PROPOSED RULES
INSURANCE COMMISSIONER
Original Notice.
Preproposal statement of inquiry was filed as WSR 08-11-106.
Title of Rule and Other Identifying Information: Administrative supervision of insurers.
Hearing Location(s): OIC Tumwater Office, Training Room 120, 5000 Capitol Boulevard, Tumwater, WA, http://www.insurance.wa.gov/about/directions.shtml, on September 22, 2009, at 10:00 a.m.
Date of Intended Adoption: October 26, 2009.
Submit Written Comments to: Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, e-mail kacys@oic.wa.gov, fax (360) 586-3109, by September 21, 2009.
Assistance for Persons with Disabilities: Contact Lorie Villaflores by September 21, 2009, TTY (360) 586-0241 or (360) 725-7087.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: In 2005, the legislature enacted HB 1034 authorizing the commissioner to place an insurer under administrative supervision under specified circumstances. These proposed rules establish the:
| • | Process for the administrative supervision of an insurer or carrier, |
| • | Requirements for the plan of correction an insurer or carrier must prepare and follow when it is subject to an administrative supervision order, and |
| • | Procedures for the administrative supervisor authorized under the commissioner's order. |
Reasons Supporting Proposal: These proposed rules implement RCW 48.31.400 through 48.31.900. Insurers and carriers will know how the commissioner will administer the company when it is under the administrative supervision of the commissioner.
Statutory Authority for Adoption: RCW 48.02.060, 48.31.435.
Statute Being Implemented: RCW 48.31.400, 48.31.900.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Mike Kreidler, insurance commissioner, governmental.
Name of Agency Personnel Responsible for Drafting: Ron Pastuch, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, (360) 725-7211; Implementation and Enforcement: Jim Odiorne, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, (360) 725-7214.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The only domestic small businesses affected by this proposed rule are multiple employer welfare associations (MEWAs). In accordance with Washington law, MEWAs must be subject to the same examination standards and consequences as health care service contractors. Therefore, no small business economic impact statement is necessary because MEWAs must comply as a matter of law, regardless of their business size.
A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Kacy Scott, P.O. Box 4025, Olympia, WA 98504-0258, phone (360) 725-7041, fax (360) 586-3109, e-mail kacys@oic.wa.gov.
August 19, 2009
Mike Kreidler
Insurance Commissioner
OTS-2589.2
ADMINISTRATIVE SUPERVISION OF INSURERS
NEW SECTION
WAC 284-16-600
Purpose.
The purpose of this regulation,
WAC 284-16-600 through 284-16-650, is to establish standards
and procedures for the administrative supervision of insurers
exceeding their powers or engaging in methods or practices
that render the continuance of their business financially
hazardous to their policyholders, creditors or the general
public.
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(1) The term "exceeded its powers" has the meaning set forth at RCW 48.31.020 (2)(a).
(2) The term "financially hazardous" means the standards set forth at WAC 284-16-310.
(3) "Insurer" has the meaning set forth at RCW 48.31.020(1) and 48.31.021.
(4) "Plan of correction" is an insurer's written plan to address or correct the commissioner's requirements to abate the findings and determination in the commissioner's order for administrative supervision.
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(a) The insurer is in a condition which makes its continued operation financially hazardous to its policyholders, creditors or the general public; or
(b) The insurer has exceeded its powers.
(2) In making a determination in subsection (1) of this section, the commissioner will consider:
(a) The conditions in RCW 48.31.020 (2)(a) to determine whether an insurer has exceeded its powers; or
(b) The findings in RCW 48.31.400(1), standards in WAC 284-16-310, and authorized actions in WAC 284-16-320(1) to determine whether an insurer is in financially hazardous condition.
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(2) The contents of a plan of correction must address the specific facts and circumstances that led to the order. The plan of correction must include all of the following elements necessary to fully address the list of requirements contained in the administrative supervision order:
(a) An executive summary identifying the objective goals of the plan with key implementation dates and a projected date for full statutory compliance;
(b) A background description of the insurer describing its history, ownership structure, relationships with affiliates, management structure, key employees, and overall operating structure of its organization;
(c) The financial condition of the insurer summarizing its major categories of assets and liabilities, revenues and expenses, and debt and capital structure based on actual annual results for the previous two calendar years and monthly financial forecasts and assumptions for the next three year period to include any specific business plans by function from the date of the commissioner's order;
(d) The causes of the financially hazardous condition or exceeding its powers situation giving rise to supervision proceedings;
(e) The proposed corrective actions specifically identifying operational changes, contractual changes, management changes, and internal control structure changes;
(f) A proposal for monitoring and reporting systems to provide periodic reviews of progress and comparisons of actual results with the plan of correction objectives;
(g) An agreement that the insurer will provide a copy of any notice, request, or other communication from any other regulatory authority that is received by the insurer under administrative supervision to the administrative supervisor or designee within five business days after receipt by the insurer; and
(h) Any other element necessary to fully address a requirement contained in the administrative supervision order.
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(2) If the commissioner and the insurer agree on the plan of correction, the commissioner will issue a written order to carry out the plan of correction. The insurer must not implement its plan of correction prior to receiving written approval by the commissioner.
(3) If the insurer fails to timely submit or the commissioner and the insurer are unable to agree to a plan of correction, the commissioner may enter an order requiring the insurer to take such corrective actions as may be reasonably necessary to remove the causes and conditions giving rise to the need for administrative supervision.
(4) Failure of the insurer to timely submit a plan of correction is a violation of the applicable provisions of Title 48 RCW.
(5) A copy of the commissioner's order approving the plan of correction or the order requiring the insurer to take corrective actions will be provided to the insurer and to the administrative supervisor.
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(2) The administrative supervisor will establish appropriate disbursement limits consistent with good internal control principles to facilitate prompt payment of claims and payables.
(3) Unless the processing of claims is an issue identified in the list of requirements referenced in RCW 48.31.400 (2)(b), the administrative supervisor will allow claims to be processed in the ordinary course of business.
(4) The administrative supervisor will promptly acknowledge every insurer's request for approval of actions identified in the administrative supervision order or plan of correction that requires approval. To the extent feasible, the administrative supervisor will act on an insurer's requests within five business days after receipt.
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