CHAPTER 160. STANDARDS TO DEFINE INSURERS DEEMED TO BE IN HAZARDOUS FINANCIAL CONDITION

 The following standards, either singly or a combination of two or more, may be considered by the Commissioner to determine whether the continued operation of an insurer transacting an insurance business in this Commonwealth might be deemed to be financially hazardous to the policyholders, creditors or the general public. The Commissioner may consider one or more of the following:

   (1)  A failure by the insurer to maintain working capital, as required by law or regulation, based on the nature, type and volume of insurance being transacted by the insurer.

   (2)  Material adverse findings relating to an insurer’s financial condition reported in financial condition or market conduct examination reports.

   (3)  The financial ratios and related reports generated by the National Association of Insurance Commissioners Insurance Regulatory Information System.

   (4)  Whether the insurer’s net loss from operations in the last 12-month period or shorter period of time, excluding net realized capital gains, is greater than 20% of the insurer’s surplus.

   (5)  Whether the insurer’s asset portfolio when viewed in light of current economic conditions with respect to value, liquidity or diversity is sufficient to assure the company’s ability to meet its outstanding obligations as they mature.

   (6)  The ability of an assuming reinsurer to perform and whether the insurer’s reinsurance program provides sufficient protection for the insurer’s surplus after taking into account the insurer’s cash flow and the classes of business written as well as the financial condition of the assuming reinsurer.

   (7)  Whether the insurer’s net loss in the last 12-month period or a shorter period of time, including change in nonadmitted assets, net realized and unrealized capital gain or loss, cash dividends paid to shareholders, and other direct charges against surplus is greater than 50% of the insurer’s surplus in excess of the minimum capital and surplus required.

   (8)  Whether an affiliate, subsidiary or reinsurer is insolvent, threatened with insolvency or delinquent in payment of monetary or other obligations.

   (9)  Contingent liabilities, pledges or guaranties in relationship to the insurer’s surplus.

   (10)  Whether a controlling person, under the laws relating to insurance holding companies, of an insurer is delinquent in the transmitting to, or payment of, net premiums to the insurer.

   (11)  The age and collectibility of receivables.

   (12)  Whether the management of an insurer, including officers, directors or another person who directly or indirectly controls the operation of the insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in that position.

   (13)  Whether management of an insurer has failed to respond to inquiries by the Commissioner or members of the Commissioner’s staff relative to the condition of the insurer or has furnished false or misleading information concerning the inquiries.

   (14)  Whether management of an insurer has done one of the following:

     (i)   Filed a false or misleading sworn financial statement, or released a false or misleading financial statement to lending institutions or to the general public.

     (ii)   Made a false or misleading entry, or omitted an entry of material amount in the books of the insurer.

   (15)  Whether the insurer reports significant increases in premium writing either before or after reinsurance ceded to an extent that it lacks adequate financial and administrative capacity to meet its obligations as they fall due.

   (16)  Whether the insurer has experienced or will experience in the foreseeable future cash flow or liquidity problems, or both.

 For the purpose of making a determination of an insurer’s financial condition under this chapter, the Commissioner may restate the value of assets and liabilities to conform to insurance law of the Commonwealth, including the following:

   (1)  Disregarding a credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired or otherwise subject to a delinquency proceeding.

   (2)  Making appropriate adjustments to asset values attributable to investments in or transactions with controlling persons, subsidiaries or affiliates.

   (3)  Refusing to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor.

   (4)  Increasing the insurer’s liability in an amount equal to a contingent liability, pledge or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next 12-month period.

   (5)  Making appropriate adjustments to liability values attributable to losses and loss adjustment expenses due to considerations, such as those elaborated in the ‘‘Statement of Principles Regarding Property and Casualty Loss and Loss Adjustment Expense Reserves’’ which is promulgated by the Casualty Actuarial Society.

   (6)  Making appropriate adjustments to liability values due to considerations elaborated in the accident and health reserve standards in sections 301.1 and 311.1 of the act (40 P. S. § §  71.1 and 93).

 (a)  If the Commissioner has reasonable cause to believe that the continued operation of an insurer transacting insurance business in this Commonwealth is financially hazardous to the policyholders or the general public, the Commissioner may, upon the Commissioner’s determination, issue an order under Article V of the act (40 P. S. § §  221.1—221.63). The order may list the requirements for the insurer to abate the determination, including the following:

   (1)  Reducing the total amount of present and potential liability for policy benefits by reinsurance.

   (2)  Reducing, suspending or limiting the volume of business being accepted or renewed.

   (3)  Reducing general insurance and commission expenses by specified methods.

   (4)  Increasing the insurer’s surplus.

   (5)  Suspending or limiting the declaration and payment of dividends by an insurer to its stockholders or to its policyholders.

   (6)  Filing reports in a form acceptable to the Commissioner concerning the market value of an insurer’s assets and the value of its loss or policy, or both, reserves.

   (7)  Limiting or withdrawing from certain investments or discontinuing certain investment practices to the extent the Commissioner deems necessary.

   (8)  Documenting the adequacy of premium rates in relation to the risks insured.

   (9)  Documenting the adequacy of the return on invested assets in relation to the current interest credits in interest sensitive policies.

   (10)  Filing, in addition to regular annual statements, interim financial reports on a form approved by the Commissioner.

   (11)  Filing comprehensive business plans utilizing a format approved by the Commissioner and completed in accordance with instructions. Business plans filed under this paragraph will be given confidential treatment, will not be subject to subpoena and will not be made public by the Commissioner or another person without the prior written consent of the insurer to which it pertains.

 (b)  If the insurer is a foreign insurer, the Commissioner’s order provided for in subsection (a) may be limited to the extent provided by statute.

 (c)  An insurer subject to an order under subsection (a) is entitled to a hearing to review that order in accordance with Article V of the act (40 P. S. §  221.10), 2 Pa.C.S. § §  501—508 and 701—704 (relating to the Administrative Agency Law) and 1 Pa. Code Part II (relating to the general rules of administrative practice and procedure).

 An order or decision of the Commissioner will be subject to judicial review in accordance with 2 Pa.C.S. § §  501—508 and 701—704 (relating to the Administrative Agency Law).