Ins 40.03(9)(d) (d) Group capital calculation filing. Except as otherwise provided in this paragraph, the ultimate controlling person of every insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner. The report shall be completed in accordance with the NAIC group capital calculation instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation. The report shall be filed with the lead state commissioner of the insurance holding company system. Insurance holding company systems described below are exempt from filing the group capital calculation:

Ins 40.03(9)(d)1. 1. An insurance holding company system that has only one insurer within its holding company structure, that only writes business and is only licensed in its domestic state and assumes no business from any other insurer.

Ins 40.03(9)(d)2. 2. An insurance holding company system that is required to perform a group capital calculation specified by the United States Federal Reserve Board. The lead state commissioner shall request the calculation from the Federal Reserve Board under the terms of information sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance holding company system is not exempt from the group capital calculation filing.

Ins 40.03(9)(d)3. 3. An insurance holding company system whose non-U.S. group-wide supervisor is located within a reciprocal jurisdiction as described in s. Ins 52.01 (4), that recognizes the U.S. state regulatory approach to group supervision and group capital.

Ins 40.03(9)(d)4. 4. An insurance holding company system:

Ins 40.03(9)(d)4.a. a. That provides information to the lead state that meets the requirements for accreditation under the NAIC financial standards and accreditation program, either directly or indirectly through the group-wide supervisor, who has determined such information is satisfactory to allow the lead state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial Analysis Handbook.

Ins 40.03(9)(d)4.b. b. Whose non-U.S. group-wide supervisor that is not in a reciprocal jurisdiction recognizes and accepts, as specified in s. Ins 40.21, the group capital calculation as the world-wide group capital assessment for U.S. insurance groups who operate in that jurisdiction.

Ins 40.03(9)(d)5. 5. Notwithstanding the provisions of subds. 3. and 4., a lead state commissioner shall require the group capital calculation for U.S. operations of any non-U.S. based insurance holding company system where, after any necessary consultation with other supervisors or officials, it is deemed appropriate by the lead state commissioner for prudential oversight and solvency monitoring purposes or for ensuring the competitiveness of the insurance marketplace.

Ins 40.03(9)(d)6. 6. Notwithstanding the exemptions from filing the group capital calculation stated in subds. 1. to 4., the lead state commissioner has the discretion to exempt the ultimate controlling person from filing the annual group capital calculation or to accept a limited group capital filing or report in accordance with criteria as specified in s. Ins 40.21.

Ins 40.03(9)(d)7. 7. If the lead state commissioner determines that an insurance holding company system no longer meets one or more of the requirements for an exemption from filing the group capital calculation under this paragraph, the insurance holding company system shall file the group capital calculation at the next annual filing date unless given an extension by the lead state commissioner based on reasonable grounds shown.

Ins 40.03(9)(e) (e) Liquidity stress test. The ultimate controlling person of every insurer subject to registration and scoped into the NAIC liquidity stress test framework shall file the results of a specific year’s liquidity stress test with the lead state insurance commissioner in accordance with the following requirements:

Ins 40.03(9)(e)1. 1. The NAIC liquidity stress test framework includes scope criteria applicable to a specific data year. These scope criteria are reviewed at least annually by the financial stability task force or its successor. Any change to the NAIC liquidity stress test framework or to the data year for which the scope criteria are to be measured shall be effective on January 1 of the year following the calendar year when such changes are adopted. All of the following apply with regard to the liquidity stress test:

Ins 40.03(9)(e)1.a. a. Insurers meeting at least one threshold of the scope criteria are considered scoped into the NAIC liquidity stress test framework for the specified data year unless the lead state commissioner, in consultation with the NAIC financial stability task force or its successor, determines the insurer should not be scoped into the framework for that data year.

Ins 40.03(9)(e)1.b. b. Insurers that do not trigger at least one threshold of the scope criteria are considered scoped out of the NAIC liquidity stress test framework for the specified data year, unless the lead state commissioner, in consultation with the NAIC financial stability task force or its successor, determines the insurer should be scoped into the framework for that data year.

Ins 40.03(9)(e)1.c. c. Regulators wish to avoid having insurers scoped in and out of the NAIC liquidity stress test framework on a frequent basis. The lead state commissioner, in consultation with the NAIC financial stability task force or its successor, will assess this concern as part of the determination for an insurer.

Ins 40.03(9)(e)2. 2. The performance of, and filing of the results from, a specific year’s liquidity stress test shall comply with the NAIC liquidity stress test framework’s instructions and reporting templates for that year and any lead state commissioner determinations, in conjunction with the NAIC financial stability task force or its successor, provided within the framework.

Ins 40.03(9)(e)3. 3. For purposes of the information reported and provided to the lead state commissioner pursuant to par. (e), the information is confidential under s. 617.13 (2), Stats. The lead state commissioner shall maintain the confidentiality of the liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company supervised by the Federal Reserve Board and non-U.S. group wide supervisors in accordance with s. 617.13 (2), Stats.

Ins 40.03(9)(f) (f) Prohibition from publication of results. The group capital calculation and resulting group capital ratio required under par. (d) and the liquidity stress test along with its results and supporting disclosures required under par. (e) are regulatory tools for assessing group risks and capital adequacy and group liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding company systems generally. Therefore, except as otherwise permitted by law, the making, publishing, disseminating, circulating or placing before the public, or causing directly or indirectly to be 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 radio or television station or any electronic means of communication available to the public, or in any other way as an advertisement, announcement or statement containing a representation or statement with regard to the group capital calculation, group capital ratio, the liquidity stress test results, or supporting disclosures for the liquidity stress test of any insurer or any insurer group, or of any component derived in the calculation by any insurer, broker, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited; provided, however, that if any materially false statement with respect to the group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount to an insurer’s or insurance group’s group capital calculation or resulting group capital ratio, liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate comparison of any amount to an insurer’s or insurance group’s liquidity stress test result or supporting disclosures is published in any written publication and the insurer is able to demonstrate to the commissioner with substantial proof the falsity of such statement or its inappropriateness, then the insurer may publish announcements in a written publication if the sole purpose of the announcement is to rebut the materially false statement.

Ins 40.03 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; CR 14-071: r. and recr. Register August 2015 No. 716, eff. 9-1-15; s. 35.17 correction in (9) (a) Register August 2015 No. 716; CR 21-106: am. (5), (9) (title), (a), (b), cr. (9) (c) (title), (d) to (f) Register July 2022 No. 799, eff. 8-1-22.

Ins 40.04 Ins 40.04 Standards for transactions within an insurance holding company system.

Ins 40.04(1) (1) Transactions within an insurance holding company system. An insurer, or affiliate of an insurer, which is required to register under s. Ins 40.03 may not enter directly or indirectly into a transaction between the insurer and the affiliate unless the insurer and affiliate:

Ins 40.04(1)(a) (a) Comply with s. 617.21 (1), Stats., and sub. (6);

Ins 40.04(1)(b) (b) Expenses incurred and payment received for the transaction are allocated to the insurer in conformity with customary insurance accounting practices consistently applied; and

Ins 40.04(1)(c) (c) The books, accounts and records of each party to the transaction clearly and accurately disclose the nature and details of the transaction including the accounting information which is necessary to support the reasonableness of the charges or fees to the respective parties.

Ins 40.04(2) (2) Transactions required to be reported and subject to disapproval. A domestic insurer, and a person attempting to acquire control of a domestic insurer, or an affiliate of a domestic insurer, which directly or indirectly is involved in or benefits from, a transaction, shall report, under s. 617.21 (2), Stats., each of the following transactions, including amendments or modifications of transactions previously filed pursuant to this section, which are subject to any materiality standards contained in pars. (a) to (f), to the commissioner in writing at least 30 days before the domestic insurer enters into the transaction, unless the commissioner in writing approves a shorter period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported to the commissioner within 30 days after termination of a previously filed agreement, if termination is other than according to the terms of the agreement as filed, and the commissioner shall determine the type of filing required, if any. Transactions required to be reported and subject to disapproval include each of the following:

Ins 40.04(2)(a) (a) Sales, purchases, exchanges, loans, extensions of credit, guarantees, or investments involving the domestic insurer and an affiliate or a person attempting to acquire control of the domestic insurer if the transactions are equal to or exceed the lesser of 2% of the domestic insurer’s admitted assets or 10% of policyholder surplus as of the 31st day of December of the immediately preceding calendar year. All guarantees which are unlimited or not quantifiable as to amount are subject to the reporting requirements of this subsection;

Ins 40.04(2)(b) (b) Loans or extensions of credit or guarantees to any person who is not an affiliate, where the domestic insurer makes loans, extensions of credit or guarantees with the agreement or understanding that the proceeds of the transactions or benefit of the guarantees, in whole or in significant part, directly or indirectly, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the domestic insurer making the loans, extensions of credit, or guarantee, or any person attempting to acquire control of the insurer, if the transactions are equal to or exceed the lesser of 2% of the domestic insurer’s admitted assets or 10% of policyholder surplus as of the 31st day of December of the immediately preceding calendar year. All guarantees which are unlimited or not quantifiable as to amount are subject to the reporting requirements of this subsection;

Ins 40.04(2)(c) (c) Reinsurance agreements, including reinsurance pooling arrangements, or modifications to reinsurance agreements, which involve a domestic insurer and either an affiliate or a person attempting to acquire control of the domestic insurer in which the reinsurance premium, the projected reinsurance premium or a change in the insurer’s liabilities in any of the next three years equals or exceeds 5% of the insurer’s policyholder surplus, as of the 31st day of December of the immediately preceding calendar year, including, but not limited to, those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer;

Ins 40.04(2)(d) (d) All management agreements, exclusive agency agreements, service contracts, tax allocation agreements, or cost-sharing arrangements which involve a domestic insurer and either an affiliate or a person attempting to acquire control of the domestic insurer. All agreements under this paragraph entered into after the effective date of this rule shall, at a minimum and as applicable, contain all of the following: