Effective November 25, 1992, the California Department of Insurance has released the
revised and permanent version of the California Code of Regulations, Title 10, Chapter 5,
Subchapter 1, Article 4, Section 2174.1-2174.14. A copy of the Permanent Regulation is
attached for your reference. We urge you to carefully review this document in its
entirety.
James S. Pugh
Assistant Manager
JSP/imb
Enclosure
STATE OF CALIFORNIA
DEPARTMENT OF INSURANCE
45 FREMONT STREET, 24TH FLOOR
SAN FRANCISCO, CA 94105
EFFECTIVE NOVEMBER 25, 1992
CALIFORNIA CODE OF REGULATIONS, TITLE 10
CHAPTER 5 SUBCHAPTER 1 ARTICLE 4
ADOPT SECTIONS 2174.1 THROUGH 2174.14, TO READ:
2174.1 Preamble
Sections 2174.2 through 2174.14 are not meant to provide an exhaustive specification of
all possible criteria that the Commissioner may consider in determining whether grounds
are present to issue an order under Insurance Code section 1765.1. Inasmuch as it is not
possible to foresee all contingencies and provide regulations to anticipate them, the
duties and discretion of the Commissioner conferred by law regarding the legal and
financial evaluation of nonadmitted insurers proposed for use by licensees cannot be, are
not intended to be, and shall not be, exhausted by these sections.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763 and 1765.1, Insurance Code.
2174.2 Definitions
(a) "Certified" means an originally signed and/or sealed statement, dated not
more than 60 days before submission, made by a public official or other person, attached
to a copy of a document, which attests that the copy is a true copy of the original, and
that the original is in the custody of the person making the statement.
(b) "Commissioner" means the Insurance Commissioner of California.
(c) "Department" means the California Department of Insurance.
(d) "Domiciliary jurisdiction" means the state, nation or subdivision thereof
under the laws of which an insurer is incorporated or otherwise organized.
(e) "Filing" is a submission which the Department has determined is in
substantial compliance with the requirements of Section 2174.9, although it may have
exemption requests or omissions.
(f) "Insurer" means (unless the context indicates otherwise)
"nonadmitted" insurers which are either "foreign" or "alien"
insurers, as those terms are defined in Insurance Code
sections 25, 27, and 1580. The term "insurer" includes all nonadmitted insurers
selling insurance to or through purchasing groups as defined in the Liability Risk
Retention Act of 1986 (15 U.S.C. section 3901 et seg) and the California Risk Retention
Act of 1990 (Insurance Code section 125 et seg.), except insurers which are risk retention
groups as defined by those Acts.
(g) "Licensee" includes both surplus line brokers and special lines' surplus
line brokers licensed pursuant to Insurance Code sections 1760.5(b), 1765 and
1765.2-1765.4.
(h) "NAIC" means the National Association of Insurance Commissioners or its
successor organization.
(i) "NAIIO" means the Nonadmitted Alien Insurer Information Office of the NAIC
or its successor office.
(j) "Placement" means the placing of insurance by a licensee with an insurer
pursuant to the provisions of Chapter 6, Part 11 Division 1, of the Insurance Code.
(k) "State" means any State of the United States; the District of Columbia; a
commonwealth and a territory.
(1) "Submission" means the providing to the Department of documents required
under Section 2174.4.
(m) "Verified" means a document or copy accompanied by an originally signed
statement, dated not more than 60 days before submission, from a responsible executive or
official who has authority to provide the statement and knowledge whereof he or she
speaks, attesting either under oath before a notary public, or under penalty of perjury
under California law, that the assertions made in the document are true.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763 and 1765.1, Insurance Code.
2174..3 Placements
(a) Minimum Standards
The Commissioner has set forth in Section 2174.9 certain minimum standards of insurer
financial stability, reputation and integrity to guide licensees in their selection of
insurers for placements. A licensee who makes a placement with an insurer which fails to
meet the minimum standards may be subject to disciplinary action pursuant to Section
2174.9(c).
(b) Submit and Use
Except as provided in subsection (c) below, placement may be made immediately after
submission, without awaiting a determination of whether the submission was accepted for
filing.
(c) Exemptions
Exemptions from certain of the minimum standards may be requested by licensees as set
forth in Section 2174.5(g). No placements may be made with an insurer while an exemption
request
- 2 -
is pending for that insurer. Unless within 90 days from the date of submission the
submission has been rejected pursuant to Section 2174.7, an order under CIC Section 1765.1
has been issued, or the licensee has waived the 90 day period, the exemption request shall
be deemed to have been granted for a period of one year from the date of submission.
NOTE: Authority Cited: Sections 1668, 1763, 1765, Insurance Code. Reference: Sections
1668, 1763, 1765 and 1765.1, Insurance Code.
2174.4Required submissions
(a) Submissions
Except as provided in Section 2174.4(c), a licensee shall submit all of the following
before making a placement:
(1) Department Form A (Appendix A), as a cover sheet.
(2) The documents required by Section 2174.5.
(3) A filing fee of $1500.00.
(b) Updates
During the twelve months after a licensee makes a filing under Section 2174.4(a), the
licensee shall keep the documents current by submitting all of the following:
(1) More recently-dated versions of documents as soon as such updated documents are
available.
(2) Information to reflect any change in the data contained in documents previously filed
which relates to Sections 2174.5(b) through (f) and 2174.9(a)(2) through (8).
(3) A filing fee of $250 per document for updates of financial documents; and a filing fee
of $35 per document for all other updates.
(c) Exceptions
Unless the Department specifically directs a licensee otherwise pursuant to Insurance Code
Section 1765.1, the submission required by Section 2174.4(a) need not be made in any of
the following circumstances:
(1) Where the licensee has made Section 2174.4(a) and (b) submissions within the preceding
twelve months on that same insurer, and all exemption requests, if any, have been granted.
(2) Where the licensee has determined that the financial stability, reputation, and
integrity of an insurer is sufficient to safeguard the interest of the prospective
insured; and that another licensee has made a filing under Section 2174.4(a) on that same
insurer within the preceding twelve months and any exemption requests have been granted;
and the licensee makes the following submission:
(A) Department Form A.
(B) A filing fee of $35.00.
(3) Where another licensee has made a filing under Section 2174.4(a) on an insurer within
the preceding twelve months, and
-3-
the licensee has made a submission under 2174. (C)(2) for that same insurer within the
preceding twelve months.
(4) Where the licensee's placement covers only liability arising out of the ownership,
maintenance, or use of a motor vehicle, aircraft or boat in the Republic of Mexico, and is
issued by an insurer domiciled in Mexico.
(d) Additional Requirements
All submissions by the licensee made pursuant to this section shall meet the requirements
of Insurance Code Section 8 and shall be forwarded to the Department at the following
address:
Surplus Lines Enforcement Unit
Investigation Bureau
California Department of Insurance
45 Fremont
San Francisco, CA 94105
All submissions shall be made in triplicate, except that submissions shall be made in
quadruplicate if one or more exemption requests are made under Section 2174.5(g).
NOTE: Authority Cited: Sections 1763, 1771, and 12921.6, Insurance code. Reference:
Sections 1763 and 1765.1, Insurance Code.
2174.5 Documents To Submit
(a) Financial Documents
The financial documents as specified below, each showing the insurer's condition as of a
date not more than twelve months prior to submission:
(1) Annual Statement
A copy of an annual statement, prepared in the form prescribed by the NAIC. For an alien
insurer, in lieu of an annual statement a licensee may submit Department Form (Appendix B)
and Department Form C (Appendix C) as prepared by the insurer, and, if listed by the ISI
financial report service, the NAIIO, or both, a copy of the most recent annual financial
data furnished either to ISI or NAIIO shall also be filed.
(2) Audited Financial Report
A copy of an audited financial report on the insurer's condition which meets the standards
of subpart (4) for foreign insurers or subpart (5) for alien insurers.
(3) Trusteed Assets
If the insurer is an alien:
(A) A certified copy of the trust agreement referenced in Section 2174.9(a)(4).
-4-
(B) A verified copy of the most recent quarterly statement or list of the assets in the
trust.
(4) Reporting standards for Foreign Insurers
(A) Financial documents must be certified.
(B) An audited financial report shall constitute a supplement to the insurer's annual
statement, as required by the annual statement instructions issued by the NAIC.
(C) An audited financial report shall be prepared by an independent certified public
accountant or accounting firm in good standing with the American institute of Certified
Public Accountants and in all states where licensed to practice; and be prepared in
conformity with statutory accounting practices prescribed, or otherwise permitted, by the
insurance regulator of the insurers domiciliary jurisdiction.
(D) An audited financial report shall include information on the insurer's financial
position as of the end of the most recent calendar year, and the results of its
operations, cash flows and changes in capital and surplus for the year then ended.
(E) An audited financial report shall be prepared in a form and using language and
groupings substantially the same as the relevant sections of the insurer's annual
statement filed with its domiciliary jurisdiction, and presenting comparatively the
amounts as of December 31 of the most recent calendar year and the amounts as of December
31 of the preceding year.
(5) Reporting Standards for Alien Insurers
(A) Except as provided in Section 2174.5(a)(3)(B), financial documents should be
certified; if certification of a document is not available, the document must be verified.
(B) Financial documents should be expressed in United States dollars, however may be
expressed in another currency, if the exchange rate for the other currency as of the date
of the document is also provided.
(C) The responses provided in Department Form C should follow the Insurance Solvency
International ("ISI") Guide to Alien Reporting Format, "Standard
Definitions of Accounting Items," (August, 1987). Responses that do not agree with a
standard definition must be fully explained in the form.
(D) An audited financial report shall be prepared by an independent auditor licensed as
such in the insurer's domiciliary jurisdiction or in any state.
(E) An audited financial report shall be prepared in accord with either (i) Generally
Accepted Auditing Standards that prescribe Generally Accepted Accounting Principles, or
(ii) International Accounting Standards as published and revised from time to time by the
International Accounting Standards Committee and the International Auditing Guidelines
published by the International Auditing Practice Committee of the International Federation
of Accountants; and shall include financial statement notes and a summary of significant
accounting practices.
-5-
(6) Substitutions
The Commissioner may accept, in lieu of a document described above, any certified or
verified financial or regulatory document, statement or report if the Commissioner finds
that it possesses reliability and financial detail substantially equal to or greater than
the document for which it is proposed to be a substitute.
(7) Supplements
If one of the financial documents required to be submitted under Section 2174.5(a)(1) and
(2) is dated within twelve months of submission, but the other document is not so dated,
the licensee may use the outdated document if it is accompanied by a supplement. The
supplement must meet the same requirements which apply to the supplemented document, and
must update the outdated document to a date within the prescribed time period, preferably
to the same date as the non-supplemented document.
(b) License
A certified copy of the insurer's license issued by its domiciliary jurisdiction, plus a
certificate of good standing, certificate of compliance or other equivalent certificate,
from either that jurisdiction or, if the jurisdiction issues no such certificates, from
any state where it is licensed.
(c) Agent for Service of Process
Information on the insurer's agent in California for service of process, including the
agent's full name and address. The agent's address must include a street address where the
agent can be reached during normal business hours.
(d) Principal Place of Business
The complete street address, mailing address and telephone number of the insurer's
principal place of business..
(e) Market Conduct Information
A certified or verified explanation, report or other statement, from the insurance
regulatory office or official of the insurer's domiciliary jurisdiction, concerning the
insurer's record regarding market conduct and consumer complaints; or, if such information
cannot be obtained from that jurisdiction, then such other information as the licensee can
procure to demonstrate a good reputation for payment of claims and treatment of
policyholders.
(f) Regulatory Disclosure
A verified statement, from the insurer or licensee, on whether the insurer or any
affiliated entity is currently known to be the subject of any order(s) or proceeding(s)
regarding conservation, liquidation or other receivership; or regarding revocation or
suspension of a license to transact insurance in any jurisdiction; or otherwise seeking to
stop the insurer from transacting insurance in any jurisdiction. The statement shall
identify any such proceeding(s) by date, jurisdiction, and relief or sanction sought; and
shall attach a copy of any such order(s).
-6-
(g) Request for Exemption
If the licensee requests any of the exemptions authorized by Subsections 2174.9(a)(3),(6)
or (7), a letter that sets forth the request(s) and all of the reasons why the licensee
contends that the insurer satisfies the standards for each exemption requested. The
licensee must indicate where provided on the Department Form A cover letter accompanying
the submission that an exemption is requested. Failure to make such an indication is a
waiver of the 90 day limitation period of Section 2174.3(b). The licensee shall make no
placements with an insurer unless and until all requested exemptions are granted.
(h) Additional Information
If requested by the Department, such additional information concerning the insurer that
the Department finds necessary for its review; and, if offered by a licensee, any
additional information which the licensee would like the Department to consider in its
review.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763 and 1765.1, Insurance Code.
2174.6 Filing
(a) Time of Filing
Submissions are not considered filed until a determination is made that the submission is
in substantial compliance with the requirements of Section 2174.9. Submissions determined
to be in substantial compliance will be accepted for filing and recorded as filed as of
the date of determination.
(b) Effect of Filing
Acceptance of a submission for filing is not a determination that the submission meets
with all requirements. After due examination of the filing, the Commissioner may determine
that an order under CIC Section 1765.1 is necessary to protect the public interest.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763 and 1765.1, Insurance Code.
-7-
2174.7 Rejection of Documents
Submissions which are not in substantial compliance with the requirements of Section
2174.9 may be rejected. When a submission is rejected, the licensee will be provided with
the reasons for the rejection and may be issued an order under CIC Section 1765.1 pursuant
to the provisions of Section 2174.9(c). Filing fees are non-refundable.
NOTE: Authority Cited: Sections 1763 and 12977, Insurance Code.
Reference: Sections 1763 and 1765.1, Insurance Code.
2174.8 List of Filings
(a) The Department shall maintain a list of filings for public inspection at the filing
office in San Francisco and the Insurance Commissioner's office in Los Angeles.
(b) For each filing, the list shall contain the names of the insurer and the licensee, and
the date of filing. A filing which contains one or more exemption requests shall be noted
on the list as "Exemption Requested -- Not For Use Under 2174.4(c)." The
notation of an exemption request shall be removed when no exemption request is pending.
(c) The filing may remain on the list for a period not to exceed one year unless removed
pursuant to an order issued under Insurance Code Section 1765.1.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763 and 1765.1, Insurance Code.
2174.9 Standards For Evaluation Of Insurers
(a) Review of Filings
The Department may issue an order under Insurance Code Section 1765.1 with respect to a
filing made under Section 2174.4(a), if the filing does not meet all of the following
conditions:
(1) Completeness of Filing
All documents required by Section 2174.4 have been filed and any exemption request has
been granted. Each of the documents appear after review to be complete, clear,
comprehensible, unambiguous, accurate and consistent.
(2) Regulatory Action
The documents affirm that the insurer is not subject in any jurisdiction to an order or
proceeding which:
(A) Seeks to stop it from transacting insurance.
(B) Relates to conservation, liquidation or other receivership.
(C) Relates to revocation or suspension of its license.
-8-
(3) Capital and Surplus
The documents demonstrate that the insurer's capital and surplus is at least $15 million,
unless:
(A) The insurer is excepted as provided in subpart (4) below; or
(B) An exemption from this minimum requirement is granted. The Commissioner may grant an
exemption if the licensee has applied for same pursuant to the provisions of Section
2174.5(g), and demonstrates that the exemption is warranted because the insurer provides
only unique or specialized coverages and/or serves unique, specialized or limited markets,
and the insurer's capital and surplus is sufficient for its risks and markets.
(4) Trust Account
If the insurer is an alien, the documents should confirm that a trust account for the
protection of United States' policyholders and claimants is maintained in the United
States, in a Federal Reserve System member bank, under a trust agreement in a form
acceptable to the Commissioner. If the trust agreement is in the form of the NAIC Standard
Form Trust Agreement For Alien Surplus Lines Insurers, and if the insurer will write life,
accident and health, disability or credit insurance, the agreement shall include an
amendment to make the trust funds available for all risks, including life, accident and
health, disability and credit insurance. The trust amount should be not less than $5.4
million, except that if the alien insurer is an association or syndicate (with individuals
or unincorporated insurers as members), the trust amount should be not less than $100
million. An alien insurer which maintains a $100 million trust account pursuant to this
subpart is excepted from the capital and surplus requirements of subpart (3) above.
(5) Quality of Assets
The documents confirm that the assets which meet the financial requirements of subparts
(3) and (4) above are in the form of cash, or securities of the same character and quality
as specified in Insurance Code sections 1170 through 1182, or in readily-marketable
securities listed on regulated United States' national or principal regional security
exchanges securities specifically valued by the NAIC Securities Valuation office shall be
presumed readily-marketable absent evidence to the contrary. Letters of credit in the form
of the Compromise Letter of Credit Form (Appendix D) may fund the trust required under
subpart (4) above, but will not qualify as assets under subpart (3).
(6) Seasoning
The documents affirm that the insurer has actively transacted insurance for the three
years immediately preceding the filing made under Section 2174.4(a) unless an exemption is
granted. The Commissioner may grant an exemption if the licensee has applied for same
pursuant to Section 2174.5(g) and demonstrates that:
-9-
(A) The insurer meets the condition for any exception set forth in Insurance Code Section
716(a), (b), or (c); or
(B) If the insurer has been actively transacting insurance for at least twelve months, and
the licensee demonstrates that the exemption is warranted because the insurers current
financial strength, operating history, business plan, ownership and control, management
experience and ability, together with any other pertinent factors, make three years of
active insurance transaction unnecessary to establish sufficient reputation.
(7) License
The documents confirm that the insurer holds a license to issue insurance policies (other
than reinsurance) to residents of the jurisdiction that granted the license unless an
exemption is granted. The Commissioner may grant an exemption if the licensee has applied
for same pursuant to the provisions of Section 2174.5(g), and demonstrates that the
exemption is warranted because the insurer proposes to issue in California only commercial
coverage, and is wholly owned and actually controlled by substantial and knowledgeable
business enterprises, which are its policyholders and which effectively govern the
insurer's destiny in furtherance of their own business objectives.
(8) Market Conduct
The information filed pursuant to Section 2174.5(e) or otherwise filed with or available
to the Commissioner, including reports received from California policyholders, shall
indicate that the insurer makes reasonably prompt payment of claims in this state or
elsewhere.
(9) Code Violations
The information available to the Commissioner shall not indicate that the insurer offers
in California through a licensee products or rates that violate any provision of the
Insurance Code.
(b) Consideration of Public Interest
Notwithstanding that all of the conditions set forth in Section 2174.9(a) have been met,
the Commissioner may determine that facts or circumstances are present in such a degree
that an order issued under Insurance Code Section 1765.1 is necessary to protect the
public interest.
(c) Failure to Make Submission or Filing
The Department may issue an order under Insurance Code Section 1765.1 where a licensee
fails to comply with the provisions of Section 2174.4(a) and (b), or where a licensee uses
an insurer which fails to meet the standards set forth in Section 2174.9(a). When such
conduct by the licensee constitutes a failure to safeguard the interests of the licensee's
insured, such failure is a violation of license qualifications under Insurance Code
Section 1765(b) and may result in denial, suspension or revocation of the license under
Insurance Code Section 1765(f).
- 10 -
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763, 1765 and 1765.1, Insurance Code.
2174.10 Procedures For Orders under section 1765.1
(a) Content
Any order issued by the Department pursuant to Insurance Code section 1765.1 shall
identify both the licensee and the insurer to which it pertains, and shall state the basis
for the Commissioner's belief that the order serves the public interest. The order shall
remain in effect until rescinded by the Commissioner, set aside by a court of competent
jurisdiction, or as provided in subsection (c) below.
(b) Service
The Department shall serve copies of the order on both the licensee and the insurer by
certified first-class mail with postage prepaid. The licensee shall be served at his or
her last-known address as indicated on the Department's license records. The insurer shall
be served by means of the agent for service of process filed pursuant to Section 2174.5(c)
or, in the Commissioner's discretion, at any other address reasonably calculated to afford
prompt actual notice to the insurer.
(c) Hearing
Any licensee or insurer served with an order under Insurance Code Section 1765.1 may,
within 30 calendar days after service of the order, request in writing a public hearing on
receiving that request, the Commissioner shall set the hearing for not less than 20 nor
more than 30 calendar days after the request was received, and shall notify the licensee
and insurer of the hearing date. Within 60 days after conclusion of the hearing, the
commissioner shall affirm the order or it shall be deemed rescinded.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763 and 1765.1, Insurance Code.
2174.11 Public Availability Of Documents
(a) All documents filed with the Commissioner under Sections 2174.4 and 2174.5, all
periodic filings required under the Section 2174.9(a)(4) trust agreement, all orders
issued under Insurance Code Section 1765.1, and all evidence, pleadings and documents
relating to hearings held under Section 2174.10(c), shall be available for public review.
Nothing herein shall make any memorandum, study or other document prepared by or for the
Department staff in its official capacity, for internal Department use, a public document.
- 11 -
(b) The Commissioner may prepare and distribute to the public a list of licensees to whom
section 1765.1 orders have been issued and of insurers named in the orders.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 856(a), 1763 and 1765.1, Insurance Code.
2174.12 Status of Nonadmitted Insurers
Neither these regulations nor the exercise of the Commissioner's power hereunder are
intended to confer on any nonadmitted insurer any status approximating in any respect that
of an admitted insurer for any purpose, including, but not limited to, the discharge of a
licensee's duty under Insurance Code section 1765 to transact their an insurance brokerage
business in a manner that safeguards the interests of their the licensee's insureds.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763, 1765, 1765.1 and 1776, Insurance Code.
2174.13 Transition
The following provisions apply to licensees who make placements with an insurers which has
been used by any licensee for California surplus line business at any tine prior to the
effective date of Sections 2174.1 through 2174.13:
(a) The documents required by Section 2174.3(a) must be submitted by the licensee not
later than 180 calendar days after the effective date.
(b) At the time of such submission, the licensee must demonstrate that the insurer meets
all the requirements of Section 2174.9(a), except that the insurer will meet the standards
set forth in Section 2174.9(a)(7) not later than one year from the date of filing.
NOTE: Authority Cited: Section 1763, Insurance Code.
Reference: Sections 1763 and 1765.1, Insurance Code.
2174.14 Notice to Licensees
The Commissioner shall mail a copy of Sections 2174.1 through 2174.14 to each licensee
upon the effective date of said Sections, and thereafter, to each new licensee.
NOTE: Authority Cited: Section 1763 and 1765.1, Insurance Code.
Reference: Section 1765.1, Insurance Code.
- 12 -
APPENDIX A
APPENDIX A
CALIFORNIA DEPARTMENT OF INSURANCE
SURPLUS LINE BROKER'S
STATEMENT OF PLACEMENT OF
(California Insurance Code Section 1765.1)
The undersigned surplus line broker has placed (or proposes to place) insurance with the
following nonadmitted insurer:
The documents required to be filed by Regulation 2174 of Title 10 of the California Code
of Regulations ("CCR") (check all applicable):
are submitted herewith. The documents include an:
OMISSION: The reason for the omission of any required document is explained in an attached
statement.
EXEMPTION
REQUEST: The documents include one or more exemption
requests [failure to indicate an exemption request is a waiver of time
pursuant to CCR Section 2174.5(g)].
were reported filed with the California Department of Insurance as follows:
Filed on (date)
Filed by (broker)
I AM INFORMED AND BELIEVE THAT THE ABOVE NAMED NONADMITTED INSURER HAS SUFFICIENT
FINANCIAL STABILITY, REPUTATION AND INTEGRITY TO RECEIVE PLACEMENTS AND SAFEGUARD THE
INTERESTS OF ITS INSUREDS.
DATE: SURPLUS LINE BROKER:
(Signature)
LICENSE NUMBER:
Department Form A (6/92)
APPENDIX B
APPENDIX B
CALIFORNIA DEPARTMENT OF INSURANCE
COMPANY INFORMATION
1. The insurer shall provide a narrative of its plan of operation including the following
information:
a) Date of incorporation, or if unincorporated, date of organization. Date of commencement
of business. if incorporated, capital stock authorized, issued and oustanding shares.
b) An explanation of the ownership and control of the insurer, its principal management,
and its subsidiaries and affiliates.
c) Territories of operation.
d) Lines of business transacted showing gross premiums, reinsurance assumed, reinsurance
ceded and net premiums.
e) An explanation of the largest gross premium amount written on one risk and type of
insurance.
f) An explanation of the method used for asset valuation.
g) Does the company have legal title and/or similar ownership rights to all assets
reported in the balance sheet?
h) If any assets are encumbered, pledged or restricted in any manner, a detailed
explanation should be provided for each such asset.
i) A schedule for each asset equal to 10% or more of the total assets or 5% of insurer's
adjusted shareholder funds, whichever is the lesser as of the financial statement date.
The schedule should describe the asset, list its cost, amortized value, market value in
U.S. currency, and/or any other method of valuation.
j) If the insurer has its loss reserves reviewed by an actuary for adequacy and
reasonableness, a copy of any lose reserve certification issued shall be filed. If no such
review is done, the insurer shall provide a complete explanation of its reserving
methodology.
k) A schedule of reinsurance per attached Form B-2 (NAIC Schedule R).
l) Provide the total for the largest amount written on any one risk and type of insurance.
Department Form B (3/92)
CALIFORNIA DEPARTMENT OF INSURANCE
COMPANY INFORMATION
2. Provide the name and address of United States Counsel (or representative).
3. Provide name and address of supervisory official at the insurance regulatory agency of
the domiciliary jurisdiction.
4. Describe any legal or regulatory action taken against the insurer and/or any of its
officers or directors. Submit copies of underlying documents when appropriate.
5. Describe any major and/or material transaction which is pending or has occurred during
the past year that affects the operation of the company. Submit copies of underlying
documents when appropriate.
6. Provide information regarding U.S. trust account.
Department Form B (3/92)
SCHEDULE R
(See Instructions Attached)
______________________
________________________
Name of Compay Report Year Ended
1.
NAIC COMPANY ID NO.
2.
NAME OF REINSURER
3.
ADDRESS, INCLUDING COUNTRY OF DOMICILE
4.
5.
REINSURANCE RECOVERABLE ON PAID LOSSES AND ALAE**
6.
REINSURANCE RECOVERABLE ON UNPAID LOSSES INCL., IBNR* AND ALAE**
7.
CURRENT YEAR PREMIUM CEDED
8.
UNEARNED PREMIUMS (EST.)
9.
DEPOSITS OF FUNDS WITHHLD FROM REINSURERS AFFILIATES
SUB- TOTALS
NON AFFI- LIATES
SUB- TOTALS
ALL OTHERS ***
* Incurred But Not Reported
** Allocated Loss Adjustment Expenses
*** See de minimis provision in Instructions
Department Form B-2 (4/92)
INSTRUCTIONS FOR COMPLETING NAIC SCHEDULE R COLUMN
1 Please provide NAIC Identification Numbers, alien/domestic.
2 Self-explanatory (see instruction for column #3)
3 List in alphabetical order by country; then list in alphabetical order by company.
4 Insert in this column, if applicable, the following letter designation:
(J) Reinsurer is subject to delinquency proceeding (i.e., conservation, rehabilitation,
receivership, liquidation, or equivalent proceeding.
(W) A dispute exists with the company which may affect the recoverability of all or part
of the balance shown. A dispute exists, for the purposes of this disclosure, when the
reinsurer has contested the validity of coverage, or the ceding or assuming insurer has
initiated arbitration or otherwise instituted legal actions concerning any amount claimed
to be recoverable.
(N) All or part of the balances recoverable are past due. A past due balance is defined
for the purposes of this disclosure, as a reinsurance claim which remains unpaid for a
period of 180 days after payment is due under the terms and conditions of the reinsurance
agreement.
5 If applicable.
6 If applicable.
7 Self -explanatory.
8 If applicable.
9 If covered by letters of credit, please identify by appending "L".
De Minimis Provision
(a) Faculatitive business -- individual recoverables amounting to less than 2% of capital
and surplus may be combined.
(b) Treaty business -- all amounts (by reinsurer) less than 2% of gross premium income on
proportional (quota share) reinsurance and all amounts (by reinsurer) less than 5% of
premium ceded on nonproportional and/or excess of loss reinsurance may be combined.
Department Form B-3 (3/92)
APPENDIX C
California Department of Insurance
(FINANCIAL REPORTING FORMAT)
JURAT
______________________________________
(Name of Insurer)
COUNTRY OF DOMICILE:
Insurance Solvency International (ISI) Number: ______________________
OFFICERS OR DIRECTORS*
(Names and Titles)
______________________ ______________________
______________________
______________________ ______________________
______________________
______________________ ______________________
______________________
______________________ ______________________
______________________
______________________ ______________________
______________________
______________________ ______________________
______________________ ______________________ President ______________________Secretary
______________________ Treasurer
The undersigned being duly sworn, state that they are the above described officers of said
insurer, and that as or the last day of the fiscal/calendar year just ended, all of the
herein described assets were the absolute property of said insurer, free and clear from
any liens or claims thereon, except as herein stated, and that this financial statement,
together with schedules and explanations therein contained, annexed or referred
interrogatories hereto are a full and true statement of all the assets and liabilities and
of the condition and affairs of said insurer as of the last day of the fiscal/calendar
year just ended, and of its income and deductions therefrom for the year ended on that
date, according to the best of their information, knowledge and belief, respectively.
Subscribed and sworn to before
me this ___________ day of ______________________President
___________________1991 ______________________Secretary
______________________Treasurer
*Please place an asterisk beside any directors added within the previous twelve months.
California Department of Insurance
Standard Financial Report
(Name of Company)
_________________________________________________
United States Trust Account Information
1. Name and address of United States contact:
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
2. Name and address of United States Trust Account, Trustee:
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
3. U.S. Trust Account-Terms and conditions of enforceability as specified in the NAIC
Standard Trust Agreement:
Terms and Conditions of enforceability
___ (1) Judgement Obtained ___(5) Open Ended with 5-yr.
cancellation clause
___ (2) Judgement Final ___(6) Expiration Date:
___ (3) Judgement Filed with ___(7) Valuation of trust:
Trustee as of:
$
___ (4) Expiration of 30 days
Major Lines of Coverage:
Section 3
Summary of financial Data Current Year Prior Year
Total Assets-------------------------------------------------$
Total Liabilities-------------------------------------------- $
Total Capital and Surplus Funds------------------------ $
Cash and Invested Assets---------------------------------$
Policyholder Reserves-------------------------------------$
Gross Written Premiums----------------------------------$
California Department of Insurance
(Name of Insurer)
Balance Sheet
For Period Ended
Assets Current Year Prior Year
1. Bonds $ ---------------- ----------------
2. Stocks, Shares ---------------- ----------------
3. Real Estate ---------------- ----------------
4. Affiliates ---------------- ----------------
5. Insurance Debts ---------------- ----------------
6. Cash Deposits ---------------- ----------------
7. Other Assets ---------------- ----------------
8. Total Assets ---------------- ----------------
---------------- -----------
----- Liabilities
9. Technical Reserves $ ---------------- ----------------
10. Loss Reserves (Unpaid Losses) ---------------- ----------------
11. Unearned Premium Reserve ---------------- ----------------
12. Funded Reserve ---------------- ----------------
13. Other Technical Reserves ---------------- ----------------
14. Other Liabilities ---------------- ----------------
15. Total Liabilities ---------------- ----------------
---------------- -----------
-----
Shareholder Funds
16. Capital $ ---------------- ----------------
17. Extra Reserves (Shs.Fds.) ---------------- ----------------
l8. Other Surplus ---------------- ----------------
19. Shareholders Funds ---------------- ----------------
20. Adj. & Add'l. Asset Value ---------------- ----------------
21. Adj. Shareholder's Funds ---------------- ----------------
22. Currency Exchange Rate ---------------- ----------------
---------------- -----------
----- (per unit of U.S. Currency)
California Department of Insurance
(Name of Insurer)
Income Statement
Report for Period Ended
Underwriting Profit/Loss Current Year Prior Year
1. Gross Premiums Written $ ---------------- --------------
2. Premiums Ceded $ ---------------- --------------
3. Net Premium Written $ ---------------- -----------
--- 4. Increase in Premium Reserves $ ---------------- -----------
--- 5. Net Premium Earned $ ---------------- -----------
--- 6. -Net Losses Incurred(1) $ ---------------- -----------
--- 7. -Management Expenses $ ---------------- --------------
8. -Net Commission Expenses $ ---------------- -----------
--- 9. +Other Underwriting Income $ ---------------- -----------
---
10. Underwriting Profit/Loss $ ---------------- --------------
Investment and Miscellaneous Profit/Loss
11. +Net InvestmentIncome(2) $ ---------------- -----------
--- 12. +Asset Valuation adjustment $ ---------------- -----------
--- 13. +OtherIncome (Interest on Investments) $ ---------------- -----------
--- 14. Overall Pre-Tax Earnings $ ---------------- --------------
15. Currency Exchange Rate $ ---------------- --------------
(per unit of currency)
-------------------------------------------------------------------------------------------------------------------
California Department of Insurance
(Name of Insurer)
Income Statement
Report for Period Ended
(See Income Statement Definitions)
(1) Net Losses
+Change in Unpaid Losses $ ---------------- -----------
---
(2) Gross Investment Income $ ---------------- --------------
Net of Investment Expenses
California Department of Insurance
Name of Insurer
Ratio Report
Current Year Ending ,Ratios expressed as percentages
Original/
Domiciliary/
Solvency and Reserves U.S. $
Currency
1. Net Premium/Shareholder Funds --------- ---------------
2. Technical Reserve+Shareholder Fund/Net Premium --------- ---------------
3. Technical Reserves/Net Premium --------- ---------------
4. Technical Reserves/Shareholder Fund --------- ----------
----- 5. *% Growth, Shareholder Funds --------- ----------
----- 6. *% Growth, Net Premiums --------- ----------
----- Profitability 7. Underwriting Profit/Inv Inc --------- ----------
----- 8. Underwriting Profit/Net Premium --------- ---------------
10. *% Growth, Pre-Tax Profit --------- ----------
----- 11. Combined Ratio (1-Yr) --------- ----------
-----
Liquidity
12. Insurance Debts/Assets --------- ----------
----- 13. Insurance Debts/Shareholder Funds --------- ----------
----- 14. Technical Reserve/Liquid Assets --------- ---------------
Reinsurance Leverage
15. Net Premium Written/Gross Premium Written --------- ----------
----- 16. Retention Ratio --------- ----------
-----
Investments
17. Investment Yield --------- ---------------
18. *%Growth, Investment Income --------- ----------
-----
* Must be reported in both currencies - U.S. and original/domicillary
APPENDIX D
APPENDIX D
COMPROMISE LETTER OF CREDIT FORM
(Name of Bank)
(Address)
FOR INTERNAL IDENTIFICATION PURPOSES ONLY
Does Not Affect Terms of Letter of Credit or Bank's Obligation. Thereunder
Our No. ____________ Other ____________
Accountholder/Applicant ____________
Reinsurer)
Beneficiary's State Of Domicile ____________
Issue Date:
________
IrrevocableClean Letter Of Credit No. ____________
To Beneficiary: (Name + Address)
We have established this clean, irrevocable, and unconditional Letter of Credit in your
favor as beneficiary for drawings up to U.S. , effective immediately. This Letter Of
Credit is issued, presentable and payable at our office at (issuing bank address) and
expires with our close of business on . Except when the amount of this Letter of Credit is
increased, this Credit cannot be modified or revoked without your consent.
The term "Beneficiary" includes any successor by operation of law of the named
Beneficiary including without limitation any such liquidator, rehabilitator, receiver or
conservator. Drawings by any liquidator, rehabilitator, receiver or conservator shall be
for the benefit of all of the Beneficiary's policyholders. (Insurers Incorporated under
the laws of California must use the language in Note 1 below in lieu of this paragraph)
We hereby undertake to promptly honor your sight draft(s) drawn on us, indicating our
Credit No. , for all or any part of this Credit upon presentation of your draft drawn on
us at our office specified in paragraph one on or before the expiraticn, date-hereof or
any automatically extended expiry date.
Except as expressly stated herein, this undertaking is not subject to any agreement,
requirement or qualification. The obligation of (issuing bank) under this Credit is the
individual obligation of (issuing bank) and is in no way contingent upon reimbursement
with respect thereto, or upon our ability to perfect any lien, security interest or any
other reimbursement.
This Letter of Credit is deemed to be automatically extended without amendment for one
year from the expiration date or any future expiration date, unless thirty days prior to
such expiration date, we notify you by Registered Mail that this letter of credit will not
be renewed for any such additional period.
Continued
This Letter of Credit is subject to and governed by the Laws of the State of (see note 2
below) and the 1983 Revision of the Uniform Customs and Practice for Documentary Credits
of the International Chamber of Commerce (Publication No. 400) and in the event of any
conflict the Laws of (see note 2 below) will control. If this credit expires during an
interruption of business as described in Article 19 of said Publication 400, the bank
hereby specifically agrees to effect payment if this Credit is drawn against within 30
days after the resumption of business.
Very truly yours,
Notes:
1. In lieu of paragraph two above, insurers incorporated under the laws of California must
use the following paragraph:
The term "Beneficiary" includes any successor by operation of law of the named
Beneficiary. If a court of law appoints a successor in interest to the named Beneficiary,
then the named Beneficiary includes and is limited to the court appointed domiciliary
receiver (including conservator, rehabilitator or liquidator).
2. Insurers incorporated under the laws of California insert California, insurers
incorporated under the laws of New York, insert New York, other insurers insert state of
incorporation or New York. United States branches of alien insurers insert state of entry
or New York.