including standards set by the actuarial standards board; or

(v) Resigned or been removed as an actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and

(e) Has not failed to notify the superintendent of any action taken by any superintendent of any other state similar to that under paragraph (E)(2)(d) of this rule.

(3) Appointed actuary

An “Appointed Actuary” is a qualified actuary who is appointed or retained to prepare the statement of actuarial opinion required by this rule; either directly by or by the authority of the board of directors through an executive officer of the company. The company shall give the superintendent timely written notice of the name, title and, in the case of a consulting actuary, the name of the firm, and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in such notice that the person meets the requirements set forth in paragraph (E)(2) of this rule. Once notice is furnished, no further notice is required with respect to this person, provided that the company shall give the superintendent timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in paragraph (E)(2) of this rule. If any person appointed or retained as an appointed actuary replaces the previous appointed actuary, the notice shall so state and give the reasons for replacement. Prior to accepting the appointment to replace an appointed actuary, the candidate should consult with the previous appointed actuary to determine whether reasons exist to decline the appointment. If reasons do exist, the source of the conflict should be resolved, or the appointment should be declined. The new appointed actuary must furnish a copy of his letter of acceptance to the superintendent, as well as a statement of consultation. The statement of consultation must be signed by the previous appointed actuary and the new appointed actuary and must include the address or new place of employment and the telephone number of the previous appointed actuary. The statement must also be accompanied by an inventory of any outstanding valuation issues that the previous appointed actuary considered unresolved at the time of resignation, or an affirmative declaration that no material issues exist. The inventory may include comments with respect to any valuation reserve issue, including but not limited to: Formula reserve compliance; formula reserve adequacy with respect to assets or other factors; adequacy of system and staff support for the appointed actuary function; adequacy of controls on systems, data bases and other mechanisms relied upon in forming the actuarial opinion; and organizational issues impacting upon the formation of an actuarial opinion (i.e., scope, authority, responsibility).

(4) Standards for asset adequacy analysis

The asset adequacy analysis required by this rule:

(a) Shall conform to the standards of practice as promulgated from time to time by the actuarial standards board and on any additional standards under this rule, which standards are to form the basis of the statement of actuarial opinion in accordance with paragraph (H) of this rule; and

(b) Shall be based on methods of analysis as are deemed appropriate for such purposes by the actuarial standards board.

(5) Liabilities to be covered

(a) Under authority of division (B) of section 3903.72 of the Revised Code, the statement of actuarial opinion shall apply to all in force business on the statement date regardless of when or where issued, e.g., reserves of Exhibits 8, 9 and 10, and claim liabilities in Exhibit 11, Part 1 and equivalent items in the separate account statement or statements.

(b) If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in divisions (E), (F), (G), (H), (K), (L), and (M) of section 3903.72 of the Revised Code, the company shall establish such additional reserve.

(c) Additional reserves established under paragraph (E)(5)(b) of this rule and deemed not necessary in subsequent years may be released. Any amounts released must be disclosed in the actuarial opinion for the applicable year. The release of such reserves would not be deemed an adoption of a lower standard of valuation.

(F) Required opinions

(1) General

In accordance with division (B) of section 3903.72 of the Revised Code, every company doing business in this state shall annually submit the opinion of an appointed actuary as provided for by this rule. The type of opinion submitted shall be determined by the provisions set forth in paragraph (F) of this rule and shall be in accordance with the applicable provisions of this rule.

(2) Company categories

For purposes of this rule, companies shall be classified as follows based on the admitted assets as of the end of the calendar year for which the actuarial opinion is applicable:

(a) Category A shall consist of those companies whose admitted assets do not exceed twenty million dollars;

(b) Category B shall consist of those companies whose admitted assets exceed twenty million but do not exceed one hundred million dollars;

(c) Category C shall consist of those companies whose admitted assets exceed one hundred million but do not exceed five hundred million dollars; and

(d) Category D shall consist of those companies whose admitted assets exceed five hundred million dollars.

(3) Exemption eligibility tests

(a) Any Category A company that, for any year beginning with the year in which this rule becomes effective, meets all of the following criteria shall be eligible for exemption from submission of a statement of actuarial opinion in accordance with paragraph (H) of this rule for the year in which these criter