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 HistoryHistory: 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 40.04Ins 40.04Standards 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:
Ins 40.04(2)(d)1.1. Identify the person providing services and the nature of such services.
Ins 40.04(2)(d)2.2. Set forth the methods to allocate costs.
Ins 40.04(2)(d)3.3. Require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the Accounting Practices and Procedures Manual.
Ins 40.04(2)(d)4.4. Prohibit advancement of funds by the insurer to the affiliate except to pay for services defined in the agreement. This subdivision does not prohibit loans or capital transactions that involve a domestic insurer and an affiliate that are otherwise permitted by statute or rule.
Ins 40.04(2)(d)5.5. State that the insurer will maintain oversight for functions provided to the insurer by the affiliate and that the insurer will monitor services annually for quality assurance.
Ins 40.04(2)(d)6.6. Define books and records of the insurer to include all books and records developed or maintained under or related to the agreement.
Ins 40.04(2)(d)7.7. Specify that all books and records of the insurer are and remain the property of the insurer and are subject to control of the insurer.
Ins 40.04(2)(d)8.8. State that all funds and invested assets of the insurer are the exclusive property of the insurer, held for the benefit of the insurer and are subject to the control of the insurer.
Ins 40.04(2)(d)9.9. Include standards for termination of the agreement with and without cause.
Ins 40.04(2)(d)10.10. Include provisions for indemnification of the insurer in the event of gross negligence or willful misconduct on the part of the affiliate providing the services.
Ins 40.04(2)(d)11.11. Specify that, if the insurer is placed in delinquency proceedings or seized by the commissioner under ch. 645., Stats.:
Ins 40.04(2)(d)11.a.a. All of the rights of the insurer under the agreement extend to the receiver or commissioner.
Ins 40.04(2)(d)11.b.b. All books and records will immediately be made available to the receiver or the commissioner, and shall be turned over to the receiver or commissioner immediately upon the receiver or the commissioner’s request.
Ins 40.04(2)(d)12.12. Specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership pursuant to ch. 645, Stats.
Ins 40.04(2)(d)13.13. Specify that the affiliate will continue to maintain any systems, programs, or other infrastructure notwithstanding a delinquency proceeding or seizure by the commissioner under chapter 645, Stats., and will make them available to the receiver, for so long as the affiliate continues to receive timely payment for services.
Ins 40.04(2)(e)(e) A transaction not in the ordinary course of business which involves a domestic insurer and either an affiliate of, or a person attempting to acquire control of, a domestic insurer and which involves or exposes to risk an amount equal to or exceeding 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; and
Ins 40.04(2)(f)(f) Any material transactions which the commissioner requires to be reported by order.