>4
ke>d) all other business risks and other relevant risks in the RBC Instructions.
(2) 
Each risk must be determined in each case by applying the factors in the manner set forth in the RBC Instructions.
(C)(1) ; A property and casualty insurer's RBC must be determined by applying the factors in the manner detailed in the RBC Instructions and must be determined in accordance with the formula detailed in the RBC Instructions. The formula must take into account, and may adjust for the covariance between:
(1a) asset risk;
(2b) credit risk;
(3c) underwriting risk; and
(4d) all other business risks and other relevant risks in the RBC Instructions.
(2) Each risk must be determined in each case by applying the factors in the manner set forth in the RBC Instructions.
(D)(1) A health organization's RBC must be determined by applying the factors in the manner detailed in the RBC Instructions and must be determined in accordance with the formula detailed in the RBC Instructions. The formula must be taken into account, and may adjust for the covariance between:
(a) asset risk;
(b) credit risk;
(c) underwriting risk; and
(d) all other business risks and other relevant risks in the RBC Instructions.
(2) Each risk must be determined in each case by applying the factors in the manner set forth in the RBC Instructions.
(DE) An excess of capital over the amount produced by the RBC requirements, formulas, schedules, and instructions contained in this article is desirable. Insurers Licensees should seek to maintain capital above the required RBC levels. Additional capital is used and is useful in securing an insurer a licensee against various risks inherent in or affecting the business of insurance and not accounted for, or which only may be partially measured, by the RBC requirements contained in this article.
(EF) If a domestic insurer licensee files an RBC Report which, in the judgment of the director, is inaccurate, then the director must adjust the RBC Report to correct the inaccuracy and must notify the domestic insurer licensee in writing of the adjustment. The notice must include the reasons for the adjustment."
SECTION 3. Section 38-9-330 of the 1976 Code, as last amended by Act 27 of 2009, is further amended to read:
"Section 38-9-330. (A) A 'Company Action Level Event' includes any of the following events:
(1) filing of an RBC Report which indicates that Total Adjusted Capital is greater than, or equal to, Regulatory Action Level RBC, but is less than Company Action Level RBC;
(2) filing of an RBC Report which indicates that a life and health insurer has Total Adjusted Capital which is greater than, or equal to, its Company Action Level RBC, but is less than the product of its Authorized Control Level RBC and 2.5 and has a negative trend;
(3) filing of an RBC Report which indicates that a property and casualty insurer has Total Adjusted Capital which is greater than, or equal to, its Company Action Level RBC, but is less than the product of its Authorized Control Level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the NAIC Property and Casualty RBC instructions; or
(4) filing of an RBC Report which indicates that a health organization has Total Adjusted Capital which is greater than, or equal to, its Company Action Level RBC, but less than the product of its Authorized Control Level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the NAIC Health RBC instructions; or
(45) issuance of an Adjusted RBC Report that indicates the event in item (1), (2), or (3), or (4) of this subsection, provided that the insurer licensee does not challenge the Adjusted RBC Report pursuant to Section 38-9-370. If the insurer licensee challenges an Adjusted RBC Report, then the Company Action Level Event occurs upon notification that an administrative law judge has rejected the challenge.
(B) In the event of a Company Action Level Event, the insurer licensee must prepare and submit to the director an RBC Plan which must:
(1) identify the conditions which contributed to the Company Action Level Event;
(2) include proposals for corrective actions which will result in the elimination of the Company Action Level Event;
(3) provide projections of the insurer's licensee's financial results for the current year and for at least the next four succeeding years if the licensee is a life and death insurer or a property and casualty insurer, or at least two succeeding years if the licensee is a health organization. The projections must consider both the absence of proposed corrective actions and the proposed corrective actions. The projections must include projections of statutory balance sheets, operating income, net income, capital, and surplus, and RBC levels. The projections both for new and for renewal business may include separate projections for each major line of business and may separately identify each income, expense, and benefit component;
(4) identify key assumptions impacting upon the projections and detail the sensitivity of the projections to the assumptions; and
(5) identify the quality of, and any problems associated with, the insurer's licensee's business including, but not limited to, assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business, and use of reinsurance, if any, in each case.
(C) The RBC Plan must be submitted within forty-five days of the Company Action Level Event. If the insurer licensee challenges an Adjusted RBC Report pursuant to Section 38-9-370, then the RBC Plan must be submitted within forty-five days after notification that an administrative law judge has rejected the challenge.
(D) Within sixty days after the submission of an RBC Plan, the director must notify the insurer licensee stating whether the RBC Plan may be implemented or if the RBC Plan is unsatisfactory. If the director determines that the RBC Plan is unsatisfactory, then notification must set forth the reasons for that determination. The notification may set forth proposed revisions which will render the RBC Plan satisfactory. Upon receipt of notification, the insurer licensee must prepare a Revised RBC Plan which may incorporate by reference any revisions proposed by the director. That Revised RBC Plan must be submitted to the director within forty-five days after the date of notification. If the insurer licensee challenges the notification under Section 38-9-370, then the Revised RBC Plan must be submitted within forty-five days after notification that an administrative law judge has rejected the challenge.
(E) If the director notifies an insurer a licensee that its RBC Plan or its Revised RBC Plan is unsatisfactory, then the director, subject to the insurer's licensee's right to a public hearing pursuant to Section 38-9-370, may specify within the notification that it constitutes a Regulatory Action Level Event.
(F) Every domestic insurer licensee that files an RBC Plan or Revised RBC Plan with the director must also file a copy of the RBC Plan or Revised RBC Plan with the chief insurance regulatory officer in any state in which that insurer licensee is licensed to transact business if that state has RBC provisions substantially similar to Section 38-9-380, Section 38-9-390, and Section 38-9-400, and if that chief insurance regulatory officer has requested the filing in writing. The insurer licensee must file a copy of the RBC Plan or Revised RBC Plan in that state no later than fifteen days after its receipt of the request to file or the date on which the RBC Plan or Revised RBC Plan is filed under Section 38-9-330(C) and (D)."
SECTION 4. Section 38-9-340 of the 1976 Code is amended to read:
"Section 38-9-340. (A) A 'Regulatory Action Level Event' includes any one of the following events:
(1) filing of an RBC Report which indicates that Total Adjusted Capital is greater than, or equal to, Authorized Control Level RBC, but is less than Regulatory Action Level RBC;
(2) issuance of an Adjusted RBC Report that indicates the event in Section 38-9-340(A)(1), provided that the insurer licensee does not challenge that Adjusted RBC Report pursuant to Section 38-9-370. If the insurer licensee challenges an Adjusted RBC Report, then the Regulatory Action Level Event occurs upon notification that an administrative law judge has rejected the challenge;
(3) failure to file an RBC Report by the March 1 first filing date, unless the insurer licensee has filed an explanation for such this failure which that is satisfactory to the director and has cured the failure within ten days after the March 1 first filing date;
(4) failure to timely submit an RBC Plan or Revised RBC Plan to the director;
(5) notification that the RBC Plan or Revised RBC Plan is, in the judgment of the director, unsatisfactory and that the notification constitutes a Regulatory Action Level Event, provided that the insurer licensee does not challenge the determination under Section 38-9-370. If the insurer licensee challenges a determination, then the Regulatory Action Level Event occurs upon notification that an administrative law judge has rejected the challenge;
(6) notification by the director that the insurer licensee has failed to adhere to its RBC Plan or its Revised RBC Plan. However, notification must conclude that the failure has had substantial adverse effect upon the ability of the insurer licensee to eliminate the Company Action Level Event in accordance with its RBC Plan or Revised RBC Plan, provided that the insurer licensee has not challenged the determination pursuant to Section 38-9-370. If the insurer licensee challenges a determination, then the Regulatory Action Level Event occurs upon notification that an administrative law judge has rejected the challenge.
(B) In the event of a Regulatory Action Level Event, the director must:
(1) require the insurer licensee to prepare and submit an RBC Plan or a Revised RBC Plan;
(2) perform an examination or an analysis of the assets, liabilities, and operations of the insurer licensee, including a review of the insurer's licensee's RBC Plan or its Revised RBC Plan; and
(3) issue a Corrective Order detailing corrective actions which the director determines are required.
(C) In determining corrective actions, the director may take into account factors which he considers relevant based upon his examination or analysis. Those factors may include, but must not be limited to, the results of any sensitivity tests undertaken pursuant to the RBC Instructions.
(D) The RBC Plan or Revised RBC Plan must be submitted within forty-five days after the occurrence of the Regulatory Action Level Event. If the insurer licensee challenges an Adjusted RBC Report or a Revised RBC Plan pursuant to Section 38-9-370, then the RBC Plan or Revised RBC Plan must be submitted within forty-five days after notification that an administrative law judge has rejected the challenge."
SECTION 5. Section 38-9-350 of the 1976 Code is amended to read:
"Section 38-9-350. (A) An 'Authorized Control Level Event' includes any of the following events:
(1) filing of an RBC Report which indicates that an insurer's a licensee's Total Adjusted Capital is greater than, or equal to, its Mandatory Control Level RBC, but is less than its Authorized Control Level RBC;
(2) issuance of an Adjusted RBC Report that indicates the event in Section 38-9-350(A)(1), provided that the insurer licensee does not challenge that Adjusted RBC Report pursuant to Section 38-9-370. If the insurer licensee challenges that Adjusted RBC Report, then the Authorized Control Level Event occurs upon notification that an administrative law judge has rejected the challenge; or
(3) the failure of an insurer a licensee to respond to a Corrective Order in a manner satisfactory to the director, provided the insurer licensee has not challenged the Corrective Order pursuant to Section 38-9-370. If the insurer licensee has challenged a Corrective Order and an administrative law judge has rejected the challenge or has modified the Corrective Order, then the Authorized Control Level Event occurs upon the failure of the insurer licensee to respond to that Corrective Order in a manner satisfactory to the director.
(B) In the event of an Authorized Control Level Event, the director may take action pursuant to Section 38-9-340 or, if the director considers it to be in the best interests of the policyholders and creditors of the insurer licensee and of the public, he may take action necessary to place the insurer licensee under regulatory control pursuant to Section 38-26-10, et seq., or to Section 38-27-10, et seq. The Authorized Control Level Event is sufficient grounds for the director to take that action, and the director has the rights, powers, and duties detailed within those provisions of law. If the director takes action, then the insurer licensee is entitled to the protections which that are afforded under those provisions pertaining to summary proceedings."
SECTION 6. Section 38-9-360 of the 1976 Code is amended to read:
"Section 38-9-360. (A) A 'Mandatory Control Level Event' includes any one of the following events:
(1) filing of an RBC Report which indicates that the insurer's licensee's Total Adjusted Capital is less than its Mandatory Control Level RBC;
(2) notification of an Adjusted RBC Report pursuant to Section 38-9-360(A)(1), provided the insurer licensee does not challenge that Adjusted RBC Report pursuant to Section 38-9-370. If the insurer licensee challenges an Adjusted RBC Report notification, then the Mandatory Control Event Level occurs upon notification that an administrative law judge has rejected the challenge.
(B) In the event of a Mandatory Control Level Event:
(1) For a life and health insurer, the director must take action necessary to place the insurer under regulatory control pursuant to Section 38-26-10, et seq., or Section 38-27-10, et seq. The Mandatory Control Level Event is sufficient grounds for the director to take that action, and the director has the rights, powers, and duties detailed within those provisions of law. If the director takes action, then the insurer is entitled to the protections afforded under those provisions pertaining to summary proceedings. The director, in his discretion, may forego action for up to ninety days after the Mandatory Control Level Event if the director finds that there is a reasonable expectation that the Mandatory Control Level Event will be eliminated within that period.
(2) For a property and casualty insurer, the director must take action necessary to place the insurer under regulatory control pursuant to Section 38-26-10, et seq., or Section 38-27-10, et seq. If the insurer is not writing business and is running off its existing business, then the director may allow the insurer to continue its run-off under his supervision. The Mandatory Control Level Event is sufficient grounds for the director to take either action, and the director has the rights, powers, and duties detailed within those provisions. If the director takes action, then the insurer is entitled to the protections afforded under those provisions pertaining to summary proceedings. The director, in his discretion, may forego action for up to ninety days after the Mandatory Control Level Event if the director finds that there is a reasonable expectation that the Mandatory Control Level Event will be eliminated within that period.
(3) For a health organization, the director must take action necessary to place the health organization under regulatory control pursuant to Section 38-26-10, et seq., or Section 38-27-10, et seq. In that event, the Mandatory Control Level Event must be considered an indication of a hazardous financial condition which serves as sufficient grounds for the director to commence delinquency proceedings, and the receiver appointed in conjunction with the proceedings has the rights, powers, and duties with respect to the licensee as are set forth in Section 38-26-10, et seq., or Section 38-27-10, et seq., or an order of liquidation, rehabilitation, or conservation entered under it. If the director takes action, then the health organization is entitled to the protections afforded under those provisions pertaining to summary proceedings. The director, in his discretion, may forego action for up to ninety days after the Mandatory Control Level Event if the director finds that there is a reasonable expectation that the Mandatory Control Level Event will be eliminated within that period."
SECTION 7. Section 38-9-365 of the 1976 Code is amended to read:
"Section 38-9-365. The director may retain actuaries, investment experts, attorneys, and any other other consultants whom he considers necessary to enforce the provisions of this article. The fees, costs, and expenses of those actuaries, experts, attorneys, and other consultants must be borne by the affected insurer licensee or other related or affiliated parties as required by the director."
SECTION 8. Section 38-9-370 of the 1976 Code is amended to read:
"Section 38-9-370. In all instances within this article in which an insurer has the right to challenge any determination or any action by a public hearing before an administrative law judge, the insurer must notify the director of its request for a public hearing within ten days after notification. Upon receipt of the insurer's request for a public hearing, the director must transmit the notice to the administrative law judge division. The date of the public hearing scheduled by the administrative law judge must be no less than ten nor more than thirty days after the date of the insurer's request. (A) A licensee has the right to a confidential hearing, on a record before the director, at which the licensee may challenge a determination or action by the director, upon notification to a licensee by the director:
(1) of an Adjusted RBC Report;
(2) that the licensee's RBC Plan or Revised RBC Plan is unsatisfactory, and that this notification constitutes a Regulatory Action Level Event with respect to the licensee;
(3) that the licensee has failed to adhere to its RBC Plan or Revised RBC Plan and that this failure has a substantial adverse effect on the ability of the licensee to eliminate the Company Action Level Event with respect to the licensee in accordance with its RBC Plan or Revised RBC Plan; or
(4) of a corrective order with respect to the licensee.
(B) The licensee shall notify the director of its request for a hearing within five days after the notification by the director pursuant to subsection (A). Upon receipt of the licensee's request for a hearing, the director shall set a date for the hearing, which must be no less than ten days nor more than thirty days after the date of the licensee's request."
SECTION 9. Section 38-9-380 of the 1976 Code is amended to read:
"Section 38-9-380. (A) All RBC Reports and Adjusted RBC Reports, to the extent the information contained within them is not required to be set forth in a publicly available annual statement schedule; all RBC Plans, including the results or report of any an examination or analysis of a licensee performed pursuant to this article; and any a Corrective Order issued by the director include, including information that will be damaging to an insurer a licensee if any of them are made available to the insurer's licensee's competitors. Therefore, such reports, plans, and orders, must be kept confidential. This information, by law, must not be made public, and is are not subject to subpoena. The director may use such these reports, plans, and orders for enforcement actions either pursuant to this article or pursuant to any other another insurance law of this State.
(B) Neither the director nor a person who received documents, materials, or other information while acting under the authority of the director can be permitted or required to testify in a private civil action concerning confidential documents, materials, or information subject to subsection (A).
(C) The director may:
(1) share documents, materials, or other information, including the confidential and privileged documents, materials or information subject to subsection (A), with other state, federal, and international regulatory agencies, with the NAIC and its affiliates and subsidiaries, and with state, federal and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information;
(2) receive documents, materials, or information, including otherwise confidential and privileged documents, materials or information, from the NAIC and its affiliates and subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and
(3) enter into agreements governing sharing and use of information consistent with this subsection."
SECTION 10. Section 38-9-390 of the 1976 Code is amended to read:
"Section 38-9-390. (A) The comparison of an insurer's a licensee's Total Adjusted Capital to any of its RBC Levels is a regulatory tool for corrective action. It is not intended as a means to rank insurers licensees. Therefore, except as otherwise specifically required under the provisions of this article, the making, publishing, disseminating, circulating, or placing before the public, or, causing to be directly or indirectly made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any a radio or television station, or in any other another way, an advertisement, announcement, or statement containing an assertion or representation with regard to the RBC Levels of any insurer a licensee or of any a component derived in the calculations by any insurer a licensee or agent engaged in the business of insurance is considered misleading and is prohibited.
(B) If any a materially false or inappropriate comparison of an insurer's a licensee's Total Adjusted Capital to its RBC Levels or any RBC Level is published in any written publication and the insurer licensee is able to demonstrate with substantial proof the falsity or the inappropriateness of such the statement to the director, then the insurer licensee may publish an announcement approved by the director in that written publication solely to rebut the materially false or inappropriate statement."
SECTION 11. Section 38-9-400 of the 1976 Code is amended to read:
"Section 38-9-400. RBC Instructions, RBC Reports, Adjusted RBC Reports, RBC Plans, and Revised RBC Plans are intended only for use by the director in monitoring the solvency of insurers licensees and in monitoring the need for corrective action. They must not be used for ratemaking, considered, or introduced as evidence in any a ratemaking proceeding, or used to calculate or to derive any elements an element</u> of an appropriate premium level or rate of return for any a line of insurance which an insurer that a licensee, an affiliated insurer licensee, or a subsidiary insurer underwrites."
SECTION 12. Section 38-9-430 of the 1976 Code is amended to read:
"Section 38-9-430. The director may exempt from the application of this article:
(1) any a domestic property and casualty insurer which that:
(1a) except for the reinsurance allowed by item (3) of this section, underwrites writes direct business only in this State;
(2b) underwrites writes direct annual written premiums of $2,000,000.00 two million dollars or less; and
(3c) assumes no reinsurance in excess of five percent of its direct written premium; and
(2) a domestic health organization that:
(a) writes direct business only in this State;
(b) assumes no reinsurance in excess of five percent of direct premium written; and
(c) writes direct annual premiums of one million dollars or less."
SECTION 13. Section 38-9-440 of the 1976 Code is amended to read:
"Section 38-9-440. (A) A foreign insurer licensee, upon written request by the director, must submit an RBC Report as of the end of the preceding calendar year not later than the date that an RBC Report would be required to be filed by a domestic insurer licensee under this article or fifteen days after that request is received by the foreign insurer licensee. In addition, any a foreign insurer licensee, upon written request by the director, must promptly submit a copy of any an RBC document that has been filed with the chief insurance regulatory officer of any other another state.
(B) In the event of a Company Action Level Event, Regulatory Action Level Event, or Authorized Control Level Event by a foreign insurer licensee as determined under the RBC Laws in its state of domicile or, if no RBC Laws are in force in that state, as determined under the provisions of this article, if the chief insurance regulatory officer of the state of domicile of that foreign insurer licensee fails to require the foreign insurer licensee to file an RBC Plan in the manner specified under that state's RBC Laws or, if no RBC statute is in force in that state, under Section 38-9-330, then the director may require the foreign insurer licensee to file an RBC Plan. The failure of the foreign insurer licensee to file an RBC Plan with the director is grounds for the director to order the foreign insurer licensee to cease and desist from writing new insurance business in this State.
(C) In the event of a Mandatory Control Level Event by a foreign insurer licensee, if no domiciliary receiver has been appointed for the foreign insurer licensee under the rehabilitation and liquidation laws of its state of domicile, then the director may petition the circuit court pursuant to Section 38-27-910, et seq., for the liquidation of its property in this State. The occurrence of the Mandatory Control Level Event must be considered grounds for the petition."
SECTION 14. Section 38-9-460 of the 1976 Code is amended to read:
"Section 38-9-460. All notices by the director which may result in regulatory action under this article must be transmitted by registered or certified mail. Those notices are effective upon the insurer's licensee's receipt."
SECTION 15. (A) Article 5, Chapter 9, Title 38, designated "Risk Based Capital" is redesignated "Risk-Based Capital".
(B) Sections 38-9-400, 38-9-410, 38-9-420, 38-9-430, 38-9-440, 38-9-450, and 38-9-460 of the 1976 Code, which are designated as Article 5, Chapter 9, Title 38, are redesignated as part of Article 3, Chapter 9, Title 38, and Article 5, Chapter 9, Title 38 is deleted.
SECTION 16. If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 17. This act takes effect January 1, 2015.
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